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1. Cooperatives in the
Philippines: An
Introduction
Published by Atty. Fred October 16th,
2008 in Cooperatives and Corporate and
Investments. 1 Comment
(Please see updated Introduction to the Philippine Cooperative
Code of 2008, taking into consideration the enactment of the
new law, Republic Act No. 9520.)
A cooperative is a duly registered association of persons with a
common bond of interest, who have voluntarily joined together
to achieve a lawful common social or economic end, making
equitable to contribution to the capital required and accepting a
fair share of the risks and benefits of the undertaking in
accordance with universally accepted cooperative principle.
The declared purpose of the law governing cooperatives
(Republic Act 6938, also known as the Cooperative Code of the
Philippines) is to foster the creation and growth of cooperatives
as a practical vehicle for promoting self-reliance and harnessing
people power towards the attainment of economic development
and social justice. The law provides important benefits to the
cooperative and its empowered members, based on our
experience in handling client-cooperatives.
2. The following are the declared principles of cooperativism:
Open and voluntary membership. Membership in a
cooperative is voluntary and available to all individuals
regardless of their social, political, racial or religious
background or beliefs.
Democratic control. Cooperatives are democratic
organizations. Their affairs are administered by persons elected
or appointed in a manner agreed upon by the members.
Members of primary cooperatives have equal voting rights on a
one-member-one-vote principle.
Limited interest in capital. Share capital shall receive a
strictly limited rate of interest.
Division of net surplus. Net surplus arising out of the
operations of a cooperative belongs to its members and shall
be equitably distributed for cooperative development common
services, indivisible reserve fund, and for limited interest on
capital and/or patronage refund in the manner provided by law.
Cooperative education. All cooperatives shall make provision
for the education of their members, officers and employees and
of the general public based on the principles of cooperation.
Cooperation among cooperatives. All cooperatives, in order
to best serve the interest of their members and communities,
shall actively cooperate with other cooperatives at local,
national, and international levels.
There are different kinds of cooperatives. In general,
these are: (1) Credit cooperative, which promotes thrift and
savings among its members and creates funds in order to grant
loans for productivity; (2) Consumer cooperative, the primary
3. purpose of which is to procure and distribute commodities to
member and non-members; (3) Producers cooperative, which
undertakes joint production whether agricultural or industrial;
(4) Service cooperative, which engages in medical, and dental
care, hospitalization, transportation, insurance, housing, labor,
electric light and power, communication and other services;
and (5) Multi- purpose cooperative, which combines two or
more of the business activities of these different types of
cooperatives. In terms of membership, cooperatives are
classified as: (a) Primary, wherein the members are natural
persons of legal age; (2) Secondary, the members of which are
primaries; and (3) Tertiary, the member of which are
secondaries upward to one or more apex organizations.
Cooperatives whose members are cooperatives are called
federations or unions.
(Please refer to updates brought about by amendments
introduced by Republic Act No. 9520, also known as the
“Philippine Cooperative Code of 2008“.)
http://jlp-law.com/blog/cooperatives-in-the-philippines-an-introduction/
4. Introduction to the
Philippine
Cooperative Code of
2008
Published by Atty. Fred March 9th, 2009
in Cooperatives and Corporate and
Investments. 3 Comments
The law which governs cooperatives, prior to the recent
enactment of Republic Act No. 9520 (“Philippine Cooperative
Code of 2008″), is Republic Act No. 6938(“Cooperative Code of
the Philippines”). Here’s a basic discussion on the new law (a
more extensive primer will subsequently be released, initially
made available to clients).
Definition. A cooperative is an autonomous and duly
registered association of persons, with a common bond of
5. interest, who have voluntarily joined together to achieve their
social, economic, and cultural needs and aspirations by making
equitable contributions to the capital required, patronizing their
products and services and accepting a fair share of the risks
and benefits of the undertaking in accordance with universally
accepted cooperative principles. (Italicized words/phrases are
inserted under the new law.)
Purpose. The declared purpose of the law, among others, is to
foster the creation and growth of cooperatives as a practical
vehicle for promoting self-reliance and harnessing people
power towards the attainment of economic development and
social justice.
Principles of Cooperativism. The following are the declared
principles of cooperativism:
Voluntary and open membership. Membership in a cooperative
is voluntary and available to all individuals regardless of their
social, political, racial or religious background or beliefs.
Democratic member control. Cooperatives are democratic
organizations that are controlled by their members who
actively participate in setting their policies and making
decisions. In primary cooperatives, members have equal voting
rights of one-member, one-vote. Cooperatives at other levels
are organized in the same democratic manner.
Member economic participation. Members contribute equitably
to, and democratically control, the capital of their cooperatives.
At least part of that capital is the common property of the
cooperative. They shall receive limited compensation or limited
interest, if any, on capital subscribed and paid as a condition of
membership.
6. Autonomy and independence. Cooperatives are autonomous,
self-help organizations controlled by their members.
Cooperation among cooperatives. Cooperatives serve their
members most effectively and strengthen the cooperative
movement by working together through local, national,
regional and international structures.
Cooperative education. All cooperatives shall make provision
for the education of their members, officers and employees and
of the general public based on the principles of cooperation.
Concern for community. Cooperatives work for the sustainable
development of their communities through policies approved by
their members. This is a new provision.
Types of Cooperatives. Cooperatives may fall under any of
the following types, in addition to others which may be
determined by the Cooperative Development Authority (CDA):
Credit Cooperative. Promotes and undertakes savings and
lending services among its members. It generates a common
pool of funds in order to provide financial assistance to its
members for productive and provident purposes.
