ABOUT COOPERATIVE
PRINCIPLES IN COOPERATIVISM
KINDS OF COOPS
STEPS IN FORMING A COOP
ABOUT MEMBERSHIP
ABOUT REGISTRATION
ECONOMIC SURVEY
COOP BYLAWS
ARTICLE OF COOPERATION
HOW TO MANAGE YOUR COOPERATIVE
| WHAT IS A COOPERATIVE ? |
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 contributions to the capital required and accepting a fair share of the risks and benefits of the undertaking in accordance with universally accepted cooperative principles.
By forming a cooperative, you pool money, human resources and talent to build a capital, and work together to produce more goods and raise incomes. Through cooperatives, you can look for the other sources of loans at low interest rates instead of borrowing from informal lenders or usurers. The cooperative can also be a mechanism for marketing your produce.
| WHAT ARE THE PRINCIPLES IN COOPERATIVISM ? |
The cooperative principles were reformulated by the International Cooperative Alliance in Vienna in 1996 during its 23 Congress.
The first principle is anchored on voluntarism. This means that each member of a cooperative becomes a member voluntarily and is not restricted by social, political or religious discrimination. In fact anyone who meets the qualifications set by a cooperative's bylaws can be a member if he willingly shoulders the responsibility.
The second principle is democracy. Crops are democratic organizations with officers and managers elected or appointed in a manner agreed on by members. Each member, no matter the amount of his share, is entitled to one vote.
The third principle is the limitation of share capital interest. In the context of cooperativism, interest on a member's share capital is limited so that no person - especially those with money - can have an overwhelming equity in the coop. This prevents the domination of the coop's affairs by wealthy members at the expense of poorer members and the organization as a whole.
The fourth principle, essentially a manifestation of the third principle, revolves on the sharing and allocation of cooperative surplus or savings. At bottom, it mandates distribution of surplus equitably so that no member, gains at the expense of another. Surpluses are, by decision of the members, used for developing the coop's business interests, providing common services to members, distribution among members in proportion to their transaction with the cooperative.
The fifth principle makes provision for the education and training of cooperative members, officers and employees, and of the general public in the principles and techniques of cooperation.
The sixth principle harps on the promotion of cooperation between cooperatives at local, national and international levels.
| KINDS OF COOPERATIVES |
| Credit Cooperative - promotes thrift and savings among its members and creates funds in order to grant loans for productive and provident purposes; | |
| Consumer Cooperative - the primary purposes is to procure and distribute commodities to members and non-members; | |
| Producers Cooperative - undertakes joint production whether agricultural or industrial; | |
| Marketing Cooperative - engages in the supply of production inputs to members, and markets their products; | |
| Service Cooperatives - engages in medical and dental care, hospitalization, transportation, insurance, housing, labor, electric light and power, communication and other services; and | |
| Multi-Purpose Cooperative - combines two (2) or more of the business activities of these different types of cooperatives. |
According to membership and territory, the following are the categories of cooperatives:
In terms of membership:
| Primary - The members of which are natural persons of legal age; | |
| Secondary - The members of which are primaries; | |
| Tertiary - The members of which are secondaries upward to one or more apex organizations. Cooperatives whose members are cooperatives are called federations or unions. |
In terms of territory, cooperatives are categorized according to areas of operation which may or may not coincide with the political subdivisions of the country.
| GENERAL STEPS IN FORMING A COOPERATIVE |
Basically, there are six steps in setting up a cooperative.
1. Get organized. You must have at least 15 members to do that. At once determine the common problems you would want solved and the basic needs you would want provided for through a cooperative. You may want to include increasing of your production, marketing of your produce, credit assistance, power generation, banking or insurance and other similar needs.
Determining your problems and needs will also help you classify the kind of a cooperative you will be organizing.
Even before a coop is set up, a dedicated core group of people who will do all organizational and paper works is a must. From his core group, working committees may include membership, finance, executive, secretariat to name a few.
2. Prepare a general statement called an economic survey. This statement will help you measure your cooperative's chances of success.
3. Draft the cooperative's bylaws. The bylaws contain the rules and regulations governing the operation of the cooperative.
4. Draft the articles of cooperation. Here you indicate the name of the cooperative, its members, term of existence and other pertinent description about your cooperative.
5. Secure bond of your accountable officer (s) normally the treasurer, or the treasurer and the manager. The amount of the bond is to be decided upon by the Board of Directors, based on the initial networth of the cooperative which includes the paid-up capital, membership fees and other assets of the cooperative at the time of registration.
