Cooperative Code: Share Capital Fines

Fines on Unpaid Subscribed Share Capital

• Bylaws may specify fines for unpaid subscribed share capital if they are fair and reasonable.

Assignment of Share Capital Contribution or Interest

• Members can only transfer shares or interests if:
  • Held for at least one year.
  • Assigned to the cooperative, its members, or individuals within membership.
  • Approved by the board of directors.

Capital Build-up

• Bylaws are required to include a realistic capital build-up program for members to increase investment as their financial situation improves.

Revolving Capital

• General assembly can authorize the board of directors to raise revolving capital by:
  • Deferring payment of patronage refunds and interest on share capital.
  • Deducing a percentage from sales proceeds.
• Certificates issued must include serial number, name, amount, interest rate, retirement time, and return amounts.

Investment of Capital by a Cooperative

• Cooperatives can invest in:
  • Shares or securities of other cooperatives.
  • Reputable local banks or cooperatives.
  • Government-issued or guaranteed securities.
  • Real estate for cooperative or member use.
  • Any investment method allowed by bylaws.

Annual Audits

• Cooperatives must undergo annual financial, performance, and social audits conducted by accredited auditors.

Financial Audit

• Conducted by an independent auditor certified by the Philippine Institute of Certified Public Accountants (PICPA).

Social Audit

• Conducted by an independent social auditor accredited by the Authority.

Performance and Social Audit Reports

• Auditors must submit reports with findings and recommendations to the board of directors.

Audit Report

• Financial audit report must meet generally accepted auditing standards and be presented to the general assembly.

Member's Right to Examine

• Members can examine cooperative records during business hours and request free excerpts (cost of production may apply).
• Officials refusing requests are liable unless the refusal is based on a board resolution.
• Members must prove their request isn't for improper purposes.

Sources of Capital for Cooperative

• Member's Share Capital:

  • Common shares for regular members allow voting and receiving interest (capped at normal investment rates).
  • Preferred shares available for regular and associate members (no voting rights for associate members).

• Loans and borrowings from deposits.

• Revolving Capital:

  • Deferred patronage refunds or interest on share capital, with certificates issued by the board of directors.

• Assistance from public or private institutions (subsidies, donations, etc.) not divided into individual shares, becoming part of donated capital.

Maximum Limitations on Share Capital Holdings

• No member, except the cooperative itself, may hold more than 10% of the cooperative's share capital.
• Share capital contributions count as equity and cannot be withdrawn or used to offset obligations while membership remains.

Maximum "Par Value" of Shares

• Shares in a primary cooperative must have a par value not exceeding One Thousand Pesos (₱1,000).

Interest on Share Capital

• Interest rates on share capital capped at the Rate of Return on Investment.
• Calculation based on net surplus after statutory reserves divided by total average share month; percentage determined by the board of directors.
• Allocation of interest requires board majority approval present and constituting a quorum.

This quiz explores the regulations surrounding fines on unpaid subscribed share capital in cooperatives. It covers key aspects like fair and reasonable fines, assignment of share capital contributions, and transfer restrictions for members. Test your understanding of cooperative bylaws and share capital management.