Consumers Cooperative. The primary purpose is to procure and
distribute commodities to members and non-members.
Producers Cooperative. Undertakes joint production whether
agricultural or industrial. It is formed and operated by its
members to undertake the production and processing of raw
materials or goods produced by its members into finished or
processed products for sale by the cooperative to its members
and non-members. Any end product or its derivative arising
from the raw materials produced by its members, sold in the
7. name and for the account of the cooperative, shall be deemed
a product of the cooperative and its members.
Marketing Cooperative. Engages in the supply of production
inputs to members and markets their products.
Service Cooperative. Engages in medical and dental care,
hospitalization, transportation, insurance, housing, labor,
electric light and power, communication, professional and other
services.
Multipurpose Cooperative. Combines two or more of the
business activities of these different types of cooperatives.
Advocacy Cooperative. A primary cooperative which promotes
and advocates cooperativism among its members and the
public through socially-oriented projects, education and
training, research and communication, and other similar
activities to reach out to its intended beneficiaries.
Agrarian Reform Cooperative. Organized by marginal farmers
majority of which are agrarian reform beneficiaries for the
purpose of developing an appropriate system of land tenure,
land development, land consolidation or land management in
areas covered by agrarian reform.
Cooperative Bank. Organized for the primary purpose of
providing a wide range of financial services to cooperatives and
their members.
Dairy Cooperative. One whose members are engaged in the
production of fresh milk which may be processed and/or
marketed as dairy products.
Education Cooperative. Organized for the primary purpose of
owning and operating licensed educational institutions
notwithstanding the provisions of Republic Act No. 9155,
8. otherwise known as the Governance of Basic Education Act of
2001.
Electric Cooperative. Organized for the primary purposed of
undertaking power generations, utilizing renewable energy
sources, including hybrid systems, acquisition and operation of
subtransmission or distribution to its household members.
Financial Service Cooperative. One organized for the primary
purpose of engaging in savings and credit services and other
financial services.
Fishermen Cooperative. Organized by marginalized fishermen
in localities whose products are marketed either as fresh or
processed products;
Health Services Cooperative. Organized for the primary
purpose of providing medical, dental and other health services.
Housing Cooperative. Organized to assist or provide access to
housing for the benefit of its regular members who actively
participate in the savings program for housing. It is co-owned
and controlled by its members.
Insurance Cooperative. Engaged in the business of insuring life
and poverty of cooperatives and their members.
Transport Cooperative. Includes land and sea transportation,
limited to small vessels, as defined or classified under the
Philippine maritime laws, organized under the provisions of this
Code;
Water Service Cooperative. Organized to own, operate and
manage waters systems for the provision and distribution of
potable water for its members and their households.
Workers Cooperative. Organized by workers, including the self-
employed, who are at same time the members and owners of
9. the enterprise. Its principal purpose is to provide employment
and business opportunities to its members and manage it in
accordance with cooperative principles.
Categories of Cooperative. On the other hand, cooperatives
are categorized according to membership and territorial
considerations:
In terms of membership -
1. Primary – Members are natural persons
2. Secondary – Members are primaries
3. Tertiary – Members are secondary cooperatives
In terms of territory, cooperatives shall be categorized
according to areas of operations which may or may not coincide
with the political subdivisions of the country.
Capital. The minimum paid-up share capital is now PhP15,000
(the minimum under the old law is only PhP2,000), subject to
increase by the CDA upon consultation with the cooperative
sector and the NEDA.
The par value of shares of a primary cooperative shall not
exceed PhP1,000.
No member of primary cooperative other than cooperative itself
shall own or hold more than 10% of the share capital of the
cooperative.
10. Membership. New members may only be admitted to the
cooperative after undergoing Pre-Membership Education
Seminar. There are two kinds of members:
1. Regular members. Entitled to all the rights and privileges of
membership, including the right to vote and be voted upon.
2. Associate members. Has no right to vote nor be voted upon
and shall be entitled only to such rights and privileges as the
bylaws may provide. However, an associate member shall be
considered a regular member if: (a) he has been a member for
2 continuous years; (b) he patronizes the cooperative as its
member; and (c) he signifies his intention of becoming a
regular member.
A member shall be liable for the debts of the cooperative to the
extent of his contribution to the share capital of the
cooperative.
Tax Treatment of Cooperative. Cooperatives which do not
transact any business with non-members or the general public
shall not be subject to any taxes and fees imposed under the
internal revenue laws and other tax laws. Cooperatives
transacting business with both members and non-members
shall be subject to another set of rules, but transactions with
members shall remain to be non-taxable.
Audit. Audit shall be conducted by an external auditor, who
must be a member of good standing of the Philippine Institute
of Certified Public Accountants, accredited by the CDA and the
Board of Accountancy.
Penal Provisions. Anyone who uses the word “Cooperative”
without being registered with the CDA is punishable by
imprisonment (5 years) and a fine (PhP20,000). Electric
11. cooperatives registered with the National Electrification
Administration (NEA) are exempt and may not register with the
CDA.
Any person who willfully attempt in any manner to evade or
defeat tax in violation of the tax treatment/privileges provided
under the Code is punishable by imprisonment (2 years but not
more than 4 years) and a fine (not less than PhP30,000 but not
exceeding PhP100,000), without prejudice to a separate action
to collect the taxes.
There are other penalties provided, including violations of the
reportorial requirements of cooperatives.
Here’s the full text of Republic Act No. 9520, the “Philippine
Cooperative Code of 2008″.
http://jlp-law.com/blog/introduction-to-the-philippine-cooperative-code-of-2008/