6. Register your cooperative with the Cooperative Development Authority (CDA). You must submit four copies each of Accountable Officer (s).
In every step, you may consult the CDA. The CDA emphasizes education as a key to the success of cooperatives.
| WHO MAY BECOME THE MEMBERS OF A PRIMARY COOPERATIVE? |
If you are Filipino, of legal age, you can be a coop member if you meet the qualifications prescribed by the coop's bylaws.
The board of directors act on application for membership.
A member may exercise his rights only after having paid the fees for membership and acquired shares in the cooperative.
KINDS OF MEMBERSHIP IN A COOPERATIVE
A cooperative has two kinds of members; regular members and associate members.
A regular member is entitled to all the rights and privileges of membership as stated in the Cooperative Code and the coop's bylaws.
An associate member has no right to vote and be voted upon and is entitled only to such rights and privileges provides by the cooperative's bylaws.
MINIMUM NUMBER OF MEMBERS IN A COOPERATIVE
Fifteen (15) natural persons of legal age who are citizens of the Philippines.
CAN GOVERNMENT OFFICERS AND EMPLOYEES JOIN A COOPERATIVE?
Yes, provided that:
| Any officer employee of the CDA shall be disqualified to be elected or appointed to any position in a cooperative; | |
| Elected officials of the government, except barangay officials, shall be ineligible to become officers and directors of cooperatives; and | |
| Any government employee may, in the discharge of his duties as member in the cooperative, use official time provided that the operations of the office he works are not adversely affected. |
| ECONOMIC SURVEY |
An economic survey is a general statement describing the structure, purpose,
economic feasibility of the proposed cooperative, area of operation, size of
membership and other pertinent data. It is, in fact, a project feasibility
study. The structure describes the kind of cooperative being set up, whether it
is primary, secondary or tertiary and whether it is a credit, consumer transport
or any other type of coop.
The purpose defines the primary, secondary and other objective of the cooperative. The area of operation merely indicates the geographical or sectoral scope of the coop. For example, a cooperative may operate in, say, Caloocan City; or it may operate in a certain social sector like farmers. Size of membership is important so as to set limits to the coop's scope of operation. This is closely related to cooperative structure.
The most important part of the survey is the economic feasibility. Here the prospective coop members estimate the incomes and expenses of the cooperative. It makes a projection of the possible growth pattern of the coop over a certain period, preferably three (3) years, and how this growth generates income and incurs expenses. It tries to anticipate possible obstacles and constraints and make allowances for them.
| COOPERATIVE BYLAWS |
Bylaws are the set of rules that determines how a cooperative is to be run
without confusion.
In general, bylaws should be consistent with the provisions of the Cooperative Code of the Philippines (RA 6938). The bylaws include:
| The qualifications for membership; how they are acquired, maintained and lost; | |
| The rights and obligations of members; | |
| The condition for transfer of a share or interest; | |
| The rules and procedures covering agenda, time, place and manner of calling, convening, conduct meeting, quorum requirements, voting system, and other matters related to the business affairs of the general assembly, board of directors, and committees; | |
| The general conduct of the affairs of the cooperative, including the powers and duties of the general assembly, board of directors, committees and the officers, and their qualifications and disqualifications; | |
| The manner in which capital may be raised and purposes for which it can be utilized; | |
| The mode of custody and investment of net surplus | |
| The accounting and auditing systems; | |
| The manner and limitations of loaning and borrowing, including limitations; | |
| The method of distribution of net surplus; | |
| The manner of adopting, amending, repealing, and abrogating by-laws; | |
| A conciliation or mediation mechanism for the amicable settlement of disputes among members, directors, officers and committees; and | |
| Other matter pertaining to the purposes and activities of the cooperative. |
| WHAT DOES THE ARTICLE OF COOPERATION CONTAIN ? |
The Article of Cooperation is a duly notarized document that legally binds all the signatories in the signatories in the formation of a cooperative.
It should contain:
| The name of the cooperative which shall include the word "cooperative," e.g. Sta. Maria Multi-purpose Cooperative; | |
| The purpose of purposes and scope of business; | |
| The term of existence of the cooperative (not more than 50 years); | |
| The area of operation and the postal addresses of the registrants; | |
| The common bond of membership; | |
| The list of names of the directors who shall manage the cooperative; and | |
| 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 of R.A. 6938. |
| WHERE TO REGISTER A COOPERATIVE ? |
The Cooperative Development Authority is the only government agency empowered to register all types of cooperatives.
