Philippine Cooperative Code of 2008 Amendments

Purpose and state policy

Republic Act No. 9520 declares the policy of the State to foster the creation and growth of cooperatives as a practical vehicle for promoting self-reliance and harnessing people power toward economic development and social justice.
The State encourages the private sector to undertake the actual formation and organization of cooperatives and must create an atmosphere conducive to cooperative growth and development.
Government branches, subdivisions, instrumentalities, and agencies must ensure technical guidance, financial assistance, and other services to enable cooperatives to develop into viable and responsive economic enterprises, producing a strong cooperative movement free from conditions that infringe upon cooperative autonomy or organizational integrity.
The State recognizes the principle of subsidiarity, where the cooperative sector initiates and regulates within its own ranks promotion and organization, training and research, audit and support services relating to cooperatives, with government assistance where necessary.

Core cooperative definitions and principles

A cooperative is an autonomous and duly registered association of persons with a common bond of interest who voluntarily join to achieve their social, economic, and cultural needs and aspirations through equitable capital contributions, patronizing products and services, and accepting a fair share of risks and benefits in line with universally accepted cooperative principles.
Every cooperative must conduct its affairs in accordance with Filipino culture, good values and experience and universally accepted cooperative principles including:
- Voluntary and Open Membership: cooperatives are voluntary and open to all persons able to use services and willing to accept membership responsibilities without gender, social, racial, cultural, political, or religious discrimination.
- Democratic Member Control: cooperatives are controlled by members who actively participate in setting policies and making decisions; elected directors and officers are accountable to the membership; in primary cooperatives, members have equal voting rights of one-member, one-vote.
- Member Economic Participation: members contribute equitably and democratically control cooperative capital; at least part of the capital is common property; members receive limited compensation or limited interest, if any, on subscribed and paid capital as a condition of membership; members allocate surpluses for reserves (at least part indivisible), member benefits in proportion to patronage, and other membership-approved activities.
- Autonomy and Independence: cooperatives are autonomous self-help organizations controlled by members; agreements with other organizations (including government) and external capital must ensure democratic control by members and maintain cooperative autonomy.
- Education, Training and Information: cooperatives must provide education and training for members, elected and appointed representatives, managers, and employees.
- Cooperation Among Cooperatives: cooperatives strengthen the movement by working together through local, national, regional, and international structures.
- Concern for Community: cooperatives work for sustainable development of their communities through policies approved by members.
Republic Act No. 9520 establishes the following expressly defined terms:
- Member: a natural or juridical person admitted by the cooperative as a member by adhering to the Code and the articles of cooperation.
- General Assembly: full membership duly assembled to exercise cooperative rights and obligations under the Code, articles, and bylaws; for numerous and dispersed membership, it may be composed of delegates elected by each sector/chapter/district in accordance with rules of the cooperative development authority.
- Board of Directors: body entrusted with management under the articles of cooperation and bylaws.
- Committee: body entrusted with specific functions and responsibilities under bylaws or general assembly/board resolutions.
- Articles of Cooperation: registered articles registered under this Code and includes registered amendments.
- Bylaws: bylaws registered under this Code and includes registered amendments.
- Registration: operative act granting juridical personality to a proposed cooperative evidenced by a certificate of registration.
- Cooperative Development Authority (the Authority): government agency in charge of registration and regulation of cooperatives.
- Universally Accepted Principles: cooperative principles adhered to worldwide.
- Representative assembly: full membership of a body of representatives elected by each sector/chapter/district duly assembled to exercise powers lawfully delegated by the general assembly under bylaws.
- Officers of the Cooperatives: includes board members, committee members created by the general assembly, general manager or chief executive officer, secretary, treasurer, and other positions provided in bylaws.
- Social Audit: procedure assessing social impact and ethical performance vis-à-vis mission, vision, goals, and a cooperative code of social responsibility established by the Authority; it enables accountability to regular members for social performance and impact.
- Performance Audit: audit on efficiency and effectiveness of the cooperative as a whole, management and officers, and responsibility centers, as basis for improving performance and objectively informing the general membership.
- Single-line or Single-purpose Cooperative: cooperative undertaking activities related to its main line of business or purpose.
- Service Cooperatives: provide services to members including transport, information and communication, insurance, housing, electric, health services, education, and banking and savings and credit.
- Subsidiary Cooperative: organization whose membership/shareholders are all or mostly from a cooperative, organized for a different purpose and receiving technical/managerial/financial assistance from a cooperative under Authority rules.
- Federation of Cooperatives: three or more primary cooperatives doing the same line of business organized at municipal/provincial/city/special metropolitan political subdivision/economic zones created by law, registered with the Authority, to undertake business activities supporting member-cooperatives.

