Part II - Review of Co-op Laws in Philippines (1997)

This document has been made available in electronic format
by the International Co-operative Alliance (ICA)

Part II - Review of Country Laws in the Philippines (1997)

Source: Co-operative Laws in Asia and the Pacific
by G.K. Sharma (pp.132-159)

The co-operative movement in Philippines was sponsored by the civic
and regional groups and were registered under the first corporation law
enacted in April, 1906, followed by the Rural Credit Co-operatives
Associations Act 1915. Co-operatives picked up particularly during the
American occupation. They were registered under the cooperative law
enacted in April, 1906, Agricultural Credit Associations Act, February 5,
1915 and Co-operative Marketing Law, on December 9, 1927 and repealed
in April 1973. These laws continued to be available to co-operatives along
with some other sectoral regulation till all of them were brought under one
law "Co-operative code of Philippines" in 1989.

The New "Co-operative Code of Philippines" became operative on July
24, 1989 and has 130 articles divided into 17 chapters and is one of the
most comprehensive and progressive laws.

Chapter I : General Concepts and Principles
Article 2 declares the policy of the state as under:

It is the declared policy of the state to foster the creation and growth
of co-operatives as a practical vehicle for promoting self-reliance and
harnessing people power towards the attainment of economic development
and social justice. The state shall encourage the private sector to undertake
the actual formation and organisation of cooperatives and shall create an
atmosphere that is conducive to the growth and development of these

Towards this end, the Government and all its branches, sub-divisions,
instrumentalities and agencies shall ensure the provision of technical
guidance, financial assistance and other services to enable the said
co-operatives to develop into viable and responsive economic enterprises
and thereby bring about a strong cooperative movement that is free from
any conditions that might fringe upon the autonomy or organisational
integrity of co-operatives.

Further, the state recognises the principle of subsidiary under which
the co-operative sector will initiate and regulate within its own ranks
the promotion and organisation, training and research, audit and support
services relating to co-operatives with government assistance where

Article 3 explains the General concepts as under:

"A cooperative is 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 contributions to the
capital required and accepting a fair share of the risks and benefits of the
undertaking in accordance with universally accepted co-operative

Article 4 includes co-operative principles as adopted by the ICA at
that time.

Chapter II : Organisation and Registration
Under Article 6 minimum number to form a co-operative is 15 and
also includes the purpose for which a cooperative can be organised. 

Article 7 again explains the objectives of the cooperatives.

Article 11 prescribes that an economic survey of the business scope,
membership, area of operation etc. has to be submitted to the
Co-operative Development Authority along with application
for incorporation. 

Article 13 states the maximum life of cooperatives as 50 years which
can be further extended for another maximum of 50 years.

Under the law Article 14 provides subjects to be included in the "Articles
of Co-operation" and article 15 provides subject to be included in the

Article 16 lays down a limit of 30 days for registration. In case of no
reply the co-operatives will be deemed to be registered. In case of
refusal appeal can be made within 90 days from the date of refusal and
failure of the office of the President to act in 90 days shall deem to be
approval of the said appeal. 

Article 19 regulates the contract made by a co-operative before
registration as legal contract.

Articles 23 and 24 deal with types of primary secondary co-operatives
and their functions.

Chapter III : Membership
Under article 26 any natural person who is a citizen of Philippines,
a co-operative and a non-profit organisation with juridical personality
is eligible for membership of a co-operative.

Under article 27 there is provision for regular voting members and
non-voting associate members.

Under article 28 employees of CDA, Elected officials of government,
except barangay officials and government officials are disqualified to
be elected or appointed to any position in a co-operative.

Under article 31 along with other provisions non-patronising the
services for an un-reasonable period as may be fixed by the board
of directors as also when a member has continuously failed to comply
with his obligations is disqualification for membership. 

Chapter IV : Administration
Article 36 prescribes 25% of all the voting members as quorum for
general meetings. 

