Friday, April 24, 2015




Section 1.  Legal Basis.  The legal basis for this Rule are as follows:

    "ART. 23. Type and Categories of Cooperatives. - (1) Types of Cooperatives - Cooperatives may fall under any of the following types:


    (e) Service Cooperatives is one which engages in medical and dental care, hospitalization, transportation, insurance, housing, labor, electric light and power, communication, professional and other services;


    "(t) Workers Cooperative is one organized by workers, including the self-employed, who are at same time the members and owners of the enterprise, its principal purpose is to provide employment and business opportunities to its members and manage it in accordance with cooperative principles."

Section 2.  Guiding Principles.  It is the declared policy of the State to foster the creation and growth of cooperatives 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 organization of cooperatives and shall create an atmosphere that is conducive to the growth and development of these cooperatives.

    These Rules shall serve as a guide to service cooperatives which are engaged in labor contracting and sub-contracting arrangements as defined under existing laws, and workers cooperative that provides labor to, and produces products in, an enterprise owned by the worker-members.  The purpose is to harmonize policies and practices of cooperatives in the light of existing treaties, laws, rules, and regulations on the matter.

Section 3.  Applicability.  This Rule shall cover the following:

    a.  Labor service cooperative - a cooperative that is engaged in providing a specific labor, job, or service to a principal under a contracting or sub-contracting arrangements as may be defined under existing laws and in accordance with the cooperative principles set forth under the Philippine Cooperative Code of 2008 (R.A. 9520); and

    b.  Workers cooperative - a cooperative organized by workers, including the self-employed who are at the same time members and owners of the enterprise.  The principal purpose is to provide employment and business opportunities to its worker-members and manage it in accordance with the cooperative principles.

    Section 4.  Distinction and Authorized Activities.  The following shall be the distinction between labor service cooperative  and workers cooperative:

    a.  Labor Service Cooperative:  

    As to nature of activities - Engaged in contracting and sub-contracting arrangements as defined by law;

    As to existence of employer-employee relationship - Existence of employer-employee relationship is at all times observed in contracting and sub-contracting arrangements during the deployment of the member.  Trilateral relationship exists between and among the principal, contractor, and the member-employees.

    b.  Workers Cooperative:

    As to nature of activities - May engage in labor and production, including contracting and subcontracting arrangements in support of the main activity as defined by law.

    As to existence of employer-employee relationship - Self-employed individual is allowed by the cooperative in regard to its enterprise.

    Section 5.  Definition of terms.  The meaning of each term as used in this Rule shall be as follows:

    I.  For those falling under workers cooperative.

    a. "Self-employed" refers to one who has his/her own personal occupational capacity put to productive use by applying his/her own capital raised by himself of together with other self-employed persons pursuing related occupational interest.

    b.  "Skilled Worker" refers to to a worker possessing technical knowledge and expertise to accomplish a work.

    c.  "Worker Cooperative" refers to a cooperative organized by workers, including self-employed individuals who are owners and members of the enterprise.

    d.  "Worker-member" is also referred to as member-owner.  He/she also works in the cooperative or is deployed as a worker with a principal availing of services offered by the cooperative.

    Worker-member ownership means work and management are carried out jointly, without the typical limitations of individual work, nor exclusively under the rules of conventional wage-based labor.

II.  For those falling under labor service cooperatives:

   a.  "Cabo" is prohibited activity referring to a person or group of persons or to a labor group which, in the guise of cooperative, supplies individual members or workers to an employers, with or without any monetary or other consideration, whether in the capacity of an agent of the employer or as an ostensible independent contractor.

   b.  "Contracting" or "Subcontracting " or "Labor Contracting"  refers to an arrangement whereby a principal agrees to put out or farm out with a contractor the performance or completion of an specific job, work or service within a definite or predetermined period, regardless of whether such job, work or service is to be performed or completed within or outside the premises of the principal.

   c.  "Contractor" refers to a labor service cooperative engaged in a legitimate contracting or subcontracting arrangement providing either labor services, skilled or temporary workers, including individual member-employees, or a combination of services to a principal under a Service Agreement.