Purposes, objectives, and allowable conduct

A cooperative may be organized and registered for any or all of the following purposes:
- encouraging thrift and savings mobilization among members;
- generating funds and extending credit for productive and provident purposes;
- encouraging systematic production and marketing among members;
- providing goods and services and other requirements to members;
- developing expertise and skills among members;
- acquiring lands and providing housing benefits for members;
- insuring against members’ losses;
- promoting and advancing members’ economic, social and educational status;
- establishing, owning, leasing or operating cooperative banks, cooperative wholesale and retail complexes, insurance and agricultural/industrial processing enterprises, and public markets;
- coordinating and facilitating cooperative activities;
- advocating for the cause of the cooperative movement;
- ensuring viability through utilization of new technologies;
- encouraging and promoting self-help or self-employment as engine for economic growth and poverty alleviation; and
- undertaking any and all other activities for effective and efficient implementation of the Code provisions.
The primary objective of every cooperative is to help improve the quality of life of its members through aims to:
- provide goods and services to enable increased income, savings, investments, productivity, and purchasing power, and promote equitable distribution of net surplus through maximum utilization of economies of scale, cost-sharing, and risk-sharing;
- provide optimum social and economic benefits;
- teach efficient ways of doing things in a cooperative manner;
- propagate cooperative practices and new ideas in business and management;
- allow lower-income and less privileged groups to increase ownership in the nation’s wealth; and
- cooperate with government, other cooperatives, and people-oriented organizations to further these objectives.
A cooperative that complies with the Code is not deemed a conspiracy or combination in restraint of trade, illegal monopoly, or an attempt to lessen competition or fix prices arbitrarily in violation of Philippine laws.

Cooperative powers and registration framework

A cooperative registered under the Code has powers, rights, and capacities including to:
- exclusively use its registered name and sue and be sued;
- have succession;
- amend its articles of cooperation and adopt/amend bylaws in line with the Code;
- deal with real and personal property necessary for lawful cooperative affairs, subject to legal and constitutional limits;
- divide, merge, or consolidate as allowed by the Code;
- form subsidiary cooperatives and join federations/unions as provided by the Code;
- avail of loans, credit, grants, donations, and assistance from foreign and domestic sources subject to conditions that do not undermine autonomy; and the Authority must provide necessary assistance in documentary requirements upon written request;
- avail of preferential rights granted under Republic Act No. 7160 and other laws, including laws granting franchises for ferries, wharves, markets, or slaughterhouses and leasing public utilities, including access to extension and on-site research services and facilities related to agriculture and fisheries;
- organize and operate schools in accordance with Republic Act No. 9155 (Governance of Basic Education Act of 2001) and other pertinent laws; and
- exercise other Code powers necessary to carry out its stated purposes.
Organizing a primary cooperative requires fifteen (15) or more natural persons who are Filipino citizens, of legal age, with a common bond of interest, and actually residing or working in the intended area of operation.
A prospective member of a primary cooperative must complete a pre-membership education seminar (PMES).
A newly organized primary cooperative may be registered as a multi-purpose cooperative only after compliance with minimum requirements for multi-purpose cooperatives set by the Authority.
A single-purpose cooperative may transform into a multi-purpose or create subsidiaries only after at least two (2) years of operations.
Any group of individuals or cooperatives intending to form a cooperative must submit to the Authority a general statement describing the structure and purposes of the proposed cooperative.
The cooperative development structure must include a bookkeeper.
The group must not be allowed to operate without necessary personnel and must submit an economic survey indicating the area of operation, the size of membership, and other pertinent data in a format provided by the Authority.
A cooperative duly registered under the Code has limited liability.
Cooperative existence is for a period not exceeding fifty (50) years from registration unless sooner dissolved or unless extended.
The cooperative term may be extended for periods not exceeding fifty (50) years in any single instance by amendment of the articles of cooperation, but no extension can be made earlier than five (5) years prior to the original or subsequent expiry dates, unless there are justifiable reasons determined by the Authority.

