Organizing and Registering A Cooperative

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This shows the steps on how to organize a cooperative and the steps on how to register a cooperative.

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Organizing and Registering A Cooperative

  1. 1. How to Organize a Cooperative? Organizing a cooperative can be complex and simple. It requires an understanding of the basic needs of the prospective cooperative members. It demands patience from the organizer who must make the cooperative’s long-term goals and objectives, and its visions a real part of the members’ lives. But it can be too easy because the Cooperative Code of the Philippines (RA 6938) has devised very clear-cut steps for the cooperative organizer and members. The following are the basic information that the prospective members should understand before organizing a cooperative. There are nine (9) steps suggested in setting up a cooperative. FIRST. 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 your production, marketing 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 cooperative you will be organizing. Even before a cooperative is set up, a dedicated core group people who will do all the organizational and paper works is a must. From this core group, working communities may be formed to set things moving. These committees may include membership, finance, executive, secretariat to name a few. Who May Become Members of a Primary Cooperative?  If you are a Filipino of legal age, you can be a coop member if you meet the qualifications prescribed by the coop's by laws.  The board of directors acts on application for membership.  A member may exercise his rights only after having paid the fees for membership and acquired shares in the cooperative, What are the Kinds of Membership in the Cooperative? A cooperative has two kinds of members; regular members and associate members.  A regular member is entitled to all the rights and privileged of membership as stated in the Cooperative Code and the coops by- laws.  An associate member has no right to vote and to be voted upon and is entitled to such rights and privileged provided by the cooperatives by laws.  Considered a regular member when it continues to patronize the cooperative for (2) years and met the minimum requirements of regular membership
  2. 2. Can Government Officers and Employees Join a Cooperative? Yes, provided that:  Any officer of the government 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 where he works are not adversely affected. When membership is denied? One may appeal to the General Assembly. The General Assembly may opt to create an appeal and grievance committee, which members served for (1) year and shall decide appeals on membership application within 30 days upon receipt. If it fails to decide within 30 days, the appeal is deemed approved in favor of the applicant.  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 where he works are not adversely affected. Termination of Membership  A member of a cooperative may, for any reason, withdraw his membership from the cooperative by giving a sixty (60) day notice to the board of directors. The withdrawing member shall be entitled to a refund of his share capital contribution and all other interests in the cooperative: Provided that such refund shall not be made if upon such payment the value of the assets of the cooperative would be less than the aggregate amount of its debts and liabilities exclusive of his share capital contribution.  The death, insanity, insolvency or dissolution of a member shall be considered an automatic termination of membership.  A member may be terminated by a vote of the majority of all the members of the board of directors for any of the following causes:  When a member has not patronized the services of the cooperative for an unreasonable period of time as may be fixed by the board of directors  When a member has continuously failed to comply with his obligations  When a member has acted in violation of the bylaws and the rules of the cooperative  For any act or omission injurious or prejudicial or the interest or the welfare of the cooperative
  3. 3. A member whose membership the board of directors may wish to terminate shall be informed of such intended action in writing and shall be given an opportunity to be heard before the said board makes its decision. The decision of the board shall be in writing and shall be communicated in person or by registered mail to the member and shall be appealable, within thirty (30) days after the decision is promulgated, to the general assembly whose decision therein, whether in a general or special session, shall be final. Pending a decision by the general assembly, the membership remains in force. SECOND. Reserve your proposed cooperative name. Secure and fill up Cooperative Name Reservation Request Form (CNRRF). This must be submitted to CDA Central Office or any of its Extension Office. A reservation fee shall apply. THIRD. Prepare a general statement called an economic survey. Economic Survey is a general statement describing, among others, the structure and purposes of the proposed cooperative. The structure and actual staffing pattern shall include a bookkeeper. This should indicate the area of operation, the size of membership and other pertinent data in a format provided by the Authority. 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 objectives of the cooperative. The area of operation merely indicates the general merely indicates the geographical or sectoral of the coop. For example, a cooperative may operate in, say Caloocan City; or it may operate in a certain 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. Economic Survey is in fact a project feasibility study – economic feasibility. Here, the prospective coop members estimate the income and expenses of the cooperative. It makes a projection of the possible growth pattern of the cooperative certain period, probably three (3) years, and how this growth generates income and incurs expenses. It tries to anticipate obstacles and constraints and make allowance for them. This statement will help you measure your cooperatives chances of success. FOURTH. Prepare the cooperative’s by-laws. The by-laws contain the rules and regulations governing the operation of the cooperative. By- laws should are the set of rules that determines how a cooperatives is to be run without confusion. In general, by-laws should be consistent with the provisions of the Cooperative Code of the Philippines (RA 6938). The by-laws include:
  4. 4.  The qualifications for membership; how they are acquired, maintained and lost;  The rights and obligations of members;  The condition for transfer of a share of interest;  The rules and procedures covering agenda, time, place, and manner of calling, covering , 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 raise and purpose 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 barrowing, including limitations;  The methods 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 purpose and activities of the cooperative. FIFTH. Prepare the articles of cooperation. Mandatory contents of the articles of cooperation are the following: (a) the name of the cooperative, which must include the word “cooperative”, e.g. Sta. Maria Multi-Purpose Cooperative; (b) the purpose or purposes and scope of business for which the cooperative is to be registered; (c) the term of existence of cooperative (not more than 50 years); (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; and “ (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 of R.A 6938. The articles of cooperation 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. SIXTH. Secure bond of accountable officer(s). A surety bond should be secured from a duly registered insurance or bonding company. Every director, officer and employee handling funds, securities or property on behalf of the cooperative shall be covered by this. The board of directors shall determine the adequacy of such bonds. The amount of the bond is to be decided upon by the Board of Directors, based on the initial network of the cooperatives which includes the paid-up capital, membership fees and other assets of the cooperatives at time of registration.
  5. 5. SEVENTH. Execute Treasurers Affidavit. A sworn statement of the treasurer elected by the subscribers showing that at least twenty-five per centum (25%) of the authorized share capital has been subscribed, and at least twenty-five per centum (25%) of the total subscription has been paid should be executed and to be attached to the articles of cooperation. The paid-up share capital shall not be less than Fifteen thousand pesos (P15,000.00). EIGHTH. Complete the Pre-Membership Education Seminar (PMES). A prospective member of a primary cooperative must have completed a Pre-Membership Education Seminar (PMES). A Certificate of PMES must be secured from the training provider. NINTH. Register your cooperative with the Cooperative Development Authority (CDA). Submit the following required documents in four (4) copies: 1. Four (4) copies each of the Economic Survey, Articles of Cooperation and By- Laws duly notarized; 2. Surety bond of accountable officers; 3. Treasurer's Affidavit; 4. Approved Cooperative Name Reservation Slip; 5. Certificate of PMES;
  6. 6. How to Register a Cooperative? Once you have organized your cooperative, your work does not end there. The cooperative now needs a legal personality, so that a cooperative is supposed to perform. With a legal, personality, the cooperative can borrow money, sell its goods and services, deliver goods, and enter into all sorts of business transactions. So that your cooperative can do all these, you must register your cooperative. STEP 1. Drafting of documents Prior to registering a co-operative, it is important that the group investigate the feasibility and legal requirements of the co-operative and its proposed activities. To assist with the formation of a co-operative, the Registry has developed a set of rules and a standard disclosure statement. These may be downloaded from the Fair Trading website www.fairtrading.nsw.gov.au or by calling the Registry on freecall 1800 502 042. Prospective members, directors and employees can prepare these documents, however the services of an accountant or solicitor may be required. Draft the rules A co-operative’s rules describe the way in which the group organizes its activities. They must include certain matters required by the Act. Some of these are listed below:  the name (which must include the word ‘co-operative’ and end with ‘limited’)  the primary activity  active membership provisions  rights and liabilities of members  number of and qualifications for directors  meeting procedures Discuss the draft rules with prospective members and decide on any changes before submitting them to the Registry for formal approval. Of particular importance is the active membership rule which should set our precisely what members need to do to contribute to the co-operative and to maintain their membership. Draft the disclosure statement The disclosure statement ensures that prospective members know the nature and extent of their liability as a member of the co-operative. It outlines areas such as the:  purpose and main activity of the co-operative  members involvement in the co-operative  projected profit and loss  names of prospective members and directors  who will act as an auditor  registered office and mailing address  any other matter relevant to the co-operative.