   d.  "Contractor's member-employee" includes an individuual member of a cooperative who has been deployed by the cooperative to perform or complete a job, work or service pursuant to a Service Agreement.  It also refers to members who are regular employees of the contractor whose functions are not dependent on the performance or completion of a specific job, work, or service within a definite period of time, such as administrative staff.

   e.  "Principal"  refers to a person or entity, including government agencies and government-owned and controlled-corporations, who puts out or farms out a specific job, service or work to a contractor.

   f.  "Service Agreement"  refers to the contract between the principal and contractor containing the terms and conditions governing the performance or completion of a specific job, work or service being farmed out for a definite or predetermined period.

   g.  "Solidary liability"  refers to the liability of the principal pursuant to the provisions of Article 109 of the Labor Code, as direct employer together with the contractor for any violation of any provision of the Labor Code, as amended, and these Rules.

   It also refers to the liability of the principal, in the same manner and extent that he/she is liable to his/her direct employees, to the extent of the work performed under the contract when the contractor fails to pay the wages of his/her employees, as provided in Article 106 of the Labor Code, as amended, and these Rules.

   h.  "Substantial capital" refers to the capital required by DOLE for labor service cooperatives to engage in labor contracting and sub-contracting arrangement.  However, for purposes of registration with the Authority, the minimum capital requirement is Fifteen Thousand (Php15,000.00) pesos.

   i.  "Trilateral Relationship"  refers to the relationship in a contracting or subcontracting arrangement where there is a contract for a specific job, work or service between the principal and the contractor, and a contract of employment between the contractor and its worker-member.

   There are three (3) parties involved in these arrangements:  the principal who decides to farm out a job, work or service to a contractor; the contractor who has the capacity to independently undertake the performance of the job, work or service; and the contractual employee who may or may not be cooperative members, engaged by the contractor to accomplish the job, work or service.

   Section 6.  Legitimate contracting or subcontracting.  Contracting or subcontracting undertaken by a cooperative shall be legitimate if all the following circumstances concur:

   (a)  The contractor must be registered as a labor service cooperative with the Authority in accordance with these Rules, and carries a distinct and independent business and undertakes to perform the job, work, or service on its own responsibility, according to its own manner and method and free from control or direction of the principal in all matters connected with the performance of the work except as to the results thereof;

   (b)  The contractor has substantial capital and/or investment; and



Wednesday, April 22, 2015


    "Without cooperatives, there will be no real financial inclusion and no genuine inclusive growth."

    Thus, said Ray Elevazo, Executive Director of the Cooperative Development Authority (CDA) in his remarks during the culmination of the Cooperative Financial Cluster Summit held last April 17-18, 2015 at Tagaytay City.

    Although we (cooperatives) are here...they forgot, or maybe, refused to believe that the cooperative movement is a century-old Philippine mass movement that dared and still bravely dares to advance inclusive growth and financial inclusion, even in the past when these phrases were still not popular and fashionable, he pointed.

    As the Cooperative Centennial fever draws in, we decided to advance through clusters.  And now, we are concluding the first cluster congress, among a number of scheduled cluster congresses this year, Elevazo said.

    Now, what we are writing is not only a chapter but a story that will tell the government and the economic elite, that cooperatives are a significant part of the Philippine economy, he concluded.  (END)

Tuesday, April 21, 2015




    Putting the people in the center of the development processes, through cooperativism, provides a solution to the possible, feared socio-economic breakedown that could be triggered by deteriorating and dehumanizing poverty.


    This, in a gist is what I make out of the message of newly-installed Chairman of the Cooperative Development Authority (CDA), HON. ORLANDO R. RAVANERA, in his power point presentation and talk delivered during the Cooperative Financial Cluster Summit, held last April 17-18, 2015 at Tagaytay City.


    He cited that poverty stems from the powerlessness of the people for lack of their access to resources; lack of capability; and lack of opportunities.

