This document defines cooperatives and outlines their key characteristics and principles according to Philippine law. It states that cooperatives are autonomous associations of persons who have voluntarily joined together to achieve common social, economic, and cultural needs. The document then lists and describes 9 characteristics of cooperatives, including being service-oriented, community-oriented, and owned/managed by members. It also outlines 7 core values and 7 principles of cooperation that cooperatives operate under, such as democracy, equity, self-responsibility, and concern for community.

1. GENERAL CONCEPTS
AND PRINCIPLES OF
COOPERATIVES
FNE102– Cooperative Management
Leslie Ann U. Gamundoy
Instructor

2. Review: Definition of Cooperative
R.A 9520, Article 3
“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 risk and benefits of the undertaking in
accordance with universally accepted
principles.”

3. Characteristics of Cooperatives
1. Cooperatives are service oriented
2. Cooperatives are community oriented
3. Cooperatives are people oriented
4. Cooperatives are owned, managed, and patronized by
their members
5. Cooperatives are business enterprises with social
responsibility
6. Cooperatives develop best through the principles of
subsidiarity
7. Cooperatives serve best when they satisfy the real felt
needs of the members and teach members to become self-
reliant
8. Cooperatives develop best from bottom to top
9. The development of cooperatives is enhanced through
multi-sectoral approach

4. Characteristics of Cooperatives
Cooperatives are service oriented
✓Cooperatives are not for profit and charity but
for service
✓Service to others is expected to be given
primary importance, while self-interest should
be given only a secondary priority.

5. Characteristics of Cooperatives
Cooperatives are community oriented
✓It helps improve the quality of members’ life
as well as the community in which they operate

6. Characteristics of Cooperatives
Cooperatives are people oriented
✓ serve as tools of change for total human
development, for total quality of life of the
members, economic, social, political, cultural
and spiritual

7. Characteristics of Cooperatives
Cooperatives are owned, managed, and
patronized by their members
✓Sense of ownership is one of the keys to the
success of cooperatives

8. Characteristics of Cooperatives
Cooperatives are business enterprises with
social responsibility
✓Net Surplus is distributed to members as
capital contributors and as consumers

9. Characteristics of Cooperatives
Cooperatives develop best through the
principles of subsidiarity
✓Mutual-help (joint and united action)
✓“If you want something done, do it yourself”
✓“Maximum Strength Through Perfect Unity”

10. Characteristics of Cooperatives
Cooperatives serve best when they satisfy
the real felt needs of the members and
teach members to become self-reliant
✓ It is a basis for patronage

11. Characteristics of Cooperatives
Cooperatives develop best from bottom to
top
✓Primary level
✓Secondary level
✓Tertiary Level
✓Federations (same business) or Union

12. Characteristics of Cooperatives
The development of cooperatives is
enhanced through multi-sectoral approach
✓Networking and linkages with government
and non-government sectors

13. Core Values of Cooperation
Democracy
Solidarity
Self Help & Self
Responsibility
Equality & Equity
Source: ICA Core Values of Cooperation

14. DEMOCRACY
• we give our members a say in the way we
run our businesses

15. EQUITY
•we carry out our business in a way that is fair
and unbiased
•Equity is a never ending challenge since this
refers to how members are treated within the
cooperative. Members should be treated
equitably in how they are rewarded, normally
through their patronage dividends, allocations to
capital reserve in their name or reductions in
charges.

16. EQUALITY
•no matter how much money a member invests
in their share account, they still have one vote
•means that the basic unit of the cooperative is
the member who is either a human being or
grouping of human beings. Members have rights
of participation, a right to be informed, a right to
be heard, and a right to be involved in making
decisions. Members should associate in a way
that is as equal as possible, one that is a
continuing challenge for all cooperatives.

17. SELF-RESPONSIBILITY
•we take responsibility for, and answer to
our actions
•Self-responsibility means that members
assume responsibility for their cooperative,
for its establishment and its continuing
vitality. Members are responsible for
ensuring that their cooperative remains
independent from other public and private
organizations.

18. SELF-HELP
•we help people to help themselves
•is based on the belief that all people can
and should strive to control their own
destiny. Full individual development can
take place only in association with others.
Through joint action and mutual
responsibility, one can achieve more, by
increasing one’s collective influence in the
market and before governments.