Under Article 37 for a secondary co-operative a maximum of five votes
are allowed as also only in case of secondary co-operatives proxy is

Under Article 38 the board members shall be not less than 5 and not more
than 15. The term of board shall not be more than 2 years and no director
shall serve more than 3 consecutive terms.

Under article 42 interim vacancy can be filled by the board subject to the
condition the Board has the necessary majority strength for the remaining

Under article 47 Board members can be paid only reasonable per diem.
Any extra compensation can be paid only with the approval of the
members meeting specifically called for this purpose.

The chapter also deals with accountability of Board Members.

Chapter V : Responsibilities, Rights, and Privileges of Co-ops
Article 53 (4) relates the procedure for destroying the records of
the co-operatives.

Under article 54 every co-operative has to prepare an annual report in
the form prescribed by the Co-operative Development Authority and
has to be sent to CDA as also to all the members. 

Under article 57 every director, officer and employee handling funds,
securities and property of the co-operative have to execute and deliver
adequate bonds to the co-operatives as decided by its Board.

The law under article 62 provides a number of tax exemptions and
under article 63 many privileges as under:

Tax and other exemptions: Co-operatives transacting business with
both members and non-members shall not be subject to tax on their
transactions to members. Notwithstanding the provisions of any law or
regulation to the contrary, such cooperatives dealing with non-members
shall enjoy the following tax exemptions: 

i. Co-operatives with accumulated reserves and undivided
net savings shall be of not more than ten million Pesos
(P10,000,000) shall be exempt from all national, city,
provincial, municipal or barangay taxes of whatever name
and nature. Such co-operatives 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. All tax free importations shall not be transferred to
any person until five years, otherwise, the cooperative and the
transferee or assignee shall be solitarily liable to pay twice the
amount of the tax and/or duties thereon.

ii. Co-operatives with accumulated reserves and undivided net
savings of more than ten million Pesos (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 the members.

b. Sales Tax - on sales to non-members: Provides, however, that
all co-operatives, regardless of classification, are exempt from
the payment of income and sales taxes for a period of ten years.

For co-operatives whose exemptions were removed by Executive
Order 93, the ten year period shall be reckoned from the affectivity
date of said executive order. Co-operatives created after the
approval of this code shall be granted the same exemptions, the
period of which shall be reckoned from the date of registration
with the Authority: Provided, that at least twenty-five percent
(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 in socio-economic projects within the area of
operation of the cooperative may be tax deductible. 

iii. All co-operatives, 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 sale or services rendered
for non-members shall be subject to the applicable percentage
taxes except sales made by producers, marketing, or service
co-operatives: Provided, further, that nothing in this article shall
preclude, the examination of the books of accounts or other
accounting records of the co-operative by duly authorised internal
revenue officers for internal revenue tax purposes only, after
previous authorization by the authority.

iv. Any judge in his capacity as notary public, ex-officio shall render
service, free of charge, to any person or group of person requiring
either the administration of oath or the acknowledgement of
articles of co-operation of a co-operative applicant for registration
and instruments of loan from cooperative not exceeding 50,000

v. 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 50,000 Pesos or the deeds of title of any property
acquired by the co-operative or any paper or document drawn in
connection with any action brought by the co-operative or with any
court judgement rendered in its favour or any instrument relative to
a bond of any accountable officer of a co-operative for the faithful
performance of his duties and obligation.

vi. Co-operatives 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
action is brought by the Co-operative Development Authority
before the court, to enforce the payment of obligations contracted
in favour of the co-operative.

vii. All co-operatives 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
co-operative 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.

viii. Any security issued by co-operatives shall be exempt from the
provisions of the Securities Act provided such security shall not
be speculative.