    He pointed out that the marginalization of people and resources, in turn, contributes to the degradation of values and of the ecosystem.

    These, also aggravate social injustice and gross inequalities; promote gross social disparity, apathy, including conflict and violence, according to him.


    Ravanera sees cooperativism  as a breakthrough solution and a  transformative leading edge, with  cooperativism serving as a tool for empowerment of the people.

    Once empowered, people can develop their full human potential, by harnessing their collective energies; and by gaining access and control over resources, he explained.

    Aside from providing empowerment, cooperatives  serve as effective vehicle for peace and development, by helping uproot the causes of conflict brought about by social exclusion, and gross inequity.

    The transformative potential of cooperativism lies in its promise to usher in a sustainable future, one characterized by ecologically-sustainable, and socially equitable development.

    This will foster social justice and equity; meaningful people's participation; meeting the Millenium Development Goals; while institutionalizing the sustainable development principles, Ravanera enunciated.

    Ultimate, cooperativism, will lead to peace, stability and sustainability, as well as accelerate democratization of wealth and power, he said.


    In line with these, Ravanera also announced that CDA, in coordination with the cooperative sector, will pursue a number of strategies.

    On regulation, CDA plans to strengthen governance and enhance cooperative regulatory framework; and implement efficient registration of cooperatives.

    On market development and trade promotion, CDA will support the development of globally-competitive products from agriculture and fishery cooperatives.

    It will also promote the establishment of market linkages and promotion in both domestic and international trade.

    On capability building, CDA will strive to strengthen the relationship of government agencies, government owned and controlled corporations; academe; and private institutions.

    For this, CDA will utilize the cooperative councils mechanism fro partnership-building and mainstreaming cooperative policies.

    CDA will also implement capacity building and institutional development for cooperatives particularly for the micro and small cooperatives, Ravanera added.

    The Cooperative Finance Cluster Summit reportedly was attended by a total of 686 participants from 215 cooperatives.  This was conducted by the CDA, with the Philippine Cooperative Center, as lead partner.  (END).


Friday, April 17, 2015




    "Pursuant to the provisions of Art. 62 (13) under Chapter V of Republic Act No. 9520, otherwise known as the Philippine Cooperative Code of 2008, "..the Cooperative Development Authority in consultation with NHA, HDMF, HLURB, HUDCC, SSS, LBP, SHFC, DBP, HGC, DILG, DENR and concerned cooperative sector hereby promulgates the following rules and regulations for the proper guidance and compliance of Housing Cooperatives.."

Section 1.  Coverage.  This Rule shall cover all cooperatives duly registered with the Authority under R.A. 9520 organized to assist or provide access to housing for the benefit of their regular members.

Section 2.  Organization.  Fifteen (15) or more natural persons who are Filipino citizens, of legal age, having a common bond of interest and actually residing or working in the intended area of operation, may organize a housing cooperative.

Section 3.  Purposes and Objectives.  A Housing Cooperative shall be organized primarily to facilitate access and provide affordable housing units to its members, and for any or all of the following purposes:

   1.  To create a resource mobilization program to ensure financial stability for the cooperative.

   2.  To foster and strengthen the principle of cooperativism by promoting a comprehensive and integrated community development program which is planned and managed by the cooperative members thereby ensuring a sustained and self-reliant cooperative community.

  3.  To development cooperative efforts and partnership with other cooperatives, with the CDA, NHA, HDMF, SSS, DBP, HUDCC, DILG, SHFC, HGC and other public or private entities thereby assuring availability of resources and lower cost of housing development.

  4.  To expand the cooperative business by stabilizing the available resources for the continuing production of housing units for its members.

  5.  To undertake such other economic or social activities as may be necessary or incidental in the pursuit of the foregoing projects.

    Section 4.  Housing Projects.  Housing Cooperatives may engage in the construction, development and/or management of housing projects.

    Section 5.  Registration Jurisdiction.  Housing Cooperatives shall file their duly accomplished application for registration with the CDA Extension Office, which shall have jurisdiction over the said cooperative.