19. SOLIDARITY
•we share interests and common purposes
with our members and other
co-operatives.
•Solidarity ensures that cooperative action is
not just a disguised form of limited self
interest, that cooperative is more than just
an association of members, but affirmation
of collective strength and mutual
responsibility.
“United we stand; Divided we fall”

20. COOPERATIVE PRINCIPLES

21. Open and Voluntary Membership
• membership is open to everyone
• Filipino citizen
• 18 years of age
• Meets the common bond of membership

22. Democratic Member Control
• all members have an equal voice in
making policies and electing
representatives
• One man, one vote

23. Member Economic Participation
• all profits are controlled democratically
by members and for their benefit
• Proportionate based on capital
contribution and patronage

24. Autonomy and Independence
• cooperatives are always independent,
even when they enter into agreements
with the Government and other
organizations

25. Education, Training and
Information
• cooperatives educate and develop their
members as well as their staff

26. Cooperation Among Cooperatives
• cooperatives work together with other
cooperatives to strengthen the
cooperative movement as a whole
• Primary cooperative needs to be
affiliated to a secondary cooperative; and
secondary to tertiary cooperative

27. Concern for Community
• cooperatives also work to improve and
develop the community, both locally and
internationally.

28. Natural and Juridical Persons
• Natural Person-persons created by God
• Juridical Persons-entities considered as such by
fiction of law and or juridical proceedings.
• A primary cooperative requires that only natural
persons can join it and there must at least 15
persons to be able to start one.
• A primary cooperative is therefore a juridical
person composed of natural persons.
• A secondary cooperative is an association of
primary cooperatives or juridical persons.

29. Rights and obligations of persons
• Persons have rights which can claim observance
from others, including the government or state.
• Persons have responsibilities as well, which can
become obligations towards others, the
government/state or the moral order.
• Rights to connote the maturity on other persons
to respect those rights and responsibilities
connote the maturity to render or oblige with
one’s responsibilities.

30. • Rights and responsibilities give persons the
rights to sue and the misfortune of being
sued.

31. Pop Up!
• XYZ Electric Cooperative registered years ago,
but not with the CDA (Cooperative
Development Authority)
• Is XYZ Cooperative a juridical person?
• Is XYZ Cooperative a “True” cooperative?
• What is the generic classification of XYZ
Cooperative?

32. Membership in Cooperative is
Voluntary
• Who have voluntarily joined together: The
word voluntary is derived from the Latin word
“voluntas” meaning “will” or “free will”.
• No person is forced to join in any cooperative.
• Persons join a cooperative out of their own
free will and volition.
• To achieve a lawful common social or
economic end: The purpose for which
cooperative is organized must be lawful

33. Lawful Ends of a Cooperative
(As enumerated in the Code Art. 6)
• To encourage thrift and savings mobilization
among the members.
• To generate funds and extend credit to the
members for productive and provident
purposes.
• To encourage among members systematic
production and marketing.
• To provide goods and services and other
requirements to the members.

34. • To develop expertise and skills among its
members.
• To promote and advance the economic, social
and educational status of the members.
• To establish, own, lease, operate cooperative
banks, cooperative wholesale and retail
complexes, insurance and agricultural/industrial
processing enterprises and public markets.
• To coordinate and facilitate the activities of
cooperative
• To undertake any and all other activities for the
effective and efficient implementation of the
provisions of Cooperative Code.

35. Cooperative Helps Members help
Themselves
• A cooperative helps members help
themselves.
• Members are encourage to develop the habit
of savings can be transformed into capital.
• Encourages members to build up capital by
making a sustained purchase through time of
equity or share capital.

36. Universally Accepted Cooperative
Principle
• The management practice of cooperatives
that have succeeded over time are therefore
reliable precedents which new or latter day
cooperatives should adopt as principles for
success.

37. General Assembly
• The full membership of the cooperative duly
assembled for the purpose of exercising all the rights
and performing all the obligations pertaining to the
cooperatives.
• In Art. 33, the Code specifies the composition of the
general assembly and states that the general assembly
is composed of such members who are entitled to vote
under the articles of cooperation and by-laws.
• The members entitled to vote, excluding from the
count, therefore, associate members and those
disenfranchised to vote, must be gathered together for
the purpose of transacting a cooperative business.

38. Board of Directors
• Assumes certain management functions aside
from policy-making powers.
• The body entrusted with the management of
the affairs of the cooperative under its articles
of cooperation and by-laws.

39. Committee
• Any body entrusted with specific function and
responsibilities under the by-laws or resolution of
the general assembly or the board of directors.
• Committees generally created are education
committee, audit committee and election
committees.
• Depending on the type of cooperative other
committees are created, such as credit
committee in credit unions or purchasing
committees in consumer cooperatives.

40. Articles of Cooperation
• Including the amendments, that is required to be
registered with the CDA (Cooperative
Development Authority
• It is an expanded ID or biodata of the
cooperative.
• Contains the name of the co-op, the address, the
purpose of the co-op. the authorized share
capital including subscribed and paid-up capitals,
the lists of the cooperators, and the incorporating
directors.

