Definitions
- "Agricultural products" include horticultural, forestry, dairy, livestock, poultry, and farm products.
- "Association" refers to a corporation organized under this Act.
- "Member" includes both members of non-stock associations and common stockholders of associations with capital stock.
- "Person" includes individuals, firms, partnerships, corporations, and associations.
Organizing a Cooperative Marketing Association
- At least 15 persons, majority residents of the Philippines and engaged in producing agricultural products, may form an association.
- Associations may be with or without capital stock.
- Incorporation follows the Corporation Law with exceptions stated in this Act.
Preliminary Investigation and Approval
- Organizers must consult the Director of the Bureau of Commerce and Industry for a market and economic survey.
- The Director may refuse incorporation if conditions do not justify organizing the association.
Cooperative Marketing Districts
- The Director may divide the country into marketing districts.
- Incorporation may be refused if another association already operates in the same district for the same products.
Powers of Associations
- Engage in marketing, processing, handling, and utilization of members' agricultural products.
- Borrow money and extend loans to members.
- Act as agents for members.
- Own shares in related associations or corporations.
- Establish reserves and make investments.
- Carry out any necessary operations to achieve its purposes.
- Associations can only handle non-members’ products for storage.
Membership Eligibility
- Membership or stock is limited to those engaged in producing agricultural products handled by the association.
- Includes lessees, tenants, lessors, and landlords involved in production.
- One association may become a member or stockholder of another.
Articles of Incorporation Requirements
- Must include "Cooperative" in the corporate name.
- State purpose, products handled, business locations, term (max 50 years).
- List incorporators and board of directors (minimum five).
- State capital stock details if applicable, including preferred stock provisions.
- Rules on property rights in non-stock associations.
Capital Subscription Requirements
- At least 20% of capital stock must be subscribed and 20% paid in cash or equivalent property before filing articles.
By-Laws Adoption and Content
- By-laws govern the association and must be adopted by majority vote or written assent.
- They include provisions on meetings, voting, directors, penalties, fees, membership qualifications, contracts, and property rights.
Filing and Certification
- By-laws may be filed with articles or separately.
- Director issues a certificate of incorporation after proper filing.
Meetings and Voting
- Regular annual meetings are required; special meetings may be called by directors or upon petition.
- Members get at least 10 days written or published notice.
- Each member has one vote regardless of stock owned.
- Preferred stockholders have no vote unless dividends are unpaid for two years.
Board of Directors and Officers
- Managed by not less than five directors elected by members.
- Directors may be elected by district; some may be appointed by public officials (max 1/5).
- Directors must generally be members or stockholders.
- Vacancies filled by board or special district elections.
- Board may appoint a manager.
- Directors elect officers including president, secretary, treasurer.
Government Employees Participation
- Government officials may be authorized to serve in associations outside office hours.
Bonding, Conflicts of Interest, and Removal
- Directors, officers, and employees handling funds or property must post bonds.
- They cannot have profit contracts with the association differing from member terms.
- Members may file charges and remove officers/directors by majority vote with due process and meetings.
Referendum
- Board decisions may be referred to members for approval if requested by at least 40% of directors.
Stock Issuance and Dividends
- Stock must be fully paid before issuance.
- Promissory notes can secure payment but not before incorporation.
- Dividends capped at 8% for membership capital/common stock and 10% for preferred stock.
Patronage Dividends
- Net profits after expenses and dividends are distributed proportionally to members based on marketing volume.
- Reserves may be set aside for the association.
Liability of Members and Transfer Restrictions
- Members liable only for unpaid portion of membership or stock subscription.
- Transfers of common stock prohibited to non-producers; restriction printed on certificates.
Stock Purchase by Association
- Association may repurchase common stock at book value unless debts exceed 50% of assets.
Preferred Stock Exchange for Property
- Preferred shares may be issued in exchange for purchased stock or property, valued fairly.
Inter-association Agreements
- Associations may contract or coordinate with other cooperatives for joint or shared business activities.
Marketing Contracts
- Members may contract to sell products exclusively through the association for up to 10 years.
- Title passes to association upon delivery unless contract specifies otherwise.
- Association may resell products and deduct costs before paying members.
Enforcement of Marketing Contracts
- By-laws or contracts may set liquidated damages for breach.
- Association entitled to injunctions and specific performance; temporary restraining orders may be granted upon bond.
Presumption of Landowner's Control
- Landowners or landlords presumed to control delivery of produce from tenants if tenancy created or changed after contract.
Liability for Warehousemen
- Warehouse operators knowingly receiving products in breach of contract liable for damages of up to 500 pesos and injunctions.
- Must also pay attorneys' fees and costs.
Penalties for Inducing Breach or Spreading False Reports
- Persons inducing breach or spreading false reports about finances face fines (100-500 pesos) and civil liability for damages.
Restriction on Use of "Cooperative" in Business Names
- Only associations complying with this Act may use "Cooperative" in their business name for producer marketing activities.
Transition of Existing Associations
- Existing associations may opt into this Act by majority vote and filing required documents.
- Previous contracts remain valid.
Books, Records, and Annual Reports
- Associations must keep detailed transaction and meeting records.
- Must submit annual reports with business summary to the Director.
Promotion and Government Supervision
- The Director must promote association formation and supervise operations.
- Has authority to investigate, order remedies, and call member meetings for removal of officers.
- Provincial treasurers and auditors may examine books upon Director’s request.
Exemption from Trade Restraint Laws
- Associations are not considered conspiracies or illegal monopolies.
- Marketing contracts are not unlawful pooling or restraint of trade.
Prohibition of Price Fixing and Abuse of Power
- Arbitrary price fixing or undue price enhancement by associations is prohibited.
- Violation subjects associations to charter forfeiture.
Tax Exemptions
- Associations exempt from merchant sales tax and income tax.
- Agricultural product tax exemptions for individual producers apply equally to associations.
Effectivity and Conflicting Laws
- This Act supersedes conflicting laws regarding organized associations.
- Corporation Law applies except where inconsistent with this Act.
- The Act took effect upon approval.