    Section 6.  Capitalization.  For purposes of registration with the Authority, a housing cooperative shall have a minimum paid-up capitalization of Fifteen Thousand Pesos (P15,000.00).

    Section 7.  Requirements for Registration.  The following shall be complied with upon filing of application:

A.  New Applicant

    (1).  Cooperative Name Reservation Notice (CNRN);

    (2).  Articles of Cooperation and By-laws;

    (3).  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;  Provided, That in no case shall the paid-up share capital be less than Fifteen Thousand Pesos (P15,000.00);

   (4).  Surety bond of accountable officers handling funds, properties and securities;

   (5).  Pre-membership Education Seminar (PMES);

   (6).  Economic Survey;

   (7).  Pre-feasibility Study of the housing projects undertaking as reviewed by NHA;

   (8).  Undertaking to Change Name in the event that another cooperative has acquired prior right to the use of the proposed name; and

   (9).  Registration Fee.

B.  Existing Cooperative

    (1).  Amended Articles of Cooperation and By-laws;

    (2).  A Resolution Certified by the Board Secretary and by the majority of the Board of Directors starting that the said amendments have been duly approved by at least two-thirds (2/3) vote of the members with voting rights;

   (3).  Audited Financial Statements showing profitable operations for the past two (2) years;

   (4).  Pre-feasibility study of the housing projects undertaking as reviewed by the NHA;

   (5).  Proof of business track record of the cooperative; and

    (6).  Amendment Fee.

Section 8.  Financing and Technical Assistance.  The Authority, in coordination with the appropriate government agencies and financial institutions, shall assist the housing cooperative in availing technical and financial assistance for its housing projects.

A blanket loan or long term wholesale loans for the financing of the housing projects undertaken by housing cooperatives shall  be created by the appropriate  housing agencies and government financial institutions (GFIs) with interest rates and terms equal to, or better than those given for socialized housing project in accordance with their charters and rules and regulations.

CDA and GFIs shall exercise prudence in providing special loan windows to housing projects of cooperatives and shall craft the Joint Implementing Rules and Regulations in Establishing Special Loan Windows for Housing Projects of Cooperatives which includes the system of identifying, measuring, monitoring and controlling risks arising from said activity.

Provided further, that the created special loan window complies and observes the provisions of the Manual of Regulations for Banks (MORB), specifically Section X395, as follows:

    a).  It is within the provision of their respective charters;

    b).  Duly coordinated with the general credit policies and corresponding Schedule of Credit Priorities as embodied in Appendix 23; and

    c).  Limit their credit to the economic activities falling Priority II of said schedules to fifty percent (50%) of their outstanding loans at any time.

The financing shall be in the form of blanket loans or wholesale loans to qualified cooperatives without need for individual processing in accordance with existing laws, rules and regulations.

Section 9.  Documentary Requirements in Availing for Technical and/or Financial Assistance.

    The cooperative in availing technical ad/or financial assistance shall file its application with the appropriate government financial institutions.  GFIs shall provide special accommodation/assistance and leniency to cooperatives, relative to evaluation and assessment for the availment of loan under the special loan window for housing projects of cooperatives.

Section 10.  Conditions for the Proposed Housing Project.  The proposed housing project of the cooperative shall have the following features as certified by the NHA or any other appropriate government agency:

    1.  Availability of Land Suitable for Housing.  The land proposed for housing is  classified as a safe and buildable area and not affected by any government infrastructure project, agricultural or industrial reserve. 

    2.  Land Ownership.  The land is owned by the cooperative or there is an on-going negotiation between the landowner and cooperative through a Contract to Sell or Reservation Agreement between the landowners and the cooperative and that the land is free from any liens and encumbrances.

    3. Target beneficiaries.  The proposed housing project should have at least Thirty (30) initial target member-beneficiaries.

Section 11.  Membership.  Membership in Housing Cooperatives shall be open to all natural Filipino citizens who meet the qualifications for membership prescribed in the Articles of Cooperation and By-laws.