41. By Laws
• Required to be registered with the CDA
together with the articles of Cooperation,
under provision of the Cooperative Code.
• These are the set of rules that governs the
internal affairs of the cooperative, such as
meetings, quorums, powers/functions of the
officers, capital sourcing, termination of
membership and the like.

42. Registration
• The operative act granting juridical personality
to a proposed cooperative and is evidenced by
a certificate of registration.

43. Cooperative Development Authority
(CDA)
• The government agency in charge of the
registration and regulation of cooperatives

44. Terms to remember…
• Co-op-short term for cooperative; formerly a
colloquialism but now widely accepted.
• Credit union-old term used to refer to the
present-day credit cooperative; referred to as
Raiffeisen-type cooperative in honor with
Freidrich Wilhem Raiffeisen to whom the word
owes the credit union idea.
• Member- a person, either natural or juridical
who, adhering to the principles set forth in the
Cooperative Code and in the articles of
cooperation.

45. Different Types of Common Bond of
Interest
Associational Present among people belonging to the
same club or organization, same
profession, or same labor union
Institutional Members work in the same industrial
plan, same government institution, same
store, same business firm or same church
Residential Members live or work in the same
barangay, city, municipality, province or
rural or urban community.
Occupational Members belong to the same occupation
or industry.

46. Branch Office
• It refers to a business office outside the principal office
where cooperative activities and business operation are
undertaken as per approved cooperative development
plan.
• For purposes of this definition, cooperative activities
shall refer to, but not limited to: acceptance and
processing of membership, conduct of Pre-Membership
Education Seminar (PMES), and other trainings.
• While business operation means conduct of business
activity/ies as stated in the objectives and purposes of
the cooperative.

47. Principal or Main Office
• It refers to the registered head office as indicated in
the articles of cooperation and bylaws of the
cooperative where the business and cooperative
activities are conducted and central records and
main books of accounts are kept.
• It is also the place where the officers and key
management staff of the cooperative direct, control,
coordinate, and manage its entire operation.

48. Pre-qualification Requirements
• That the proposed establishment of a branch in another place
but within the area of operation of the applicant cooperative
is necessitated by the existence of members in the said place
desiring to avail of the services of the cooperative within their
reach. Provided, that the number of members to be served by
the branch office will be enough for its viable operation as
shown in the business plan.
• The principal office must have a minimum paid-up capital, as
provided for in the Articles of Cooperation, to wit:

49. • Each branch must have an available operating capital as
provided for in the Business Plan, to wit
• The cooperative did not incur net loss for the last three
consecutive years and its net worth is progressive for the last
three years from the date of application.

50. Net Worth
• It refers to equity inclusive of member's
equity, donations, grants and reserve
funds less unhooked allowance for
probable losses on loans, accounts
receivable, investment and
nonperforming assets, and other capital
adjustments as may be required by CDA.

51. Documentary Requirements
A letter request for authority to establish a cooperative branch shall be
signed by the Chairman of the cooperative or General Manager as
authorized by the Board and shall be accompanied by the following
information/documents:
• Business plan; Business Plan It refers to a business study showing the
marketability of products/services, and also the financial, technical,
legal and organizational aspects of the proposed business
establishment. It shall also include financial projections for the first
three years of operations showing sustained viability. In the
preparation of the business plan, due consideration shall be given to
allocation of resources to the proposed branch.
• General assembly resolution authorizing the establishment of the
branch and commitment of investment or allocation of resources in
its operation;
• Certification signed by the Chairman/General Manager of the
following:
a. Presence of Manual of Operations for Branch;

52. Administrative Regulations
• All cooperatives intending to put up a branch and cooperatives with
existing branch office should be established within the area of
operation of the cooperative. For cooperatives intending to branch
outside the area of operation, approval of the articles of
cooperation expanding the area of operation shall be secured;
• . No branch should be established within a 500-meter radius of the
nearest cooperative engaged in the same line of business as the
proposed branch;
• The branch office shall have a separate Book of Accounts;
• . Minimum of 3 personnel to man the office such as but not limited
to manager, bookkeeper, and cashier;
• Adherence to the manual of operation at all times;

53. • Issuance of official receipt in the financial transactions of the
branch;
• Imprest system of handling cash shall be complied with at all times;
• All branch offices should secure a Barangay and Mayor's Permit;
• Compliance to other regulations as may be determined by other
government agencies including the CDA;
• Submission of operational reports to the principal/head office such
as financial statements, cash flows, and other relevant reports
required by the main office and the CDA; and
• Same report as mentioned in number 10 be submitted to the CDA
Extension Office where the branch is located

54. Inspection Report
• It refers to the documents where the
findings/observations, actions and
recommendations of the CDA authorized
person who conducted the inspection are
summarized and presented.

