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.