  7. 7. Getting Registry approval The draft rules and disclosure statement should be submitted to the Registry for approval at least 28 days before the formation meeting. The Registry will then:  send you an acknowledgement letter with the name of the person who will be reviewing your documents  discuss any areas that need clarification  confirm the co-operative’s proposed operating name  forward the approved documents to be presented at your formation meeting  forward an Application for registration form. STEP 2. Formation Meeting A formation meeting is held to finalize the particulars of the co-operative. Once you have received the Application for registration and the approved rules and disclosure statement, arrange the formation meeting and let prospective members know. You must have at least five prospective members attending the meeting. Before the meeting you need to:  prepare two copies of the approved rules for signing at the meeting  prepare one copy of the disclosure statement for signing at the meeting  have the Application for registration form ready for signing at the meeting  make enough copies of the rules for everyone at the meeting or let them know how they can obtain them  if possible, arrange for a Justice of the Peace to attend to sign the required documents  a copy the Application for membership form for the prospective members to complete. This form is contained in the Application for registration. What will be done in the meeting? 1. Elect a chairperson and secretary. Elect a chairperson to run the meeting and a secretary to keep a written record of the meeting. 2. Vote on the rules. Discuss the contents of the rules and disclosure statement to make sure everyone understands them. Two-thirds of prospective members must vote to adopt the rules to become a co-operative.  If prospective members want to change the rules, the Registry will need to approve these changes and another formation meeting will need to be held to accept the rules. You can avoid this by discussing the rules before the meeting.  If there are no changes to the rules, move that the co-operative be formed and the rules be adopted. 3. Elect the board of directors. Vote to elect the co-operative’s board of directors according to the co-operative’s rules. 4. Apply for membership. Each member at the meeting needs to complete the Application for membership form. These application forms must be signed and witnessed and kept for the co-operative’s records.
  8. 8. 5. Authorize a contact person. At the meeting, authorize someone to liaise with the Registry to complete the registration process. STEP 3. Apply to register your cooperative. Once you have voted to adopt the co-operative’s rules and disclosure statement, the chairperson and secretary of the formation meeting need to sign two copies of the rules certifying they are approved and the disclosure statement certifying it is approved. To register the co-operative the following people need to sign the Application for registration form:  the chairperson  secretary  a Justice of the Peace  Notary Public Solicitor or Commissioner for Affidavits  two directors  three members Within 2 months of the formation meeting, you need to send the Registry:  the completed Application for registration form  two copies of the rules signed by the chairperson and secretary of the formation meeting certifying that they are approved  a copy of the disclosure statement signed by the chairperson and secretary of the formation meeting certifying that it was presented  the list of the board of directors  the application fee The Registry will then:  register your co-operative  send you a registration certificate with a copy of the registered rules Where Do You Register a Cooperative? The Cooperative Development Authority (CDA) is the sole government agency mandated to register all types of cooperatives. Its main office is located at 827 Aurora Blvd., Immaculate Conception, Quezon City. To facilitate the flow of its services, extension offices have been set-up. Prospective cooperatives must submit their application to the CDA Extension Office where the principal office of the cooperative is located. These are in (1) Dagupan City; (2) Tuguegarao, Cagayan; (3) Baguio City; (4) Sto. Tomas Pampanga; (5) Manila Extension Office (MEO), Quezon Avenue, Quezon City; (6) Calamba Laguna; (7) Naga City; (8) Iloilo City; (9) Cebu City; (10) Tacloban City; (11) Pagadian City; (12) Cagayan De Oro; (13) Davao City; (14) Kidapawan, Cotabato; and (15) Butuan City.