Article 63 : Privileges of Co-operatives
Co-operative registered under this code shall, notwithstanding the
provisions of any law to the contrary, be also accorded the following

i. Co-operatives 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 treasures and other government
offices free of charge, and custodian of such articles shall issue
receipt acknowledging the articles received duly witnessed by
another person;

ii. Co-operatives organised  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;

iii. Co-operatives 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 co-operatives shall open their membership to all persons
qualified in their areas of operation;

iv. In areas where appropriate co-operatives exist, the preferential
right to supply government institutions and agencies rice, corn
and other grains, fish and other marine products, meat, eggs, milk,
vegetables and tobacco and other agricultural commodities
produced by their members shall be granted to the co-operatives

v. Preferential treatment in the allocation of fertilizers and in rice
distribution shall be granted to cooperatives by the appropriate
government agencies;

vi. 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 co-operatives;

vii. Co-operatives and their federation, such as market vendor
co-operatives, shall have preferential rights in management of
public markets and/or lease of public market facilities, stall or

viii. Credit co-operatives 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, the
Philippine National Bank, the Land Bank of Philippines, and other
financial institutions except the Central Bank of Philippines; 

ix. Co-operatives transacting business with the government of the
Philippines or any of its political sub-divisions or any of its
agencies or instrumentalities, including government-owned and
controlled corporation shall be exempt from pre-qualification
bidding requirements; and 

x. Co-operatives 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 Philippine.

Chapter VI : Insolvency of Co-operatives
In case a co-operative cannot fulfil obligations to creditors it may apply
and seek remedies under the insolvency law.

Chapter VII : Dissolution
The chapter deals with dissolution of a co-operative on voluntary basis
as also under orders of CDA under certain circumstances.

Under articles 65 and 66 the notice of the General Meeting for voluntary
dissolution has to be published in a newspaper for 3 consecutive weeks.

Another important provision under article 70 is that even after the
liquidation the co-operative continues to be body corporate for three
years for the purpose of prosecuting and defending suits by or against
it and enabling it to settle and close the affairs etc. After the period of
3 years any asset left after distributing to share holders and creditors
shall be given to the federation, union association to which the
co-operative is affiliated or to the movement. 

Chapter VIII
It deals with capital, property and funds of the co-operatives.

Chapter IX : Audit, Inquiry and Member Right to Examine
Audit has to be done by an auditor who is qualified and governed
by articles 81 and 82.

Chapter X : Allocation and Distribution of Net Surplus
Under article 86 net surplus has to be determined according to its
bye-laws and further "the net surplus shall not be construed as profit
but as excess of payments made by the members for the loans borrowed,
or the goods or services bought by them from the cooperative and which
shall be deemed to have been returned to them if the same is distributed as
prescribed herein." 

Article 87 provides net surplus distribution as under: 

1.	Reserve Funds 10%;
2. Education and training fund not more than 10%. Half of it to be
spent by the cooperative and half to be given to concerned apex
3. Operational Fund for land, building, community development and
or other funds total not to be more than 10%;
4. Balance for interest on shares not exceeding normal rate of
investment  and patronage refund to members. 

The chapter also details the conditions for regulations of these statutory funds. 

Chapter XI : Special Provision relating to Agrarian Reform Co-op
Article 88: Coverage
The provisions of this chapter shall primarily govern agrarian reform
co-operatives; Provided, that the provisions of other chapters of this
code shall apply supplementarily except insofar as this Chapter
otherwise provides.

Article 89 : Definition and Purpose 
An agrarian reform co-operative within the meaning of this code is one
where the majority of the members are agrarian reform beneficiaries and
marginal farmers and organised for any or all of the following purposes: 
i. To develop an appropriate system of land tenure, land
development, land consolidation or land management in areas
covered by agrarian reform; 
ii. To coordinate and facilitate the dissemination of scientific methods
of production, and provide assistance in the storage, transport, and
marketing of farm products for agrarian reform beneficiaries and
their immediate family, hereinafter referred to as `beneficiaries'. 
iii. To provide financial facilities to beneficiaries for provident or
productive purposes at reasonable costs;
iv. To arrange and facilitate the expeditious transfer to appropriate
and suitable technology to beneficiaries and marginal farmers at
the lowest possible cost;
v. To provide social security benefits, health, medical and social
insurance benefits and other social and economic benefits that
promote the general welfare of the agrarian reform beneficiaries
and marginal farmers; 
vi. To provide non-formal education, vocational/technical training
and livelihood programmes to beneficiaries and marginal farmers;
vii. To act as channels for external assistance and services to the
beneficiaries and marginal farmers;
viii. To undertake a comprehensive and integrated development
program in agrarian reform and resettlement areas with special
concern for the development of agro-based, marine based and
cottage based industries;
ix. To represent the beneficiaries on any or all matters that affect
their interest; and 
x. To undertake such other economic or social activities as may
be necessary or incidental in the pursuit of the foregoing purposes. 

