Cooperatives Pt. 1 PDF

BM1905 COOPERATIVES PT. 1 Definition of Terms A person either natural or juridical who, adhering to the principles set forth in this Member Code and in the articles of cooperation, has been admitted by th...

BM1905 COOPERATIVES PT. 1 Definition of Terms A person either natural or juridical who, adhering to the principles set forth in this Member Code and in the articles of cooperation, has been admitted by the cooperative as member The full membership of the cooperative duly assembled for the purpose of exercising all the rights and performing all the obligations pertaining to cooperatives, as provided by this Code, its articles of cooperation and bylaws: General Assembly Provided that for cooperatives with numerous and dispersed membership, the general assembly may be composed of delegates elected by each sector, chapter or district of the cooperative in accordance with the rules and regulations of the Cooperative Development Authority (CDA) The body entrusted with the management of the affairs of the cooperative under Board of Directors its articles of cooperation and bylaws Anybody entrusted with specific functions and responsibilities under the bylaws Committee or resolution of the general assembly or the board of directors The operative act granting juridical personality to a proposed cooperative and is Registration evidenced by a certificate of registration Cooperative The government agency in charge of the registration and regulation of Development Authority cooperatives as such, hereinafter referred to as the Authority Universally Accepted The body of cooperative principles adhered to worldwide by cooperatives. Principles The full membership of a body of representatives elected by each of the sectors, Representative chapter or district of the cooperative duly assembled for the purpose of exercising Assembly such powers lawfully delegated unto them by the general assembly in accordance with its bylaws The members of the board of directors, members of the different committees Officers of the created by the general assembly, general manager or chief executive officer, Cooperatives secretary, treasurer, and members holding other positions as may be provided for in their bylaws A procedure wherein the cooperative assesses its social impact and ethical performance vis-a-vis its stated mission, vision, goals, and code of social responsibility for cooperatives to be established by the Authority in consultation Social Audit with the cooperative sector. It enables the cooperatives to develop a process whereby it can account for its social performance and evaluate its impact on the community and be accountable for its decisions and actions to its regular members. An audit on the efficiency and effectiveness of the cooperative as a whole; its management and officers; and its various responsibility centers as basis for Performance Audit improving individual, team or overall performance and for objectively informing the general membership on such performance Single-line or Single- A cooperative undertaking activities which are related to its main line of business purpose Cooperative or purpose Those which provide any type of service to its members, including but not limited Service Cooperative to, transport, information and communication, insurance, housing, electric, health services, education, banking, and savings and credit Any organization all or majority of whose membership or shareholders come from Subsidiary a cooperative, organized for any other purpose different from that of, and receives Cooperative technical, managerial and financial assistance from, a cooperative, in accordance with the rules and regulations of the Authority Three (3) or more primary cooperatives doing the same line of business, Federation of organized at the municipal, provincial, city, special metropolitan political Cooperatives subdivision, or economic zones created by law, registered with the Authority to undertake business activities in support of its member-cooperatives 12 Handout 1 *Property of STI  [email protected] Page 1 of 14  BM1905 A cooperative is an autonomous and duly registered association of persons, with a common bond of 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. Cooperative Principles (Article 4) a) Voluntary and Open Membership Cooperatives are voluntary organizations, open to all persons able to use their services and willing to accept the responsibilities of membership, without gender, social, racial, cultural, political, or religions discrimination. b) Democratic Member Control Cooperatives are democratic organizations that are controlled by their members who actively participate in setting their policies and making decisions. Men and women serving as elected representatives, directors, or officers are accountable. c) Member Economic Participation Members contribute equitably to, and democratically control, the capital of their cooperative. 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. Members allocate surpluses for any or all of the following purposes: developing the cooperative by setting up reserves, part of which should at least be indivisible; benefitting members in proportion to their patronage of the cooperative’s business; and, supporting other activities approved by the membership. d) Autonomy and Independence Cooperatives are autonomous, self-help organizations controlled by their members. If they enter into agreements with other organizations, including government, or raise capital from external sources, they shall do so on terms that ensure democratic control of their members and maintain their cooperative autonomy. e) Education, Training, and Information Cooperatives shall provide education and training for their members, elected and appointed representatives, managers, and employees, so that they can contribute effectively and efficiently to the development of their cooperatives. f) Cooperation Among Cooperatives Cooperatives serve their members most effectively and strengthen the cooperative movement by working together through local, national, regional, and international structures. g) Concern for Community Cooperatives work for the sustainable development of their communities through policies approved by their members. 