Section 12.  Regulatory Power.  The Authority shall have the power to regulate the internal affairs of Housing Cooperatives such as:

    a.  Exercise of rights and privileges of members;

    b.  Formulation of rules and procedures and the conduct of meetings of General Assembly, Board of Directors and Committees;

    c.  Manner of election and qualification of Officers, Directors and Committee Members;

    d.  Allocation and distribution of net surplus; and

    e.  Other matters relating to the internal affairs of Housing Cooperatives.

    As to matters relating to the technical aspects of the housing program and such other matters affecting the Housing Cooperatives shall be in accordance with the standards promulgated by existing laws.

    Section 13.  Joint Monitoring and Evaluation Committee.  A Joint Monitoring and Evaluation Committee has been created, composed of CDA, as the lead agency, NHA, HLURB, HDMF, HUDCC, SSS, LBP, DBP, SHFC, HGC, DILG, DENR, concerned cooperative sector and other appropriate government agencies and financial institutions.

    The Committee shall have the following functions:

    1.  To formulate joint standards for the proper implementation, monitoring, organization, management and development of cooperative housing project, all matters relating thereto.

    2.  To assist in settling inter/intra cooperative disputes.

    3.  To submit annual accomplishment reports to the Authority.

    4.  To recommend changes to this IRR from time to time as it may deem necessary.

    Section 14.  Settlement of Disputes.  Intra/inter cooperative disputes shall be settled as far as practicable through conciliation-mediation mechanism embodied under Art. 137, cooperative by-laws, and pertinent issuances.

    Should such conciliation-mediation proceedings fail, the matter shall be settled through voluntary arbitration.

    However, in cases where the dispute/s fall within the jurisdiction of the HLURB, the same shall be referred to the said agency and it shall be resolved in accordance with the HLURB regulations.

(To be continued with/followed by:  Rule II-Agrarian Reform Cooperatives).  (END)

Saturday, April 11, 2015




Section 1.  Legal Basis.  The legal basis for this Rule Art. 137 of the Code, quoted as follows:

    "Art. 137.  Settlement of Disputes, Conciliation, and Mediation Proceedings. - Dispute among members, officers, directors, and committee members, and intra-cooperative, inter-cooperative, intra-federation or inter-federation disputes shall, as far as practicable, be settled amicably in accordance with the conciliation or mediation mechanism embodied in the By-laws of cooperatives and in such other applicable laws.

The conciliation and mediation committee or the cooperative shall facilitate the amicable settlement of intra-cooperative disputes and disputes among members, officers, directors, and committee members.

Should such conciliation and mediation proceedings fail, the matter shall be settled through voluntary arbitration:  Provided, however, That before any party can validly file a complaint with the Authority for voluntary arbitration, it must first secure a certificate from its conciliation and mediation committee and from the cooperative union or federation to which it belongs that despite all efforts to settle the issues, the same have failed.

The jurisdiction of the voluntary arbitration shall be exclusive and original and their decisions shall be appealable to the Office of the President.  The Authority shall issue and adopt the proper rules of procedures governing arbitration as the primary and exclusive mode of dispute resolution in accordance with the Alternative Dispute Resolution Act of 2004.

For this purpose, the Authority shall constitute a list of Qualified Voluntary  Arbitrators."

Section 2.  Statement of Policy and Objectives.  It is the policy and objective of these Rules to provide a fair and expeditious settlement of intra-cooperative and inter-cooperative disputes by way of an institutional mode of voluntary arbitration as an alternative to judicial proceedings with the end in view of ensuring and possibly restoring the disrupted harmonious and friendly relationships between or among the parties.

Section 3.  Applicability of Rules and Judicial Technical Rules.  These Rules are applicable to proceedings in voluntary arbitration before the Authority.

Voluntary Arbitration is an administrative proceeding.  The technical rules applicable to court or judicial proceedings need not be controlling and it is in the spirit and intention of these rules to use every and all reasonable means to ascertain the facts in each case speedily and objectively, and without regard to technicalities of low or procedure, all in the interest of substantive due process.