Article 90 : Co-operative Estates
Landholding like plantation, estates or haciendas acquired by the State
for the benefit of the workers in accordance with the comprehensive
agrarian reform program shall be owned collectively by the workers
beneficiaries who shall form a co-operative at their option.

Article 91 : Infrastructure 
In agrarian reform and resettlement areas, the Government shall grant
to agrarian reform co-operatives preferential treatment, if necessary, the
authority to construct, maintain and manage with government funding
roads, bridges, canals, wharves, ports, reservoirs, irrigation systems,
waterworks systems and other infrastructures. For this purpose
government technical assistance, facilities and equipment shall be
made available to such agrarian reform cooperatives for their use.

Article 92 : Lease of Public Lands 
The Government may lease public lands to any agrarian reform
co-operative for a period not exceeding twenty-five (25) years, subject
to renewal for another twenty-five years only : Provided, that the
application for renewal shall be made one (1) year before the expiration
of the lease: Provided further, that such lease shall be for the exclusive
use and benefit of the beneficiaries and marginal farmers subject to the
provisions of the Comprehensive Agrarian Reform Program.

Article 93 : Preferential Right
In agrarian reform areas, an agrarian reform co-operative shall have
the preferential right in the grant of franchise and certificate of public
convenience and necessity for the operation of public utilities and
services: Provided that it meets the requirements and conditions imposed
by the appropriate government agency granting the franchise or certificate
of public convenience and necessity. 

Electric service agencies shall, upon request of agrarian reform
co-operatives, immediately provide electric services to agrarian reform
areas. If the electric service agencies concerned fail for any reason to
provide the services requested within a period of one year from receipt
thereof, the agrarian reform co-operative concerned may provide the
electric services in the agrarian reform area directly through its own
resources and shall continue to do so until such time that the electric
service agency concerned purchases all the investments made by agrarian
reform co-operative in the electrification of the agrarian reform areas.

Article 94 : Privileges 
Subject to such reasonable terms and conditions as the Department
of Agrarian Reform and the Authority may impose, agrarian reform
co-operatives may be given the exclusive right to do any or all of the
following economic activities in agrarian reform and resettlement areas:

1. Supply and distribution of consumer, agricultural, aqua-cultural
and industrial goods, production inputs and raw materials and
supplies, machinery, equipment, facilities and other services and
requirements of the beneficiaries and marginal farmers in the
agrarian reform areas at reasonable prices;

2. Marketing of the products and services of the beneficiaries on the
local and foreign markets; 

3. Processing of the members' products into finished consumer or
industrial goods for domestic consumption or of export;

4. Provision of essential public services at cost such as power,
irrigation, potable water, passenger and/or cargo transportation by
land, sea or air, communication services, and public health and medical care services; 

5. Management, conservation, and commercial development of
marine, forestry, mineral, water, and other natural resources
subject to compliance with the laws and regulations on
environmental and ecological controls; and

6. Provision of financial, technological, and other services and
facilities required by the beneficiaries in their daily lives and

The Government shall provide the necessary financial and technical
assistance to agrarian reform co-operatives to enable them to discharge
effectively their purposes under this article. The Department of Agrarian
Reform, the Co-operative Development Authority and the Central Bank
of the Philippines shall draw up a joint program for the organisation and
financing of the agrarian reform cooperatives subject to this Chapter. This
joint program shall be geared towards the beneficiaries' gradual
assumption of full ownership and management control of the agrarian
reform co-operatives within ten years from the date of registration of
said co-operatives. 