12 Handout 1 *Property of STI  [email protected] Page 2 of 14  BM1905 Organization and Registration of Cooperatives Purpose of Cooperatives (Article 6) A cooperative may be organized and registered for any or all of the following purposes: a. To encourage thrift and savings mobilization among the members; b. To generate funds and extend credit to the members for productive and provident purposes; c. To encourage among members systematic production and marketing; d. To provide goods and services and other requirements to the members; e. To develop expertise and skills among its members; f. To acquire lands and provide housing benefits from the members; g. To insure against losses of the members; h. To promote and advance the economic, social and educational status of the members; i. To establish, own, lease or operate cooperative banks, cooperative wholesale and retail complexes, insurance and agricultural/industrial processing enterprises, and public markets; j. To coordinate and facilitate the activities of cooperatives; k. To advocate for the cause of the cooperative movement; l. To ensure the viability of cooperatives through the utilization of new technologies; m. To encourage and promote self-help or self-employment as an engine for economic growth and poverty alleviation; and/or n. To undertake any and all other activities for the effective and efficient implementation of the provisions of this Code. Objectives and Goals of a Cooperative (Article 7) (1) To provide goods and services to its members to enable them to attain increased income, savings, investments, productivity, and purchasing power, and promote among themselves equitable distribution if net surplus through maximum utilization of economies of scale, cost-sharing, and risk-sharing; (2) Provide optimum social and economic benefits to its members; (3) Teach them efficient ways of doing things in a cooperative manner; (4) Propagate cooperative practices and new ideas in business and management; (5) Allow the lower income and less privileged groups to increase their ownership in the wealth of the nation; and (6) Cooperate with the government, other cooperatives and people-oriented organizations to further the attainment of any of the foregoing objectives. Primary Cooperative (Article 10) The following may organize a primary cooperative: Fifteen (15) or more natural persons who are Filipino citizens; Of legal age; Having a common bond of interest; Actually residing or working in the intended area of operation. Must have completed a Pre-Membership Education Seminar (PMES). Liability (Article 12) A cooperative duly registered under this Code shall have limited liability. Term (Article 13) A cooperative shall exist for a period not exceeding 50 years from the date of registration unless sooner dissolved or unless said period is extended. The cooperative term, as originally stated in the articles of cooperation, may be extended for periods not exceeding 50 years; in any single instance by an amendment of the articles of cooperation. No extension can be made earlier than five (5) years prior to the original or subsequent expiry date/dates unless there are justifiable reasons for an earlier extension as may be determined by the Authority. 12 Handout 1 *Property of STI  [email protected] Page 3 of 14  BM1905 Articles of Cooperation (Article 14) All cooperatives applying for registration shall file with the Authority the articles of cooperation, which shall be signed by each of the organizers and acknowledged by them if natural persons, and by the chairpersons or secretaries, if juridical persons, before a notary public. The articles of cooperation shall set forth: a. The name of the cooperative which shall include the word ‘cooperative;’ b. The purpose or purposes and scope of business for which the cooperative is to be registered; c. The term of existence of the cooperative; d. The area of operation and the postal address of its principal office; e. The names, nationality, and the postal addresses of the registrants; f. The common bond of membership; g. The list of names of the directors who shall manage the cooperative; h. The amount of its share capital, the names and residences of its contributors and a statement of whether the cooperative is primary, secondary or tertiary in accordance with Article 23; and i. The articles of cooperation may also contain any other provisions not inconsistent with this Code or any related law. Note: No cooperative, other than a cooperative union, shall be registered unless the articles of cooperation is accompanied with the bonds of the accountable officers and a sworn statement of the treasurer elected by the subscribers showing that at least 25% of the authorized share capital has been subscribed and at least 25% of the total subscription has been paid. In no case shall the paid-up share capital be less than P15,000. Bylaws (Article 15) Each cooperative to be registered under this Code shall adopt bylaws not inconsistent with the provisions of this Code. The bylaws shall be filed at the same time as the articles of cooperation. The bylaws of each cooperative shall provide: a. The qualifications for admission to membership and the payment to be made or interest to he acquired as a condition for the exercise of the right of membership; b. The rights and liabilities of membership; c. The circumstances under which membership is acquired, maintained, lost; d. The procedure to be followed in cases of termination of membership; e. The conditions under which the transfer of a share or interest of the members shall be permitted; f. The rules and procedures on the agenda, time, place, and manner of calling, convening, conducting meetings, quorum requirements, voting systems, and other matters relative to the business affairs of the general assembly, board of directors, and committees; g. The general conduct of the affairs of the cooperative, including the powers and duties of the general assembly, the board of directors, committees and the officers, and their qualifications and disqualifications; h. The manner in which the capital may be raised and the purpose for which it can be utilized; i. The mode of custody and of investment of not surplus; j. The accounting and auditing systems; k. The manner of loaning and borrowing, including limitations thereof; l. The method of distribution of net surplus; m. The manner of adopting, amending repealing, and abrogating bylaws; n. A conciliation or mediation mechanism for the amicable settlement of disputes among members, directors, officers and committee members of the cooperative; and o. Other matters incident to the purposes and activities of the cooperative. 