See office directory for the location of central office and extension offices.
GENERAL REQUIREMENTS IN REGISTERING A COOPERATIVE
You will have to submit four copies of the Economic Survey, Bylaws and Article of Cooperation.
The Article of Cooperation should be accompanied by the following:
| Bonds of the accountable officers (any director, officer and employee handling funds, securities or properties on behalf of the cooperative. The board of directors determines the amount of bonds required based on the initial networth which shall include the paid-up capital, membership fees and other assets of the cooperative at the time of registration); and | |
| Sworn statement of the treasurer showing that at least 25% of the
authorized share has been subscribed and at least 25% of the total
subscription has been paid. The paid-up capital must not be less than
P2,000. It must be noted that no member may won more than 20% of the
subscribed capital; and that each share must not be less than P1.00. |
Notes:
* Registration fee should be paid to the
authorized CDA staff according to this schedule.
* One tenth (1/10) of one percent of the paid up share capital with the minimum of
| Laboratory Cooperative ------------- NO FEE | |
| New Primary Cooperative ------------- P 250.00 | |
| Secondary Cooperative ------------- P 500.00 | |
| Tertiary Coop ------------- P 2,000.00 | |
| Amendments i compliance with RA6938 NO FEE ii others ------------- P 200.00 | |
| Bond for accountable officers maybe secured from duly registered/accredited bonding and insurance companies of the office of the insurance commission. |
| HOW TO MANAGE YOUR COOPERATIVE ? |
Does a Cooperative follow a basic Organizational Structure?
Yes.
Your cooperative will need at least the following for its day to day operation.
| General Assembly | |
| Board of Directors | |
| Set of Officers | |
| Hired management/paid employees |
What is the General Assembly?
The General Assembly is the highest policy-making body of the cooperative and is the final authority in the management and administration of the affairs of the cooperative.
It is composed of members who are entitled to vote, duly assembled and constituting a quorum.
The general assembly holds at least one meeting a year; the date of the meeting is fixed in the bylaws, or within 90 days after the close of each fiscal year.
For newly registered cooperatives, a special general assembly meeting must be called within 90 days from the date of approval.
What are the Powers of the General Assembly?
The General Assembly has the following exclusive powers which cannot be degated:
| To determine and approve amendments to the articles of cooperation and bylaws; | |
| To elect or appoint the members of the board of directors, and to remove them for cause; | |
| To approve developmental plans of the cooperative; and | |
| Other matters requiring a 2/3 vote of all the members of the general assembly. |
What is the Board of Directors?
The Board of Directors is the body that formulates policies, directs, supervises and manages the business of the cooperative.
It is composed of five (5) to fifteen (15) members elected by the general assembly.
Their term of office is determined by the bylaws of the of the cooperative. A term of office must not exceed two years. Also no director can serve for more than three (3) consecutive terms.
The board of directors must hold monthly meetings, unless the bylaws say otherwise. Special meetings may be called anytime by the chairman.
Directors cannot attend or vote by proxy at board meetings.
Who can be Members of the Board of Directors?
All regular members who meet the qualifications and none of the disqualifications set by the bylaws of the cooperative can be elected to the board of directors.
Who are the Officers of the Cooperative Chosen?
The board of directors elect among themselves only the chairman and vice-chairman.
Then they either elect or appoint the other officers needed by the cooperative, such as the treasurer who takes custody of all the monies, securities and papers and maintains complete records of its cash transactions and secretary who keeps the records of the cooperative.
What are the Committees Needed by a Cooperative?
Through the bylaws, a cooperative may form any committee it thinks necessary for its formation.
An executive committee may also be formed. The board of directors appoints its members and may, through a majority vote, delegate powers to it.
As a reminder, an audit committee must be provided for in the bylaws of the cooperative.
What Constitute a Quorum?
Unless the bylaws define it otherwise, a quorum consists of 25% of all the regular members entitled to vote.
For the board of directors a simple majority of its members makes a quorum.
What Books Should be Maintained and Kept Open?
Books to be maintained and kept open to the members of the cooperative and the CDA are:
| A copy of the Cooperative Code of the Philippines and all other laws about cooperative; | |
| A copy of the regulations of the CDA; | |
| A copy of the articles of cooperation and bylaws of the cooperative; | |
| A register of member; | |
| Minutes of the meeting of the general assembly, board of directors and committees; | |
| Share books; | |
| Financial statements; and | |
| Other documents as may be prescribed by law or the by-laws. |
Are the Cooperative Required to be Audited Annually?