Article 95 : Organisation and Registration 
Agrarian reform co-operatives may be organised and registered under this
code only upon prior written verification by the Department of Agrarian
Reform to the effect that the same is needed and desired by the
beneficiaries; results of a study that has been conducted fairly indicate
the economic feasibility of organising the same and that it will be
economically viable in its operations, and that the same may now be
organised and registered in accordance with the requirements of the Code.

Chapter XII : Special Provisions on Public Service Co-operatives
Article 96 : Definition and Coverage
A public service co-operative, within the meaning of this Code, is one
organised to render public services as authorised under a franchise or
certificate of public convenience and necessity duly issued by the
appropriate government agency. Such services may include the following:

i.	Power generation, transmission, and/or distribution;
ii. Ice plants and cold storage services. Electric co-operatives
created under Presidential Decree No. 269 shall be governed by
this Chapter if  they qualify as cooperatives under the provisions
of this Code;
iii. Communications services including telephone, telegraph, and
iv. Land, sea and air transportation co-operatives for passenger
and/or cargo. Transport co-operatives organised under the
provisions of Executive Order No. 898, Series of 1983, shall be
governed by this Chapter;
v.	Public markets, slaughterhouses and other similar services; and 
v. Such other types of public service as may be engaged in by any
co-operative. Such co-operative shall be primarily governed by this
Chapter and the general provisions of this Code insofar as they
may be applicable unless they are consistent herewith.

Article 97 : Registration Requirement 
No public service co-operative shall be registered unless it satisfies the 
following requirements:
1. It has the favourable endorsement of the proper government
agency authorised to issue the franchise or certificates of public
convenience and necessity; 
2. Its Articles of corporation and bye-laws provide for the
membership of the users and/or producers of the service of such
co-operatives; and
3. It satisfies such other requirements as may be imposed by the other
pertinent government agencies concerned. In case there are two or
more applicants of the same public service franchise or certificate
of public convenience and necessity, all things being equal,
preference shall be given to a public service co-operative.

Article 98 : Regulation of Public Service Co-operatives 
1. The internal affairs of public service co-operative such as the
rights and privileges of members, the rule and procedures for
meetings of the general assembly, board of directors and
committees; for the election and qualifications of officers,
directors and committee members; allocation and distribution
of surpluses; and all other matters relating to their internal affairs
shall be governed by this Code.
2. All matters relating to the franchise or certificate of public
convenience and necessity of public services co-operatives
such as capitalization and investment requirements, equipment
and facilities, frequencies, rate-fixing, and such other matters
affecting their public service shall be governed by the proper
government agency concerned.
3. The Co-operative Development Authority and the proper
government agency concerned shall jointly issue the necessary
rules regulations to implement this chapter.

Chapter XIII : Special Provisions Relating to Co-operative Banks
Article 99 : Governing Law
1. The provisions of this chapter shall primarily govern
co-operative banks registered under this Code and the other
provisions of this Code shall apply to them only insofar as they
are not consistent with the provisions contained in this chapter. 
2. Co-operatives duly established and registered under the provisions
of this Code may organise among themselves a co-operative bank
which shall likewise be considered a cooperative registrable under
the provisions of this Code subject to the requirements of and
requisite authorization from the Central Bank.

Article 100 : Definition, Classification and Functions 
A co-operative bank is one organised by the majority shares of which is
owned and controlled by co-operatives primarily to provide financial and
credit services to co-operatives. The term `co-operative bank' shall
include co-operative rural banks.