12 Handout 1 *Property of STI  [email protected] Page 4 of 14  BM1905 Amendment of Articles of Cooperation and Bylaws (Article 18) a. The articles of cooperation and bylaws may be amended by two-thirds (2/3) vote of all the members with voting rights, without prejudice to the right of the dissenting members to exercise their right to withdraw their membership under Article 30. b. Both the original and amended articles and/or bylaws shall contain all provisions required by law to be set out in the articles of cooperation and bylaws. Amendments shall be indicated by underscoring or otherwise appropriately indicating the change or changes made and a copy of the amended articles or amended bylaws duly certified under oath by the cooperative secretary and a majority of the directors stating the fact that said amendment or amendments to the articles of cooperation and/or bylaws have been duly approved by the required vote of the members. c. All amendments to the articles of cooperation and/or bylaws shall be submitted to the Authority. The amendments shall take effect upon its approval by the Authority or within 30 days from the date of filing thereof if not acted upon by the Authority for a cause not attributable to the cooperative Registration (Article 16) A cooperative acquires juridical personality from the date the Authority issues a certificate of registration under its official seal. All applications for registration shall be finally disposed of by the Authority within 60 days from the filing thereof; otherwise the application is deemed approved, unless the cause of the delay is attributable to the applicant. In case of a denial of the application for registration, an appeal shall lie with the Office of the President within 90 days from receipt of notice of such denial. Failure of the Office of the President to act on the appeal within 90 days from the filing thereof shall mean approval of said application. Certificate of Registration (Article 17) A certificate of registration issued by the Authority under its official seal shall be conclusive evidence that the cooperative therein mentioned is duly registered unless it is proved that the registration thereof has been canceled. Administration Figure 1. Organizational Structure of a Cooperative Source: https://www.slideshare.net/jobitonio/basic-cooperative-education-seminar 12 Handout 1 *Property of STI  [email protected] Page 5 of 14  BM1905 General Assembly (Article 32) The general assembly shall be composed of such members who are entitled to vote under the articles of cooperation and bylaws of the cooperative. Powers of the General Assembly (Article 33) The general assembly shall be the highest policy-making body of the cooperative and shall exercise such powers as are stated in this Code, in the articles of cooperation and the bylaws of the cooperative. The general assembly shall have the following exclusive powers which cannot be delegated: (1) To determine and approve amendments to the articles of cooperation and bylaws; (2) To elect or appoint the members of the board of directors, and to remove them for cause. However, in the case of the electric cooperatives registered under this Code, election of the members of the board shall be held in accordance with its bylaws or election guidelines of such electric cooperative; and (3) To approve developmental plans of the cooperative. Meetings (Article 34) (1) Regular meeting It shall be held annually by the general assembly on a date fixed in the bylaws, or if not so fixed, on any date within 90 days after the close of each fiscal year. Notice of regular meetings shall be sent in writing, by posting or publication, or through other electronic means to all members of record; (2) Special Meeting Whenever necessary, a special meeting of the general assembly may be called at any time by a majority vote of the board of directors or as provided for in the bylaws. A notice in writing shall be sent one (1) week prior to the meeting to all members who are entitled to vote. However, a special meeting shall be called by the board of directors after compliance with the required notice within one (1) month after receipt of a request in writing from at least 10% of the total members who are entitled to vote to transact specific business covered by the call. If the board fails to call a regular or a special meeting within the given period, the Authority, upon petition of 10% of all the members of the cooperative who are entitled to vote, and for good cause shown, shall issue an order to the petitioners directing them to call a meeting of the general assembly by giving proper notice as required in this Code or in the bylaws. The Authority may call a special meeting of the cooperative to report to the members the result of any examination, or other investigation of the cooperative affairs (3) Special General Assembly In the case of a newly approved cooperative, a special general assembly shall be called, as far as practicable, within 90 days from such approval. Note: Notice of any meeting may be waived, expressly or impliedly, by any member. Quorum (Article 35) A quorum shall consist of at least 25% of all the members entitled to vote. In the case of cooperative banks, the quorum shall be as provided in Article 99. In the case of electric cooperatives, a quorum, unless otherwise provided in the bylaws, shall consist of 5% of all the members entitled to vote. Voting System (Article 36) Each member of a primary cooperative shall have only one (1) vote. In the case of members of secondary or tertiary cooperatives, they shall have one (1) basic vote and as many incentive votes as provided for in the bylaws but not to exceed five (5) votes. The votes cast by the delegates shall be deemed as votes cast by the members thereof. However, the bylaws of a cooperative other than a primary may provide for voting by proxy. Voting by proxy means allowing a delegate of a cooperative to represent or vote in behalf of another delegate of the same cooperative. 