Articles, bylaws, and capital/subscription requirements

Cooperatives applying for registration must file with the Authority articles of cooperation signed by organizers and acknowledged before a notary public by natural persons or by chairpersons/secretaries for juridical persons.
The articles of cooperation must set out:
- the cooperative name including the word “cooperative”;
- the purpose(s) and scope of business for registration;
- term of existence;
- area of operation and postal address of principal office;
- names, nationality, and postal addresses of registrants;
- common bond of membership;
- list of directors who will manage the cooperative; and
- share capital amount, names and residences of contributors, and a statement whether the cooperative is primary, secondary, or tertiary in accordance with Article 23.
Articles of cooperation may include other provisions not inconsistent with the Code or related law.
Registration submissions must include four (4) copies each of the proposed articles of cooperation, bylaws, and the general statement required under Article 11.
No cooperative may be registered unless its articles of cooperation are accompanied (except for a cooperative union described in Article 25) by:
- bonds of accountable officers; and
- a sworn statement of the treasurer elected by subscribers showing at least twenty-five percent (25%) of authorized share capital is subscribed and at least twenty-five percent (25%) of total subscription is paid.
Paid-up share capital must not be less than Fifteen thousand pesos (P15,000.00).
The Authority must periodically assess required paid-up share capital and may increase it every five (5) years when necessary upon consultation with the cooperative sector and the National Economic Development Authority (NEDA).
Each cooperative to be registered must adopt bylaws not inconsistent with the Code and file them at the same time as the articles of cooperation.
Bylaws must provide:
- qualifications for admission to membership and the payment/interest as a condition of membership;
- rights and liabilities of membership;
- circumstances for acquisition, maintenance, and loss of membership;
- procedure for termination of membership;
- conditions permitting transfer of shares/interest;
- rules for agenda, time, place, manner of calling/convening meetings, quorum, voting systems, and other general assembly/board/committee business matters;
- general conduct of cooperative affairs, including powers/duties and qualifications/disqualifications of general assembly, board of directors, committees, and officers;
- how capital may be raised and purposes for its utilization;
- mode of custody and investment of net surplus;
- accounting and auditing systems;
- manner of loaning and borrowing, including limitations;
- method of distribution of net surplus;
- procedure for adopting/amending/repealing/abrogating bylaws;
- a conciliation or mediation mechanism for amicable settlement of disputes among members and among directors/officers/committee members;
- other matters incident to cooperative purposes and activities.

Juridical personality and registration decisions

A cooperative formed or organized under the Code acquires juridical personality on the date the Authority issues a certificate of registration under its official seal.
The Authority must finally dispose of registration applications within sixty (60) days from filing; if not, the application is deemed approved, unless delay is attributable to the applicant.
If the Authority denies registration, an appeal lies with the Office of the President within ninety (90) days from receipt of the denial notice.
If the Office of the President fails to act on the appeal within ninety (90) days from the appeal filing, the application is deemed approved.
A certificate of registration issued by the Authority is conclusive evidence of due registration unless the registration is proved cancelled.

Amendments, contracts pre-registration, and structural change

Amendments of articles and bylaws must be for legitimate purposes and generally require a two-thirds (2/3) vote of all members with voting rights.
Dissenting members retain the right to withdraw under Article 30.
Amendments must contain all provisions required by law, and must indicate changes by underscoring or other appropriate marking.
Copies of amendments must be certified under oath by the cooperative secretary and a majority of directors stating that amendments were duly approved.
All amendments must be submitted to the Authority.
Amendments take effect upon Authority approval or within thirty (30) days from filing if the Authority does not act for a cause not attributable to the cooperative.
Contracts between private persons and the cooperative executed prior to registration remain valid and binding between the parties and upon registration.
A formal written contract must be adopted and made in the cooperative’s name or on its behalf before registration.
Division of cooperatives: any registered cooperative may divide into two (2) or more cooperatives by resolution approved by three-fourths (3/4) vote of all members with voting rights present and constituting a quorum, subject to Authority-prescribed procedure.
New cooperatives become legally established upon registration with the Authority, provided Code requirements are complied with by the new cooperatives.
No division of a cooperative in fraud of creditors is valid.
Merger and consolidation: two (2) or more cooperatives may merge or consolidate, effective upon issuance of a certificate by the Authority.
No merger or consolidation is valid unless approved by three-fourths (3/4) vote of all members with voting rights, present and constituting quorum in separate general assembly meetings for each constituent cooperative.
Dissenting members may withdraw under Article 30.
Effects of merger/consolidation include:
- constituent cooperatives become one (surviving or consolidated cooperative);
- separate existence of constituent cooperatives ceases except the surviving/consolidated cooperative;
- surviving/consolidated cooperative gains all rights, privileges, immunities, powers, and assumes all duties and liabilities of a cooperative organized under the Code;
- surviving/consolidated cooperative acquires all assets, rights, privileges, immunities, and franchises of constituent cooperatives;
- surviving/consolidated cooperative assumes all liabilities/obligations, and pending claims/actions may be prosecuted by or against it; and creditor rights and liens are not impaired.

