Guidelines on Cooperative Merger and Consolidation

Merger is a union where two or more existing cooperatives are absorbed by another cooperative that survives and continues the combined business.
Consolidation is a union of two or more cooperatives to form a new cooperative called a consolidated cooperative.
The definitions distinguish whether there is an absorbing surviving cooperative (merger) or a new entity (consolidation).

A Plan of merger or consolidation may be initiated either by the Board of Directors or by the General Assembly.
The Board may initiate the plan through a resolution duly approved by a majority of the Board of Directors.
The General Assembly may initiate the plan through action of at least 10% of the total members with voting rights, with notice to the Board of Directors regarding the plan.
The plan initiation rules apply to both merger and consolidation plans.

The plan of merger or consolidation must include the following elements:
- The rationale for the merger or consolidation.
For a merger, the plan must include:
- The names, addresses, dates and numbers of registration of the constituent cooperatives, and their respective areas of operation.
- The proposed amendments to the surviving cooperative’s articles of cooperation and by-laws.
For a consolidation, the plan must include:
- The names and addresses of the consolidated cooperatives and their areas of operation.
- The proposed articles of cooperation and by-laws for the consolidated cooperative.
The plan must include duly audited statements of financial condition, including schedules of:
- Assets, liabilities and capital of the merging or consolidating cooperatives.
The plan must include a list of members of each cooperative intending to merge or consolidate, which must be:
- Duly certified by each cooperative’s board secretary, and
- Attested by the Board Chairman.

The Board of Directors of all merging or consolidating cooperatives must call their respective General Assembly Meetings to act on the merger or consolidation plan.
Notice must be given to all members of record and to creditors.
Notice must be sent thirty (30) days prior to the scheduled meeting.
The General Assembly meetings are the required fora for member action on the merger or consolidation plan.

No merger or consolidation is valid unless the plan is approved by two-thirds (2/3) of all members eligible to vote for each constituent cooperative.
Approval must be obtained at separate general assembly meetings of each constituent cooperative.
The approval requirement applies to both merger and consolidation.

Dissenting members of each cooperative may withdraw membership in accordance with Articles 31 and 32 of Republic Act No. 6938.
Dissenting members are entitled to a refund of their share capital and all other interests in the cooperative.
The refund must be paid within thirty (30) days from the date of the notice of withdrawal.

Within seven (7) days after approval of the merger or consolidation, officers must publish an announcement:
- Once a week for three (3) consecutive weeks in a national or local newspaper in the cooperatives’ areas of operation.
Publication may be supplemented by radio and television announcements.
As an alternative publication method, officers may post the announcement in at least three (3) conspicuous public places, including barangay, municipal or provincial halls within the area of operations.
Expenses for publication and posting must be paid from the funds of the merging or consolidating cooperatives.
Officers must send letters by registered mail to the creditors announcing the merger or consolidation.

Any person objecting to the merger or consolidation must file objections with the CDA within thirty (30) days after the last date of publication or posting.
The CDA may conduct hearings to resolve any objection raised.
Hearings to resolve objections must be terminated within three (3) months from the CDA’s receipt of the objections.

Officers must file with the CDA within fifteen (15) days from the last date of publication or posting of the announcement.
The filing must be submitted in four (4) copies and must include:
- (a) A resolution of merger or consolidation, certified by the secretary and attested by the chairman or presiding officer and board secretary.
- (b) The approved plan of consolidation with duly notarized articles of cooperation and adopted by-laws, or the approved plan of merger with proposed amendments to articles of cooperation and by-laws.
- (c) The minutes of general assembly meetings with their respective attendance sheets, certified by the secretary and attested by the chairman of each cooperative.
- (d) Bonds of accountable officers for the surviving or consolidated cooperative.
- (e) The original certificate of registration of the merged or consolidated cooperatives.
- (f) The registration fee.

The CDA must issue a Certificate of Registration in case of consolidation or a Certificate of Registration of Amendments in case of merger after proper evaluation of the submitted proceedings and documents.
The merger or consolidation becomes effective upon issuance of Certificate of Merger or Consolidation by the CDA.

No merger or consolidation may be made in fraud or in any manner that impairs the rights of creditors.
The surviving or consolidated cooperative becomes responsible for all liabilities and obligations of each constituent cooperative.

The circular is adopted on 26 Feb. 1996 by the Board of Administrators of the CDA.
The circular expressly cites Article 21 (3) of Republic Act No. 6938 as the governing legal basis.
The circular expressly cites Section (3) Rule 6 of the Rules and Regulations Implementing Certain Provisions of the Cooperative Code of the Philippines as a procedural/implementing basis.
The circular is styled as guidelines governing the procedure for merger and consolidation of cooperatives under the Cooperative Code framework.