12 Handout 1 *Property of STI  [email protected] Page 6 of 14  BM1905 Composition and Term of the Board of Directors (Article 37) Unless otherwise provided in the bylaws, the direction and management of the affairs ‘of a cooperative shall be vested in a Board of Directors which shall be composed of not less than five (5) nor more than fifteen (15) members elected by the general assembly for a term fixed in the bylaws but not exceeding a term of two (2) years and shall hold office until their successors are duly elected and qualified, or until duly removed for cause. Powers of the Board of Directors (Article 38) The board of directors shall be responsible for the strategic planning, direction-setting, and policy formulation activities of the cooperatives. Director (Article 39) (1) Any member of a cooperative who, under the bylaws of the cooperative, has the right to vote and who possesses all the qualifications and none of the disqualifications provided in the laws or the bylaws shall be eligible for election as director. (2) The cooperative may, by resolution of its board of directors, admit as director, or committee member one appointed by any financing institution from which the cooperative received financial assistance solely to provide technical knowledge not available within its membership. Such director or committee member need not be a member of the cooperative and shall have no powers, rights nor responsibilities except to provide technical assistance as required by the cooperative. (3) The members of the board of directors shall not hold any other position directly involved in the day to day operation and management of the cooperative. (4) Any person engaged in a business similar to that of the cooperative or who in any way has a conflict of interest with it, is disqualified from election as a director of said cooperative. Meeting of the Board and Quorum Requirement (Article 40) (1) In the case of primary cooperatives, regular meetings of the board of directors shall be held at least once a month. (2) Special meetings of the board of directors may be held at any time upon the call of the chairperson or a majority of the members of the board Provided that written notices of the meeting specifying the agenda of the special meeting shall be given to all members of the board at least one (1) week before the said meeting. (3) A majority of the members of the board shall constitute a quorum for the conduct of business, unless the bylaws provide otherwise. (4) Directors cannot attend or vote by proxy at board meetings. Vacancy in the Board of Directors (Article 41) Any vacancy in the board of directors, other than by expiration of term, may be filled by the vote of at least a majority of the remaining directors, if still constituting a quorum; otherwise, the vacancy must be filled by the general assembly in a regular or special meeting called for the purpose. A director so elected to fill a vacancy shall serve only the unexpired term of his predecessor in office. Officers of the Cooperative (Article 42) The board of directors shall elect from among themselves the chairperson and vice-chairperson, and elect or appoint other officers of the cooperative from outside of the board in accordance with their bylaws. All officers shall serve during good behavior and shall not be removed except for cause after due hearing. Loss of confidence shall not be a valid ground for removal unless evidenced by acts or omission causing loss of confidence in the honesty and integrity of such officer. No two (2) or more persons with relationships up to the third civil degree of consanguinity or affinity nor shall any person engaged in a business similar to that of the cooperative nor who in any other manner has interests in conflict with the cooperative shall serve as an appointive officer. 12 Handout 1 *Property of STI  [email protected] Page 7 of 14  BM1905 Committees of Cooperatives (Article 43) (1) The bylaws may create an executive committee to be appointed by the board of directors with such powers and duties as may be delegated to it in the bylaws or by a majority vote of all the members of the board of directors. (2) The bylaws shall provide for the creation of an audit, election, mediation and conciliation, ethics, and such other committees as may be necessary for the conduct of the affairs of the cooperative. The members of both the audit and election committees shall be elected by the general assembly and, the rest shall be appointed by the board. The audit committee shall be directly accountable and responsible to the general assembly. It shall have the power and duty to continuously monitor the adequacy and effectiveness of the cooperative’s management control system and audit the performance of the cooperative and its various responsibility centers. Functions, Responsibilities, and Training Requirements of Directors, Officers, and Committee Members (Article 44) The functions and responsibilities of the directors, officers, and committee members, as well as their training requirements, shall be in accordance with the rules and regulations issued by the Authority. Liability of Directors, Officers and Committee Members (Article 45) Directors, officers, and committee members, who willfully and knowingly vote for or assent to patently unlawful acts or who are guilty of gross negligence or bad faith in directing the affairs of the cooperative or acquire any personal or pecuniary interest in conflict with their duty as such directors, officers, or committee members shall be liable