Law Summary
Definitions and Cooperative Concepts
- Cooperative: A registered association with a common interest, equitable capital contributions, sharing risks and benefits.
- Membership is voluntary, open to all individuals regardless of background.
- Universal cooperative principles apply, including democratic control and limited interest on capital.
Organization and Registration of Cooperatives
- Minimum of 15 persons with common bond can organize a cooperative.
- Purposes include thrift, credit, production, marketing, services, housing, insurance, economic and social advancement.
- Articles of Cooperation and Bylaws must be filed and include specific mandatory contents.
- Registration confers juridical personality and must be completed within 30 days or deemed approved.
Cooperative Powers and Legal Capacities
- Cooperatives can sue and be sued, amend articles, adopt bylaws, hold property, merge, receive grants, and exercise related powers.
- Cooperatives not in restraint of trade or monopolies when compliant with the Code.
Membership Provisions
- Members include natural persons or juridical entities; only natural persons for primary cooperatives.
- Regular members have full rights; associate members have limited privileges.
- Membership termination includes withdrawal, death, delinquency, or expulsion for causes.
Administration and Governance
- General Assembly is the highest policy-making body with exclusive powers like amendments and elections.
- Board of Directors manages daily affairs with set composition, powers, liabilities, and meeting quorum.
- Officers elected by board, with disqualification and removal rules.
- Committees including executive and audit committees may be established.
Rights and Responsibilities
- Cooperatives must keep records open for member and Authority inspection.
- Annual reports, books of account, membership register and documents must be maintained.
- Bonding of accountable officers is mandatory.
- Members have priority lien on collateral for cooperative debts.
Tax and Other Privileges
- Cooperatives transacting only with members exempt from government taxes and fees.
- Cooperatives transacting with nonmembers enjoy exemptions and preferential treatments subject to conditions.
- Voting privileges, preferential rights in government contracts, tax exemptions, and free services are granted.
Insolvency, Dissolution, and Liquidation
- Insolvency handled under the Insolvency Law.
- Voluntary dissolution by members’ resolution if creditors are unaffected, otherwise requires Authority petition and notice.
- Involuntary dissolution by court order for illegality or insolvency.
- Dissolution by Authority for noncompliance or failure to operate.
- Liquidation rules ensure orderly closure and distribution of assets.
Capital, Property, and Funds
- Capital from share contributions, loans, revolving funds, and donations.
- Share capital interest rates limited.
- Restrictions on shareholding to promote equitable participation.
- Investment and revolving capital governed.
Audit and Members’ Right to Inspect
- Annual independent audit required.
- Members may examine and copy cooperative records.
- Safe keeping and preservation of records mandated.
Distribution of Net Surplus
- Allocation includes reserve fund (minimum 10%), education fund (up to 10%), optional funds, remainder distributed as interest on capital and patronage refunds.
- Unexpended funds credited to federations or apex organizations upon dissolution.
Special Provisions for Agrarian Reform Cooperatives
- Govern economic and social activities for agrarian reform beneficiaries.
- Preferential rights for infrastructure and services.
- Government assistance for financing, technology transfer, and development.
Special Provisions for Public Service Cooperatives
- Defined as those rendering franchise-based public services.
- Registration requires endorsement from regulatory agencies.
- Internal affairs governed by Cooperative Code; public service operations regulated by appropriate agencies.
Special Provisions for Cooperative Banks
- Mainly serve cooperatives.
- Subject to Central Bank supervision.
- Membership limited to cooperatives and federations.
- Specific capitalization and registration requirements.
Credit Cooperatives
- Financial cooperatives encouraging savings and providing loans.
- May form federations for essential services.
- Exclusive use of the term “credit cooperative” protected.
Cooperative Insurance Societies
- Provide insurance services covering members and property.
- Subject to Insurance Code with modified capitalization and reserve requirements.
- Insurance Commission to implement regulations.
Miscellaneous Provisions
- Labor laws and social legislations apply to cooperatives.
- Authority maintains a register and publishes cooperative statuses.
- Dispute resolution through mediation, failing which court proceedings.
Penal Provisions
- Illegal use of "cooperative" title fined and punished.
- Public officials prohibited from interfering in cooperatives’ internal affairs.
- Directors and officers liable for unlawful acts, disloyalty, and misuse of confidential information with severe penalties.
- General penalties for other Code violations.
Final Provisions
- Electric cooperatives assisted in transition.
- Regulations issued by Cooperative Development Authority and approved by the President.
- The Code liberally interpreted in favor of cooperatives.
- Repeals prior inconsistent laws except specific decrees.
- Existing cooperatives deemed registered subject to compliance.
- Separability clause and effectivity provisions.
This comprehensive framework establishes the rights, duties, organizational structure, fiscal practices, and regulatory oversight of cooperatives across sectors and ensures their promotion, protection, and sustainable development under Philippine law.