55. Satellite Office
• It refers to an office established by a cooperative
outside of its principal/main office but within its area
of operation to provide limited services to its
members but which does not however maintain
books of accounts as it is done only by the
principal/main office.
• The term satellite office shall include an extension
office, a sub- office or other terms of similar import.

56. Documentary Requirements
The application for a Letter of Authority to establish a
cooperative satellite office shall be accompanied by the
following documents:
• Certificate of Compliance for the preceding year;
• Oath of Undertaking signed by the Chairperson of the
cooperative for the specific services/activities to be
undertaken by the proposed satellite office;
• Certification as to available space and manpower to
manage the office; and
• Official Receipt showing payment of the processing fee.

57. Services/Activities Allowed in a
Cooperative Satellite Office
The cooperative satellite office shall render services and conduct
business activities, which shall not be limited to the following:
• Recruitment of members;
• Acceptance of applications for membership;
• Acceptance of loan applications;
• Collection and acceptance of payments for share capital
contributions, loans, and/or utility bills in the case of electric and
water service cooperatives; and
• Release of loans, patronage refund, and interest on capital. All
applications for membership, loans, and other business transactions
accepted in the satellite office shall be endorsed to the
principal/main office for appropriate action. In no case shall the
satellite office exercise discretion on such matters.

58. • Presence of a signage as a cooperative satellite office;
• List of specific transactions that may only be undertaken as approved by the
cooperative's Board of Directors;
• Presence of Operational Structure;
• Submission of summary reports to the head office;
• Presence of a Barangay Permit and a Mayor's Permit that should be posted
in the office at all times;
• Maintenance of Accountable Forms (e.g. Cash
Acknowledgement/Provisional/ Official Receipt, vouchers, etc.);
• Maintenance of record of daily transactions to be submitted to the
principal/main office;
• Official Receipts showing payments of processing fees;
• Availability of appropriate logistics (e.g. personnel complement, computer,
tables, chairs, cash register, cash vault or box, if applicable, etc);
Conditions for Cooperative Satellite
Office Operations

59. • Presence of a minimum number of personnel as
determined by the principal/main office to
effectively discharge the functions of the satellite
office;
• Turn-over or deposit of all collections within the day
to the account of the principal/main office or imprest
system of handling cash; and
• Other conditions as may be determined by the CDA

60. Relocation/Transfer of Cooperative
Satellite Office
• Notice to the CDA of such relocation/transfer of
satellite office at least 3 months before the actual
transfer;
• Posting of notice of relocation/transfer in a
conspicuous place where the satellite office is
located at least 3 months prior to the scheduled date
of relocation/transfer; and
• Payment of processing fee for the issuance of new
Letter of Authority upon surrender and cancellation
of the old Letter of Authority

61. Voluntary Closure of Cooperative
Branch
• A document, duly signed by a Branch Manager noted by the
Chairman of the Cooperative, of its intention to close a branch
office shall be submitted to the CDA at least 3 months prior to
the closure;
• Sending of Notice/Posting of Notice of Closure in conspicuous
place of the branch office shall be made in order to inform
members and creditors of the branch office to be closed at
least 3 months prior to the closure; and
• Upon submission of the report on the completion of Par. 1
and 2, the CDA shall automatically issue an Order of Closure
to the concerned cooperative branch office. This also cancels
the Certificate of Authority issued.

62. Art. 3 General Concepts
• - 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.
•

63. • Bond of Membership It refers to the conditions where members associate themselves to
attain their common goals and objectives which may either be residential, occupational,
associational, and institutional.
• Capital It refers to the sum total of member's share capital including deposits, revolving
capital, subsidies, donations, legacies, grants, aids, land structures, plants, equipment
facilities, machines, and other assets of a cooperative.
• Share Capital It refers to the money paid or required to be paid by the members for the
conduct of the operations of the cooperative.
• Authorized Share Capital It refers to the capitalization of the cooperative as prescribed in
the Articles of Cooperation.
• Paid-up Share Capital It refers to the portion of the subscribed share capital, which has
been paid by the members of the Cooperative.
• Unpaid Subscription It refers to the subscribed share capital, which is not yet fully paid by
a member.
• Registration It refers to the operative act gaining juridical personality to a proposed
cooperative as evidenced by a Certificate of Registration.

64. Mind Alert
• The ABC Faculty Union Savings and Credit Cooperative
was established by the Faculty Union. All faculty union
members received letters of invitation throughout the
organizing phase from the organizer. The officers were
chosen from the about 35 attendees. The paperwork or
documents required for registration with CDA were
completed by the cooperative development officer. After
registration, the officers put the coop into operation
right away since they assumed faculty members had high
I.Q.s.
• Comment on the action of the officers.