jointly and severally for all damages or profits resulting therefrom to the cooperative, members and other persons. When a director, officer, or committee member attempts to acquire or acquires, in violation of his duty, any interest or equity adverse to the cooperative in respect to any matter which has been reposed in him in confidence, he shall, as a trustee for the cooperative, be liable for damages and shall be accountable for double the profits which otherwise would have accrued to the cooperative. Compensation (Article 46) (1) In the absence of any provision in the bylaws fixing their compensation, the directors shall not receive any compensation except for reasonable per diems. The directors and officers shall not be entitled to any per diem when, in the preceding calendar year, the cooperative reported a net loss or had a dividend rate less than the official inflation rate for the same year. Any compensation other than per diems may be granted to directors by a majority vote of the members with voting rights at a regular or special general assembly meeting specifically called for the purpose. However, no additional compensation other than per diems shall be paid during the first year of existence of any cooperative. (2) The compensation of officers of the cooperative as well as the members of the committees created pursuant to this Code or its bylaws may be fixed in the bylaws. (3) Unless already fixed in the bylaws, the compensation of all other employees shall be determined by the board of directors. Dealings of Directors, Officers, or Committee Members (Article 47) A contract entered into by the cooperative with one (1) or more of its directors, officers, and committee members is voidable, at the option of the cooperative, unless all the following conditions are present: (1) That the presence of such director in the board meeting wherein the contract was approved was not necessary to constitute a quorum for such meeting; (2) That the vote of such director was not necessary for the approval of the contract; (3) That the contract is fair and reasonable under the circumstances; and (4) That in the case of an officer or committee member, the contract with the officer or committee member has been previously authorized by the general assembly or by the board of directors. 12 Handout 1 *Property of STI  [email protected] Page 8 of 14  BM1905 Where any of the first two (2) conditions set forth in the preceding paragraph is absent, in the case of a contract with a director, such contract may be ratified by a three-fourths (3/4) vote of all the members with voting rights, present and constituting a quorum in a meeting called for the purpose. However, full disclosure of the adverse interest of the directors involved shall be made at such meeting, and that the contract is fair and reasonable under the circumstances. Disloyalty of a Director (Article 48) A director who, by virtue of his office, acquires for himself an opportunity which should belong to the cooperative shall be liable for damages and must account for double the profits that otherwise would have accrued to the cooperative by refunding the same, unless his act has been ratified by a three fourths (3/4) vote of all the members with voting rights, present and constituting a quorum. This provision shall be applicable, even though the director used his own funds in the venture. Illegal Use of Confidential Information (Article 49) (1) A director or officer, or an associate of a director or officer, who, for his benefit or advantage or that of an associate, makes use of confidential information that, if generally known, might reasonably be expected to adversely affect the operation and viability of the cooperative, shall be held: a. Liable to compensate the cooperative for the direct losses suffered by the cooperative as a result of the illegal use of information; and b. Accountable to the cooperative for any direct benefit or advantage received or yet to be received by him or his associate, as a result of the transaction. (2) The cooperative shall take the necessary steps to enforce the liabilities described in subsection a. Removal of Elected Officer (Article 50) All complaints for the removal of any elected officer shall be filed with the board of directors. Such officer shall be given the opportunity to be heard. The majority of the board of directors may place the officer concerned under preventive suspension pending the resolution of the investigation. Upon finding of a prima facie evidence of guilt, the board shall present its recommendation for removal to the general assembly. An elective officer may be removed by three-fourths (3/4) votes of the regular members present and constituting a quorum, in a regular or special general assembly meeting called for the purpose. The officer concerned shall be given an opportunity to be heard at said assembly. Responsibilities, Rights, and Privileges Official Address (Article 51) Every cooperative shall have an official postal address to which all notices and communications shall be sent. Such address and every change thereof shall be registered with the Authority. Books to be Kept Open (Article 52) (1) Every cooperative shall have the following documents ready and accessible to its members and representatives of the Authority for inspection during reasonable office hours at its official address: a. A copy of the regulations of the Authority; b. A copy of the articles of cooperation and bylaws of the cooperative; c. A register of members; d. The books of the minutes of the meetings of the general assembly, board of directors, and committees; e. Share books, where applicable; f. Financial statements; and g. Such other documents as may be prescribed by laws or the bylaws. (2) The accountant or the bookkeeper of the cooperative shall be responsible for the maintenance and safekeeping of the books and records of account of the cooperative in accordance with generally accepted accounting practices. He shall also be responsible for the production of the same at the time of audit or inspection. (3) Each cooperative shall maintain records of accounts such that the true and correct condition and the results of the operation of the cooperative may be ascertained therefrom at any time. The financial statements audited according to generally accepted auditing standards, principles, and practices shall be published annually and shall be kept posted in a conspicuous place in the principal office of the cooperative. 