A co-operative bank may perform the following functions:
1.	To carry on banking and credit services for the co-operatives;
3. To receive financial aid or loans from the Government and the
Central Bank of the Philippines for and in behalf of the
co-operative banks and primary co-operatives and their federations
engaged in business and supervise the lending and collection of
4. To mobilise savings of its members for the benefit of the
co-operative movement; 
5. To act as a balancing medium for the surplus funds of
co-operatives and their federations; 
6. To discount bills and promissory notes issued and drawn
by co-operatives; 
7.	To issue negotiable instruments to facilitate the activities of
8.	To issue debentures subject to the approval of and under conditions
and guarantees to be prescribed by the Government; 
9. To borrow money from banks and other financial institutions
within the limit to be prescribed by the Central Bank, and
10. To carry out all other functions as may be prescribed by the
Authority: Provided that the performance of any banking function
shall be subject to prior approval by the Central Bank of the

Article 101 : Registration Requirements

No entity shall be registered by the Co-operative Development Authority
as a co-operative bank unless the articles of corporation and bye-laws
thereof as well as its establishment and operation as a co-operative bank
have been approved by the Central Bank of the Philippines and it satisfies
all requirements for registration as a co-operative.

Article 102 : Membership
Membership of a co-operative bank shall include only co-operatives
and federations of co-operatives.

Article 103 : Board of Directors
The number, composition, and voting rights of the board of directors shall
be defined in the articles of corporation and bye-laws of the co-operative
bank, notwithstanding provisions of this Code to the contrary.

Article 104 : Loans
Co-operatives may obtain loans from a cooperative bank. Loans granted
by a co-operative bank shall be reported to the Central Bank of

Article 105 : Supervision
The co-operative banks registered under this Code shall be under the
supervision of the Central Bank. The Central Bank upon consultation
with the agency and the co-operative movement shall formulate guidelines
regarding the operations and banking transactions of cooperative banks.
These guidelines shall give due recognition to the unique co-operative
nature and character of cooperative banks. To this end, the co-operative
banks may be exempted from Central Bank rules and regulations,
applicable to other types of banks, which would impede the co-operative
rural bank from performing legitimate financial and banking services to
its members. 

Article 106 : Capitalisation
1. A national co-operative bank shall have a minimum authorised
share capital of two hundred million pesos in relation to Article
14 (5). The authorised share capital shall be divided into such
number of shares with a minimum par value of one thousand pesos
per share. For the purpose primarily of determining the
permanency of equity, the types of share a co-operative bank may
issue, including the terms thereof and the rights appurtenant
thereto, shall be subject to such rules and regulations as the
Central Bank may prescribe.

2. A local co-operative bank shall have a minimum authorised share
capital of twenty million pesos divided into such number of shares
with a minimum per value of one hundred pesos per share. 

Article 107 : Distribution of Net Surplus
The provisions of this Code on the allocation and distribution of net
surplus shall apply.

Article 108 : Privileges
Co-operative banks shall have the following privileges subject to the
approval of the Central Bank and compliance with applicable banking
laws, rules and regulations:

1. The co-operative banks registered under this Code shall be
given the same privilege granted to the rural banks, private
development banks, commercial banks, and all other banks,
private development banks, commercial banks, and all other
banks to rediscount notes with the Central Bank, the Land Bank
of the Philippines, and other government banks without affecting
in any way the provisions of this code; and

2. To act as a depository of government funds. For this purpose, all
government departments, agencies and units of the national and
local governments, including government-owned and controlled
corporations are hereby authorised to deposit their funds in any
co-operative bank.

Article 109 : Assistance to Co-operative Bank
Whenever a co-operative bank organised under this code is distressed or
may need assistance in the rehabilitation of its financial condition or to
avoid bankruptcy, the Monetary Board of the Central Bank of the
Philippines shall designate an official of the Central Bank or a person
Of recognised competence in banking or finance as receiver or
Conservator of the said bank pursuant to the provisions of Section 29
of Republic Act No. 265 as amended.

Chapter XIV : Special Provisions Relating to Credit Co-operatives
Article 110 : Coverage
This chapter shall apply only to credit co-operatives and the rest of the
provisions of this code shall apply to them insofar as the same are not
inconsistent with the provisions of this Chapter.

Article 111 : Definition and Objectives
A credit co-operative is a financial organisation owned and operated by
its members with the following objectives:
1.	To encourage savings among its members;
3. To create a pool of such savings for which loans for productive
or provident purposes may be granted to its members; and 
4. To provide related services to enable its members to maximise the
benefit from such loans.

