3. CAPITAL SOURCES OF FUNDS
Capital Sources.- Cooperatives may derive their capital from any or all of the following
sources:
• Member’s share capital;
• Loans and borrowings including deposits;
• Revolving capital which consists of the deferred payment of patronage refunds, or
interest on share capital; and
• Subsidies, donations, legacies, grants, aids and such other assistance from any
local or foreign institution whether public or private: Provided, That capital coming
from such subsidies, donations, legacies, grants, aids and other assistance shall
not be divided into individual share capital holdings at any time but shall instead
form part of the donated capital or fund of the cooperative.
Upon dissolution, such donated capital shall be subject to escheat.
4. ART. 73. LIMITATION ON SHARE CAPITAL
HOLDINGS
No member of primary cooperative other than cooperative
itself shall own or hold more than ten per centum (10%) of
the share capital of the cooperative.
CAPITAL SOURCES OF FUNDS
5. ART. 75. CAPITAL BUILD UP
The bylaws of every cooperative shall be provided for a
reasonable and realistic member capital build-up program
to allow the continuing growth of the members’ investment
in their cooperative as their economic conditions continue
to improve.
CAPITAL SOURCES OF FUNDS
7. NET SURPLUS
Notwithstanding the provisions of existing laws, the net surplus of cooperatives shall
be determined in accordance with its by-laws. Every cooperative shall determine its
net surplus at the close of every fiscal year.
8. ORDER OF DISTRIBUTION
The net surplus of every cooperative shall be distributed as follows:
1. An amount for the reserve fund which shall be at least ten per
centum (10%) of net surplus: Provided, That, in the first five (5)
years of operation after registration, this amount shall not be less
than fifty per centum (50%) of the net surplus:
9. ORDER OF DISTRIBUTION
2. Not more than Ten percent (10%) for Education and Training
Fund (ETF). The fund shall provide for the training, development
and similar other cooperative activities geared towards the growth
of the cooperative movement:
Half of the amounts transferred to the education and training fund
annually under this subsection shall be spent by the cooperative for
education and training purposes; while the other half may be
remitted to a union or federation chosen by the cooperative or of
which it is a member.
10. ORDER OF DISTRIBUTION
3. Not less than three percent (3%) for Community Development
Fund (CDF). The Community Development Fund shall be used for
projects or activities that will benefit the community where the
cooperative operates.
4. Not more than seven per centum (7%) for Optional Fund, the
Optional Fund shall be used for a land and building, and any other
necessary fund.
11. ORDER OF DISTRIBUTION
5. The remaining net surplus shall be made available to the
members in the form of Interest on Share Capital
(ISC)not to exceed the normal rate of return on
investments and Patronage Refunds:
13. Interest on Share Capital shall not exceed the Rate of Return
on Investment. Unless otherwise provided for in the By-
laws of the cooperative, share capital shall earn interest;
the Rate of Interest shall be computed as follows:
Rate of ISC = X (Net Surplus less Statutory Reserves)
Total Average Share Month
Where X: shall be a percentage to be determined by the
Board of Directors allocated for interest on share capital.
Sec. 9. INTEREST ON SHARE CAPITAL (ISC)
14. No allocation of interest on share capital shall be made
without the approval of the Board of Directors which may
increase or decrease any or both.
Payment of interest, unless otherwise provided for in the By-
laws, must be made on such date as may be determined by
the Board of Directors. The General/Representative Assembly,
however, upon the recommendation of the Board of
Directors, may defer the payment of such interest including
Patronage Refund to raise Revolving Capital.
Sec. 9. INTEREST ON SHARE CAPITAL (ISC)
15. PATRONAGE REFUND
The principle of Patronage Refund is a principle of equity
wherein an equal right of members to participate in the
organization and to equitably share in the benefits
accruing is established.
16. Under the principle, the Net Surplus shall not be construed as profit,
but as excess payments made by them from the cooperative and
which shall be deemed to have been returned to them if the same
is distributed as prescribed by the Code and by prescribed
Implementing Rules and Regulations . Provided that:
1. the amount allocated for patronage refund shall not be
less than thirty percent (30%) of the net surplus after
deducting the statutory reserves based on the principle of
equity; and
2. in no case shall the rate of patronage refund be more than
twice the rate of interest on share capital.
PATRONAGE REFUND
17. Formula in Computing the Patronage Refund (PR):
Rate of PR = X (Net Surplus less Statutory Reserves)
Interest on Loans
Where: X shall be a percentage to be determined by
the Board of Directors allocated for interest on
Patronage Refund
PATRONAGE REFUND
18. SAMPLE COMPUTATION
Statement of Operation
December 31, 2014
Income:
Interest on Loan 100,000
Membership fee 5,000
Other Income 3,000
Total 108,000
Less Expenses:
Salaries and wages 12,000
Organizational expenses 20,000
Taxes and Licenses 1,000
bond of Account Officers 1,000
Total 34,000
Net Surplus 74,000
20. SAMPLE COMPUTATION
Assuming that the following percentages were
determined by the Board of Directors :
Assuming 70% of 22,200 is for ISC
15,540.00
Assuming 30% of 22,200 is for PR
6,660.00