12 Handout 1 *Property of STI  [email protected] Page 9 of 14  BM1905 (4) Subject to the pertinent provisions of the National Internal Revenue Code and other laws, a cooperative may dispose by way of burning or other method of complete destruction any document, record or book pertaining to its financial and nonfinancial operations which are already more than five (5) years old except those relating to transactions which are the subject of civil, criminal, and administrative proceedings. An inventory of the audited documents, records, and books to be disposed of shall be drawn up and certified to by the board secretary and the chairman of the audit committee and presented to the board of directors which may thereupon approve the disposition of said records. Reports (Article 53) (1) Every cooperative shall draw up regular reports of its program of activities, including those in pursuance of their socio-civic undertakings, showing their progress and achievements at the end of every fiscal year. The reports shall be made accessible to its members, and copies thereof shall be furnished to all its members of record. These reports shall be filed with the Authority within 120 days from the end of the calendar year. The form and contents of the reports shall be as prescribed by the rules of the Authority. Failure to file the required reports shall subject the accountable officer/s to fines and penalties as may be prescribed by the Authority, and shall be a ground for the revocation of authority of the cooperative to operate as such. The fiscal year of every cooperative shall be the calendar year, except as may be otherwise provided in the bylaws. (2) If a cooperative fails to make, publish, and file the reports required herein, or fails to include therein any matter required by this Code, the Authority shall, within 15 days from the expiration of the prescribed period, send such cooperative a written notice, stating its noncompliance and the commensurate fines and penalties that will be imposed until such time that the cooperative has complied with the requirements. Register of Members (Article 54) Any register or list of members or shares kept by any registered cooperative shall be prima facie evidence of the following particulars entered therein: (1) The date on which the name of any person was entered in such register or list as member; and (2) The date on which any such person ceased to be a member. Probative Value of Certified Copies of Entries (Article 55) (1) A copy of any entry in any book, register or list regularly kept in the course of business in the possession of a cooperative shall, if duly certified in, accordance with the, rules of evidence, be admissible as evidence of the existence of the entry and prima facie evidence of the matters and transactions therein recorded. (2) A copy of any entry in any book, register or list regularly kept in the course of business in the possession of a cooperative shall, if duly certified in, accordance with the rules of evidence, be admissible as evidence of the existence of the entry and prima facie evidence of the matters and transactions therein recorded Bonding of Accountable Officers (Article 56) Every director, officer, and employee handling funds, securities or property on behalf of any cooperative shall be covered by a surety bond to be issued by a duly registered insurance or bonding company for the faithful performance of their respective’ duties and obligations. The board of directors shall determine the adequacy of such bonds. Upon the filing of the application for registration of a cooperative, the bonds of the accountable officers shall be required by the Authority. Such bonds shall be renewed annually, and the Authority shall accordingly be informed of such renewal. Preference of Claims (Article 57) (1) Notwithstanding the provisions of existing laws, rules, and regulations to the contrary, but subject to the prior claim of the Authority, any debt due to the cooperative from a member shall constitute a first lien upon any raw materials, production inputs, and products produced; or any land, building, facilities, equipment, goods or services acquired and held, by such member through the proceeds of the loan or credit granted by the cooperative to him for as long as the same is not fully paid. (2) No property or interest on property, which is subject to a lien under paragraph (1), shall be sold nor conveyed to third parties without the prior permission of the cooperative. The lien upon the property or 12 Handout 1 *Property of STI  [email protected] Page 10 of 14  BM1905 interest shall continue to exist even after the sale or conveyance thereof until such lien has been duly extinguished. (3) Notwithstanding the provisions of any law to the contrary, any sale or conveyance made in contravention of paragraph (2) hereof shall be void. Instrument for Salary or Wage Deduction (Article 58) (1) A member of a cooperative may, notwithstanding the provisions of existing laws to the contrary, execute an instrument in favor of the cooperative authorizing his employer to deduct from his/her salary or wages, commutation of leave credits and any other monetary benefits payable to him by the employer and remit such amount as may be specified in satisfaction of a debt or other demand due from the member to the cooperative. (2) Upon the execution of such instrument and as may be required by the cooperative contained in a written request, the employer shall make the deduction in accordance with the agreement and remit forthwith the amount so deducted within 10 days after the end of the payroll month to the cooperative. The employer shall make the deduction for as long as such debt or other demand remains unpaid by the employee. (3) The term ’employer’ as used in this article shall include all private firms and the national and local governments and government-owned or controlled corporations who have under their employ a member of a cooperative and have agreed to carry out the terms of the instrument mentioned in paragraphs (1) and (2) of this article. (4) The provisions of this article shall apply to all similar agreements referred to in paragraph (1) and were enforced prior to the approval of this Code. (5) Notwithstanding the provisions of existing laws to the contrary, the responsibilities of the employer as stated in paragraphs (1) and (2) of this article shall be mandatory: Provided, that in the case of a private employer, the actual and reasonable costs of deducting and remitting may be collected. Primary Lien (Article 59) Notwithstanding the provisions of any law to the contrary, a cooperative shall have a primary lien upon the capital, deposits, or interest of a member for any debt due to the cooperative from such a member. Tax Treatment of Cooperatives (Article 60) Duly registered cooperatives under this Code, 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 not falling under this article shall be governed by the succeeding section. Tax and Other Exemptions (Article 61) Cooperatives transacting business with both members and non-members shall not be subject to tax on their transactions with members. In relation to this, the transactions of members with the cooperative shall not be subject to any taxes and fees, including but not limited to final taxes on members’ deposits and documentary tax. Notwithstanding the provisions of any law or regulation to the contrary, such cooperatives dealing with nonmembers shall enjoy the following tax exemptions: (1) Cooperatives with accumulated reserves and undivided net savings of not more than P10,000,000 shall be exempt from all national, city, provincial, municipal, or barangay taxes of whatever name and nature. Such cooperatives shall be exempt from, customs duties, advance sales, or compensating taxes on their importation of machinery, equipment, and spare parts used by them and which are not available locally as certified by the Department of Trade and Industry (DTI). All tax-free importations shall not be sold nor the beneficial ownership thereof be transferred to any person until after five (5) years; otherwise, the cooperative and the transferee or assignee shall be solidarily liable to pay twice the amount of the imposed tax and/or duties. (2) Cooperatives with accumulated reserves and undivided net savings of more than P10,000,000 shall pay the following taxes at the full rate: a. Income Tax - On the amount allocated for interest on capitals: Provided, that the same tax is not consequently imposed on interest individually received by members: Provided, further, that cooperatives, regardless of classification, are exempt from income tax from the date of registration with the Authority; 12 Handout 1 *Property of STI  [email protected] Page 11 of 14  BM1905 b. Value-Added Tax - On transactions with non-members: Provided, however, that cooperatives duly registered with the Authority, are exempt from the payment of value-added tax, subject to Section 109, sub-sections L, M and N of Republic Act No. 9337, the National Internal Revenue Code, as amended: Provided, that the exempt transaction under Section 109 (L) shall include sales made by cooperatives duly registered with the Authority organized and operated by its members to undertake the production and processing of raw materials or of goods produced by its members into finished or processed products for sale by the cooperative to its members and non-members: Provided, further, that any processed product or its derivative arising from the raw materials produced by its members, sold in the name and for the account of the cooperative, shall be deemed a product of the cooperative: Provided, finally, that at least 25% of the net income of the cooperatives is returned to the members in the form of interest and/or patronage refunds; c. All other taxes unless otherwise provided herein; and d. Donations to charitable, research, and educational institutions and reinvestment to socioeconomic projects within the area of operation of the cooperative may be tax-deductible. (3) All cooperatives, regardless of the amount of accumulated reserves and undivided net savings, shall be exempt from payment of local taxes and taxes on transactions with banks and insurance companies: Provided, that all sales or services rendered for non-members shall be subject to the applicable percentage taxes except sales made by producers, marketing or service cooperatives: Provided, further, that nothing in this article shall preclude the examination of the books of accounts or other accounting records of the cooperative by duly authorized internal revenue officers for internal revenue tax purposes only, after previous authorization by the Authority. (4) In areas where there are no available notary public, the judge, exercising his ex officio capacity as notary public, shall render service, free of charge, to any person or group of persons requiring the administration of oath or the acknowledgment of articles of cooperation and instruments of loan from cooperatives not exceeding P500,000. (5) Any register of deeds shall accept for registration, free of charge, any instrument relative to a loan made under this Code which does not exceed P250,000 or the deeds of title of any property acquired by the cooperative or any paper or document drawn in connection with any action brought by the cooperative or with any court judgment rendered in its favor or any instrument relative to a bond of any accountable officer of a cooperative for the faithful performance of his duties and obligations. (6) Cooperatives shall be exempt from the payment of all court and sheriff’s fees payable to the Philippine Government for and in connection with all actions brought under this Code, or where such actions are brought by the Authority before the court, to enforce the payment of obligations contracted in favor of the cooperative. (7) All cooperatives shall be exempt from putting up a bond for bringing an appeal against the decision of an inferior court or for seeking to set aside any third-party claim: Provided, that a certification of the Authority showing that the net assets of the cooperative are in excess of the amount of the bond required by the court in similar cases shall be accepted by the court as a sufficient bond. (8) Any security issued by cooperatives shall be exempt from the provisions of the Securities Act, provided such security shall not be speculative. 