Law Summary
Key Definitions
- Defines critical terms such as Articles of Cooperation, Board of Directors, Contributions, Cooperatives (primary, secondary, tertiary), CSF, CSF Cooperatives, Endorsers, GFIs, Lending Banks, LGUs, MSMEs (with asset-based classification), NGOs, qualified borrowers, Surety Agreement, Trustee Banks, and registration specifics.
- Clarifies that CSF acts as a collateral substitute through surety cover.
Creation and Registration of CSF Cooperatives
- CSF Cooperatives are LGU-partnered cooperatives established in provinces or cities.
- Articles of Cooperation and bylaws must be registered with the CDA.
- CDA issues a certificate of registration conferring juridical personality.
Governance Structure
- The Board of Directors includes representatives from members, GFIs, and government agencies; LGUs serve as non-voting ex officio members.
- Board responsibilities include policy formulation, administration, designation of trustee banks, contract execution, auditing, and issuing surety agreements.
Capital and Fund Composition
- Requires at least 25% of authorized capital to be subscribed and 25% of subscriptions to be paid up, with a minimum of P5,000.
- CSF composed of contributions from member-cooperatives/NGOs, LGU counterparts (at least equal in amount), and GFIs or other government institutions.
- LGU contributions align with Cooperative Code mandates, supporting cooperative development.
Credit Surety Fund Operations
- Fund serves as surety cover for qualified borrowers, exclusively invested in safe instruments like government securities.
- Maximum loans for qualified borrowers capped at ten times their contribution to the Fund.
- Management entrusted to CSF Cooperatives' Board with trustee banks handling fiduciary functions.
Membership and Withdrawal
- Members include cooperatives, NGOs, LGUs, GFIs, and other institutions contributing to the CSF.
- Private members may withdraw contributions subject to no outstanding obligations and liquidity conditions.
- LGUs, GFIs, and government agencies may withdraw only upon CSF Cooperative dissolution.
Regulatory Oversight
- CDA authorized to regulate, register, supervise, and monitor CSF Cooperatives; may impose sanctions for violations.
- CDA to require periodic reports and conduct examinations for compliance.
- CDA to submit annual reports to DOF and BSP.
Role of the Bangko Sentral ng Pilipinas (BSP)
- BSP promotes, facilitates technical assistance, and helps set criteria for CSF Cooperatives.
- BSP focuses on enhancing rural credit policies and inclusive finance.
Taxation and Legal Provisions
- CSF Cooperatives enjoy tax privileges under the Philippine Cooperative Code.
- Non-cooperative members taxed under regular tax rules.
- Surety Agreements not considered insurance contracts under the Insurance Code.
- Governed primarily by this Act; Cooperative Code applies only if consistent.
Implementation, Interpretation, and Transitory Provisions
- CDA, DOF, and BSP tasked with promulgating rules within 60 days of effectivity.
- Provisions liberally construed to favor CSF Cooperative establishment.
- Existing CSF agreements prior to enactment may register as CSF Cooperatives.
- Amendments to inconsistent laws made to align with this Act.
Effectivity and Miscellaneous
- Act takes effect 15 days after publication.
- Contains separability clause ensuring unaffected provisions remain valid if part declared unconstitutional.