  9. 9. What Are The General Requirements In Registering A Cooperative? You will need four copies each of the Economic Survey, By -Laws and Articles of Cooperation. The Articles of Cooperation should be duly notarized and accompanied by there following. • Bonds of the accountable officers (any director, officer and employee handling funds, securities offices and employee handling funds, securities or properties on behalf of the cooperative. The board of directors determine the amount of bonds required based on the initial network 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 own more than 20% of the subscribed capital; and that each share must not be less than P1.00 How Much Is The Registration Fee? The following are the amount of fees to be paid for the registration of cooperatives per CDA per Memorandum Circular 2004-07, Series of 2004: The initial registration fee to be imposed shall be 1/10 of 1% of the authorized share capital or the basic fee below whichever is higher: • Primary Cooperatives (Php 500.00) • Seconday Cooperatives (Php 2,000.00) • Tertiary Cooperatives (Php 3,000.00) • Laboratory Cooperatives (Php 50.00) For What Purpose May A Federation Of Cooperatives Be Registered? A federation of Cooperatives whose members are primary and /or secondary cooperatives with a single line or multi- purpose business activities may be registered for any or all of the following purposes:  Primary Purpose- To carry on, encourage on any cooperative enterprise authorized under Article 6 of R.A. 6938;  Secondary Purposes- To carry on, any encourage and assist educational and advisory  work relating to its member cooperatives;  To render services designed to encourage simplicity, efficiency, and economy in the conduct of the business of its member cooperatives and to facilitate the implementation of their bookkeeping , accounting and other systems and procedures;  To coordinate and facilitate the activities of its member cooperatives;  To print, publish, and circulate any newspaper of other publication in the interest of its member cooperatives and enterprises;  To enter into joint ventures with national or international cooperative of other countries in the manufacture and sale of products and/ or services in the Philippines and abroad; and.  To perform such other function as nay be necessary to attain its objectives.
  10. 10. A federation of Cooperatives may be registered by carrying out the formalities of registration of a cooperative. Registered cooperatives may organize a federation at the provincial, city, regional, and national levels according to the types of business carried on. For What Purposes May Cooperative Unions Be Registered? Registered cooperatives and federations may organize a federation or join cooperatives unions to represent the interest and welfare of all types of cooperatives at the provincial, city, regional, and national levels. Cooperative unions may have the following purposes:  To represent its member organization;  To acquire, analyze, and disseminate economic, statistical, and other phases of cooperatives within its area of operation;  To sponsor studies in the economic, legal ,financial, social, and other phases of cooperation, and publish their results;  To promote the knowledge of cooperative principles and practices;  To develop the cooperative movement in their respective areas of operation;  To advice the appropriate authorities on all question relating to cooperatives  To raise funds through membership fees and contribution , donations, and subsidies from local and foreign sources whether private or government; and  To do and perform such other activities as may be necessary to attain these objectives. Cooperatives unions may assist the national and local government in the letters of development activities in their respective areas of operation. How Soon Should The CDA Act On Your Application For Registration? If there is no action within 30 days, the application is considered approved, unless the application himself causes the delay. What Should You Do if Application Is Denied? If the application is denied, you may appeal to the Office of the President. If the Office of the President fails to act within 90 days from the filing of appeal, the application is considered approved. What Evidence Confirms The Approval Of Your Registration? If your application has been approved, the CDA will give you a Certificate of Registration. The certificate confirms that your cooperative has been duly registered. What Are The Powers And Capacities Of A Registered Cooperative? Once your cooperative is registered under the Cooperative Code Of the Philippine (R.A. 6938) it will have the following powers and capabilities:  To sue and be sued in its cooperative name;
  11. 11.  Of succession;  To amend its Articles of Cooperative in accordance with the provisions of R.A. 6938;  To adopt by laws not contrary to law ,morals or public policy, and to amend and repeal the same in accordance with R.A. 6938;  To purchase, receive, take of grant, convey, sell, lease, pledge, mortgage, and otherwise deal with such real and personal property as the transaction of the lawful affairs of the cooperative may reasonably and necessarily require, subject to the limitations prescribed by law and the Constitution;  To enter into division, merger or consolidated , as provided in R. A. 6938;  To join federations federation or unions, as provided in R.A. 6938;  To accept and receive grants, donations and assistance from foreign and domestic sources; and  To exercise such other powers granted by R.A. 6938 necessary to carry out its purpose as stated in its Article of Cooperation.

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