12 Handout 1 *Property of STI  [email protected] Page 12 of 14  BM1905 Privileges of Cooperatives (Article 62) Cooperatives shall, notwithstanding the provisions of any law to the contrary, be also accorded the following privileges: (1) Cooperatives shall enjoy the privilege of depositing their sealed cash boxes or containers, documents or any valuable papers in the safes of the municipal or city treasurers and other government offices free of charge, and the custodian of such articles shall issue a receipt acknowledging the articles received duly witnessed by another person; (2) Cooperatives organized among government employees, notwithstanding any law or regulation to the contrary, shall enjoy the free use of any available space in their agency, whether owned or rented by the Government; (3) Cooperatives rendering special types of services and facilities such as cold storage, ice plant, electricity, transportation, and similar services and facilities shall secure a franchise therefor, and such cooperatives shall open their membership to all persons qualified in their areas of operation; (4) In areas where appropriate cooperatives exist, the preferential right to supply government institutions and agencies rice, corn and other grains, fish and other marine products, meat, eggs, milk, vegetables, tobacco and other agricultural commodities produced by their members shall be granted to the cooperatives concerned; (5) Preferential treatment in the allocation of fertilizers, including seeds and other agricultural inputs and implements, and in rice distribution shall be granted to cooperatives by the appropriate government agencies; (6) Preferential and equitable treatment in the allocation or control of bottomries of commercial shipping vessels in connection with the shipment of goods and products of cooperatives; (7) Cooperatives and their federations, such as farm and fishery producers and suppliers, market vendors and such other cooperatives, which have for their primary purpose the production and/or the marketing of products from agriculture, fisheries and small entrepreneurial industries and federations thereof, shall have preferential rights in the management of public markets and/or lease of public market facilities, stalls or spaces: Provided, that these rights shall only be utilized exclusively by cooperatives: Provided, further, That no cooperative forming a joint venture, partnership or any other similar arrangement with a non- cooperative entity can utilize these rights; (8) Cooperatives engaged in credit services and/or federations shall be entitled to loans, credit lines, rediscounting of their loan notes, and other eligible papers with the Development Bank of the Philippines (DBP), the Land Bank of the Philippines (LBP), and other financial institutions except the Bangko Sentral ng Pilipinas (BSP); The Philippine Deposit Insurance Corporation (PDIC) and other government agencies, government- owned and controlled corporations and government financial institutions shall provide technical assistance to registered national federations and unions of cooperatives which have significant engagement in savings and credit operations in order for these federations and unions to establish and/or strengthen their own autonomous cooperative deposit insurance systems; (9) A public transport service cooperative may be entitled to financing support for the acquisition and/or maintenance of land and sea transport equipment, facilities, and parts through the program of the government financial institutions. It shall have the preferential right to the management and operation of public terminals and porta whether land or sea transport where the cooperative operates and on securing a franchise for active or potential routes for the public transport; (10) Cooperatives transacting business with the Government of the Philippines or any of its political subdivisions or any of its agencies or instrumentalities, including government-owned and controlled corporations shall be exempt from prequalification bidding requirements, notwithstanding the provisions of Republic Act No. 9184, otherwise known as, the Government Procurement Act; (11) Cooperatives shall enjoy the privilege of being represented by the provincial or city fiscal or the Office of the Solicitor General, free of charge, except when the adverse party is the Republic of the Philippines; 12 Handout 1 *Property of STI  [email protected] Page 13 of 14  BM1905 (12) Cooperatives organized by faculty members and employees of educational institutions shall have the preferential right in the management of the canteen and other services related to the operation of the educational institution where they are employed: Provided, that such services are operated within the premises of the said educational institution; and (13) The appropriate housing agencies and government financial institutions shall create a special window for financing housing projects undertaken by cooperatives, with interest rates and terms equal to, or better than those given for socialized housing projects. This financing shall be in the form of blanket loans or long-term wholesale loans to qualified cooperatives, without need for individual processing. REFERENCE: Republic of the Philippines. (2008). Republic Act No. 9250: An Act Amending the Cooperatives Code of the Philippines to be known as the “Philippines Cooperative Code of 2008”. Retrieved October 8, 2019, from https://www.lawphil.net/statutes/repacts/ra2009/ra_9520_2009.html 12 Handout 1 *Property of STI  [email protected] Page 14 of 14