Cooperative types and categories

Cooperatives may fall under types including:
- Credit cooperative (savings and lending among members for productive and provident purposes);
- Consumers Cooperative (procure and distribute commodities to members and non-members);
- Producers Cooperative (joint production and processing of raw materials/goods produced by members into finished/processed products for sale by the cooperative to members and non-members);
- Marketing Cooperative (supply production inputs to members and market their products);
- Service Cooperative (medical/dental care, hospitalization, transportation, insurance, housing, labor, electric light and power, communication, professional and other services);
- Multipurpose Cooperative (combines two (2) or more business activities of different types);
- Advocacy Cooperative (primary cooperative promoting and advocating cooperativism through socially-oriented projects, education/training, research, and communication);
- Agrarian Reform Cooperative (organized by marginal farmers, majority agrarian reform beneficiaries, for land tenure/development/consolidation/management in agrarian reform areas);
- Cooperative Bank (provides a wide range of financial services to cooperatives and their members);
- Dairy Cooperative (members engaged in fresh milk production; processing/marketing as dairy products);
- Education Cooperative (owns and operates licensed educational institutions notwithstanding Republic Act No. 9155);
- Electric Cooperative (undertakes power generation using renewable energy sources including hybrid systems; acquisition/operation of sub-transmission or distribution to household members);
- Financial Service Cooperative (savings and credit services and other financial services);
- Fishermen Cooperative (organized by marginalized fishermen; products marketed fresh or processed);
- Health Services Cooperative (medical, dental and other health services);
- Housing Cooperative (assists or provides access to housing; co-owned and controlled by its members who actively participate in a housing savings program);
- Insurance Cooperative (insuring life and property of cooperatives and members);
- Transport Cooperative (land and sea transportation limited to small vessels as classified under Philippine maritime laws);
- Water Service Cooperative (own/operate/manage water systems for distribution of potable water);
- Workers Cooperative (workers including self-employed, as members and owners; provides employment/business opportunities and manages per cooperative principles);
- Other types as determined by the Authority.
Cooperatives are categorized by:
- membership: Primary (members are natural persons), Secondary (members are primaries), and Tertiary (members are secondary cooperatives); and
- territory: categorized by areas of operation which may or may not coincide with political subdivisions.

Federations, cooperative unions, and their functions

A federation of cooperatives must undertake functions to:
- carry on cooperative enterprises authorized under Article 6 that complement/augment but do not conflict, compete with, or supplant members’ business activities;
- carry on, encourage, and assist educational and advisory work relating to member cooperatives;
- render services to encourage simplicity, efficiency, and economy in members’ business conduct and facilitate bookkeeping, accounting, and other systems/procedures;
- print, publish, and circulate newspapers or other publications in the interest of member cooperatives and enterprises;
- coordinate and facilitate activities of member cooperatives;
- enter joint ventures with national or international cooperatives of other countries for manufacture and sale of products and/or services in the Philippines and abroad; and
- perform other functions necessary to attain its objectives.
A federation of cooperatives may be registered by performing formalities for registration of a cooperative.
Registered cooperatives may organize a federation according to type of business activity.
Cooperative unions: registered cooperatives and federations may organize or join cooperative unions to represent interests and welfare at provincial, city, regional, and national levels.
Cooperative unions may have purposes to:
- represent member organizations;
- acquire/analyze/disseminate economic, statistical, and other information relating to members and all types of cooperatives within the area of operation;
- sponsor studies in economic, legal, financial, social and other phases of cooperation and publish results;
- promote cooperative knowledge of principles and practices;
- develop the cooperative movement in their jurisdictions;
- advise appropriate authorities on questions relating to cooperatives;
- raise funds through membership fees, dues, contributions, donations, and subsidies from local and foreign sources whether private or government; and
- do and perform other non-business activities necessary to attain foregoing objectives, including assisting national and local government in development activities in their jurisdictions.