Article 112 : Organisation and Registration
Credit Co-operatives shall be organised and registered in accordance
with the general provisions of this Code.

Article 113 : Organisational Linkages
Credit co-operatives may organise chapters or subsidiaries, or join leagues
and federations for the purpose of providing commonly needed essential
services including but not limited to the following:
1.	Interlending of surplus fund;
2.	Mutual benefits;
3.	Deposit guarantee; 
4.	Bonding; 
5.	Education and training;
6.	Professional and technical assistance;
7.	Research and Development;
8.	Representation; and
9.	Other services needed to improve their performance.

Existing support organisations such as federations of credit co-operatives
at the provincial, regional and national levels may continue as such under
this code. 

Article 114 : Prohibition
The term credit co-operative shall be used exclusively by those who are
duly registered under this Chapter, and no person or group of persons, or
organisation shall use the said term unless duly registered herein.

Chapter XV : Insurance Co-operatives
Article 15 : Co-operative Insurance of Societies
Existing co-operatives may organise themselves into a co-operative insurance entity for the purpose of covering the insurance requirements
of the co-operative members including their properties and assets.

Types of Insurance Provided
Under the co-operative insurance program established and formed
by virtue of the provisions of this Code, the co-operative insurance
societies shall provide its constituting members different types of
insurance coverage, loan protection, retirement plans, endowment
with health and accident coverage, fire insurance, motor vehicle
coverage, bonding, crop and livestock protection and equipment

Article 17 : Applicability of Insurance Laws
The provisions of the Insurance Code and all other laws and regulations
relative to the organisation and operation of an insurance company shall
apply to co-operative insurance entities organised under this code. The
requirements on capitalization, investments and reserves of insurance
firms may be liberally modified upon consultation with the Co-operative
Development Authority and the co-operative sector. But in no case may the requirements be reduced to less than half of those provided for 
under the insurance Code and other related laws.

Article 118 : Implementing Rules
The Insurance Commission upon consultation with the Co-operative
Development Authority and the cooperative sector, shall formulate
the rules and regulations implementing these provisions.

Chapter XVI : Miscellaneous Provisions
This chapter deals with compliance with other applicable laws and
also settlement of disputes. 

Chapter XVII : Final Provisions
Article 122 deals with Electrical co-operatives, CDA and National
Electric Administration which was the registration authority for
electric co-operatives before enactment of this code.

1. Article 123 provides for issue of regulations under this code.
Article 124 provides penalities. The use of word 'cooperative'
by anyone is punishable by one year's imprisonment and fine
of Pesos 1000/.

The other penalties are:

2. Direct or indirect interference or intervention by any public
official or employee into internal affairs of co-operative of
which he is not a member, such as, but not limited to, the
a. Influencing the election or appointment of officers, directors,
committee members and employees through public or private
endorsement or campaign for or against any person or group of
b. Requiring prior clearance for any policy or decision within
c. Requesting a demanding for the creation of positions or
organisational units, or recommending any person for appointment,
transfer or removal from his position; or
d. Any other acts inimical or adverse to the autonomy and
independence of co-operatives. In case of violation of any
provision of this subsection, the individual and in the case of
organisations, its officers and directors shall, upon conviction by a
court, each suffer a penalty of not less than one year but not more
than 5 years imprisonment or a fine in the amount of not less than
five thousand pesos or both at the discretion of the court:        
3. A director, officer or committee member who violated the
provisions of Article 47 (liability of directors, officers and
committee members),  Article 50 (disloyalty of a director) and
Article 51 (illegal use of confidential information) shall upon
conviction suffer a fine of not less than five thousand pesos not
more than five hundred pesos or imprisonment  of not less than
five years but not more than ten years or both at the court's
4. Any violation of any provision of this code for which no penalty
is imposed shall be punishable by imprisonment of not less than
six months not more than one year and fine of not less than one
thousand pesos or both at the discretion of the court.