Yes. Cooperative are subject to an annual audit by an auditor who is independent of the cooperative being audited and of any subsidiary of the cooperative and is a member of any recognized professional accounting or cooperative auditor's association with similar qualifications.
Is there a Need for an Annual Report?
Yes.
An annual report about the affairs of the cooperative must be given to each member and to the federation/union to which it is affiliated and the CDA every fiscal year.
Failure to file the annual report may result in calcellation of the certificate of registration.
Can the CDA Intercede in Behalf of the Coops Members?
If the board of directors does not call regular or special meetings of the general assembly, the CDA can, through a petition of 10% of all the members, issue an order directing the board to call for such meetings.
The CDA may also call special meetings for the purpose of reporting to the members the results of audit, examination, or other investigation of the cooperative ordered or made by it.
What Privileges Does a Cooperative Have Under the New Cooperative Code?
The coop manager must know the many benefits accruing to cooperatives under the new law. By knowing these privileges, the manager can save the cooperative a lot of money. Cooperative privileges include tax exemption, general privileges accorded to all cooperatives, and special privileges granted to specific types of cooperatives.
For instance, a cooperative which does not transact business with non-members or the general public are exempted from government taxes or fees imposed under the Internal Revenue Laws and other laws.
If a cooperative transacts business with both the general public and its members, it is nevertheless exempted from paying taxes on the transaction made with its members.
Even then, coops which transact business with the general public still enjoy very liberal tax exemptions.
Coops with accumulated reserves and undivided net savings of not more than P10 million are exempt from national, city, provincial, municipal or barangay taxes. They are exempt from customs duties, advance sales or compensating taxes on importation of machineries and spare parts which are not available locally as long as the Department of Trade and Industry certifies it so.
Even coops with more than P10 million accumulated reserves and undivided net savings are exempt from paying income and sales taxes on sales to members for a period of at least 10 years from registration.
Donations to charitable, research and educational institutions and reinvestment in socio-economic projects are also tax deductible.
Transactions with banks and insurance companies are exempted from paying local taxes.
Judges who are ex-officio notaries public will give free service to coops related to registration and instrument of loan not exceeding P50,000.00.
Register of deeds will register for free any instrument of a coop relative to loan not exceeding P50,000.00
Coops are exempt from paying court and sheriff's fees. Coops are exempt from putting up a bond when it makes a court appeal.
Securities issued b coops are exempt from the provisions of the Securities Act as long as these securities are not speculative.
What are the General Privileges Enjoyed by Cooperatives?
These privileges are:
| The right to deposit their valuable in government offices free of charge with the government official acting as custodian of such valuables. | |
| Free use of office space, when the cooperative members are government employees, in the government office. | |
| Special types of coops like cold storage, electricity, transport and similar services can open their membership to all persons qualified in their areas of operation. | |
| The preferential right to supply government offices with their produce, in the allocation of fertilizers and rice distribution, use of buttomries for shipment of their goods, and in the management of public markets. | |
| Entitlement to loans, credit lines, and rediscounting, of notes with government financial institution like PNB, Land Bank and DBP. | |
| Exemption from prequalification requirements when bidding for a government project. | |
| The right to be represented by the provincial or city fiscal or the Office of the Solicitor general, free of charge in legal suits. |
How is the Net Surplus of a Cooperative Allocated and Distributed?
Generally, the distribution of a cooperative's surplus is determined by its by-laws. Surplus is determine at the close of a coop's fiscal year or as prescribe by its by-laws. A cooperative's surplus is not profit in the usual sense of the word. Surplus is considered excess payment by the members for the loans they borrowed or the goods and services they bought from the cooperative.
As far as the coop is concerned, this excess payment or surplus is considered as having been returned to the members if the surplus is distributed in the following manner. First priority goes to the reserve fund which is at least 10 percent of the net surplus. The reserve fund is meant to stabilize coop operations and may be used only for investments allowed by the code.
Second priority goes to the Education and Training fund which is not more than 10 percent of net surplus. Fees and fines may also be credited to such funds. Normally, this fund is shared equally between the coop and its apex organization.
Third priority is an optional fund, a land and building fund, community development fund and any other necessary funds. After all these have been allocated, the remainder is available to the general membership in the form of interest on his investment and patronage refund. Nevertheless, interest on share capital should not exceed normal rates.