Membership rights, eligibility, and liabilities

A cooperative may have regular members and associate members.
Regular members have entitlement to all membership rights and privileges; associate members have no right to vote or be voted upon and have only the rights and privileges provided in bylaws.
A cooperative organized by minors is a laboratory cooperative and must be affiliated with a registered cooperative, and laboratory cooperatives are governed by special guidelines promulgated by the Authority.
An associate member becomes a regular member if the associate meets minimum requirements of regular membership, continues to patronize the cooperative for two (2) years, and signifies intention to remain a member.
Authority officers/employees are disqualified from being elected or appointed to any cooperative position, except that the disqualification does not extend to a cooperative organized by Authority officers or employees.
Elective government officials are ineligible to become officers and directors of cooperatives, except that the disqualification does not extend to a party-list representative who is an officer of the cooperative he or she represents.
A government employee or official may use official time to attend general assembly, board and committee meetings and cooperative seminars/conferences/workshops/technical meetings/training courses locally or abroad if allowed by the head of office concerned, provided the office operations are not adversely affected.
Membership application: an applicant is deemed a member after board approval and after making required membership payments or acquiring interests as prescribed by bylaws.
If the board refuses/denies membership, the applicant may appeal to the general assembly, and the decision of the general assembly is final.
The general assembly may create an appeal and grievance committee for one (1) year to decide membership application appeals within thirty (30) days from receipt; if the committee fails to decide within that period, the appeal is deemed approved in favor of the applicant.
Member liability: a member is liable for cooperative debts to the extent of his contribution to the cooperative’s share capital.

Termination, withdrawal, and refunds

Withdrawal: a member may withdraw for any valid reason by giving a sixty (60) day notice to the board of directors.
Subject to bylaws, the withdrawing member is entitled to a refund of share capital contribution and other interests.
No refund is made if payment would cause the value of cooperative assets to be less than the aggregate debts and liabilities excluding the member’s share capital contribution.
Valid grounds for termination include death or insanity of a member in a primary cooperative, and insolvency or dissolution of a member in a secondary or tertiary cooperative.
In case of death or insanity of an agrarian reform beneficiary-member, next of kin may assume the duties and responsibilities of the original member.
Termination by board: membership may be terminated by majority vote of all board directors for causes including:
- non-patronage of cooperative services for an unreasonable period as determined by the board of directors;
- violation of bylaws and cooperative rules;
- acts or omissions injurious or prejudicial to cooperative interests or welfare;
- the Code also establishes member liability to extent of share capital contribution as a stated ground category in the board termination enumeration.
Procedure for board termination decisions:
- the board must inform the member in writing of intended action and give opportunity to be heard;
- the board decision must be in writing, communicated in person or by registered mail;
- the decision is appealable to the general assembly within thirty (30) days from receipt; the general assembly decision is final.
The general assembly may create an appeal and grievance committee (for one (1) year) to decide membership termination appeals within thirty (30) days; failure to decide within the period deems the appeal approved in favor of the member.
Pending a general assembly decision, membership remains in force.

General assembly, governance meetings, and voting

The general assembly comprises the voting-entitled members under the articles of cooperation and bylaws.
The general assembly is the highest policy-making body and exercises powers under the Code, articles, and bylaws.
The general assembly has exclusive powers that cannot be delegated to a smaller body:
- determine and approve amendments to articles of cooperation and bylaws;
- elect or appoint board of directors and remove them for cause (with electric cooperatives subject to bylaws or election guidelines for board elections);
- approve developmental plans of the cooperative.
For prompt and intelligent decision-making, the general assembly may delegate some powers to a smaller body by three-fourths (3/4) vote of members with voting rights present and constituting quorum; delegated powers must be enumerated in bylaws.
Meetings:
- Regular meeting: annually on the date fixed in bylaws, or if not fixed, within ninety (90) days after close of each fiscal year.
- Notice for regular meetings must be sent in writing by posting or publication or through other electronic means to all members of record.
- Special meeting: may be called any time by majority vote of the board, or as provided in bylaws; written notice must be sent one (1) week prior to voting members.
- After compliance with notice requirements, the board must call a special meeting within one (1) month after receipt of a written request from at least ten percent (10%) of total members entitled to vote to transact specific business.
- If the board fails to call within the given period, the Authority, upon petition of ten percent (10%) of all members entitled to vote for good cause shown, issues an order directing petitioners to call the meeting with proper notice.
- For newly approved cooperatives, a special general assembly must be called as far as practicable within ninety (90) days from approval.
- The Authority may call a special meeting for reporting results of examination or other investigation of cooperative affairs.
- Notice of any meeting may be waived expressly or impliedly by any member.
Quorum:
- general assembly quorum is at least twenty-five percent (25%) of members entitled to vote;
- for cooperative banks, quorum is as provided in Article 99 of the Code;
- for electric cooperatives, quorum unless otherwise provided in bylaws is five percent (5%) of members entitled to vote.
Voting system:
- each member of a primary cooperative has only one (1) vote.
- members of secondary or tertiary cooperatives have one (1) basic vote and incentive votes in bylaws not exceeding five (5) votes.
- delegate votes are deemed the votes of the delegates’ members.
- bylaws of cooperatives other than primary may provide voting by