Section 4.  Jurisdiction.  The Arbitral Tribunal as contemplated by these Rules shall have original, exclusive and primary jurisdiction over disputes among members, officers, directors, and committee members, and intra-cooperative, inter-cooperative, intra-federation or inter-federation disputes which were not settled amicably in accordance with the Conciliation/Mediation Mechanisms.  Likewise, the Arbitral Tribunal shall continue to exercise exclusie and original jurisdiction over the afore-mentioned disputes although the arbitration is commercial pursuant to Section 21 of R.A. 9285 or the Alternative Dispute Resolution Act of 2004.

Excluded from the coverage of these rules are disputes arising from employer-employee relationships which shall be covered by the Labor Code, those involving criminal liability, and other matters which by law cannot be compromised.

Section 5.  Exercise of Jurisdiction.  The Arbitral Tribunal cannot acquire jurisdiction over the dispute, unless there exist:

    a.  An Arbitration Agreement either in their Articles of Cooperation, By-laws, contracts or other form of written communication between and among the parties;

    b.  In the absence of an existing Arbitration Agreement, the parties subsequently agree to submit the same for voluntary arbitration, which submission maybe in a form of:

    i.  An exchange of communication between the parties or some other form showing that the parties have agreed to submit whatever dispute to voluntary arbitration or adhere to the provisions of Article 137 of R.A. 9520;

    ii.   Expressly or impliedly submitting to voluntary arbitration as can be gleaned from their respective writeen communications or pleadings filed with the Authority or before the Arbitral Tribunal in accordance with these rules; or

    iii.  Signing a Submission Agreement during the preliminary conference.

    Section 6.  Jurisdictional Challenge.  A Motion to Dismiss based on lack of jurisdiction shall be resolved by the appointed Arbitral Tribunal in accordance with the principle of Kompetenz-Kompetenz.

    Section 7.  Filing and Commencement of Action.  Any party to a dispute not settled through a Conciliation/Mediation Proceeding in the primary and union/federation level can commence an action for Voluntary Arbitration by a filing a Verified Request/Complaint, with a Certificate of Non-Forum Shopping, in the prescribed form and number of copies with the Authority through its Legal Division which shall serve as the Voluntary Arbitration Secretariat or the "Secretariat".  Whenever practicable, all complaints should be directly filed with the Secretariat.

   However, the CDA-Extension Office having administrative jurisdiction over the cooperatives/parties involved in the dispute can receive the complaints which involved the latter, with the obligation to transmit the same to the Secretariat.  The date of the commencement of the action shall be the date the verified request/complaint was received by the Secretariat.

    Section 8.  Condition Precedent.  In the case of a primary cooperative affiliated with a federation/union, the complaint shall be accompanied by a Certificate of Non-Settlement issued by the said Federation/Union to which the primary cooperative is affiliated with.

    In the case of a primary cooperative not affiliated with any federation or union, the complaint shall be accompanied by a Certificate of Non-Settlement issued by the Conciliation/Mediation Committee of such primary cooperative together with a Certificate of Non-Affiliation with any Federation/Union signed by the Chairperson of the Board of Directors of the same cooperative.

    If the conciliation/mediation committee fails or refuses to conduct the conciliation/mediation proceedings and/or to issue a Certificate of Non-Settlement within five (5) calendar days from the request to conciliate/mediate, the party in interest shall submit an Affidavit stating such fact, in lieu of the Certificate.

    In case of non-compliance with the pre-condition, absent any showing of justifiable reason, exemption, the Arbitral Tribunal, or the Authority (if no member of the tribunal has yet been appointed, shall suspend voluntary arbitration proceedings pending compliance therewith within reasonable period directed by the Arbitral Tribunal or the Authority.

    Section 9.  Contents of the Verified Request/Complaint.  The Verified Request/Complaint shall contain:

    1.  The Names and Addresses of the Complainant/s and Respondents;

    2.  A Brief Description of the statement of claim and the Documentary Evidences, if any; and

    3.  The Relief Prayed For.

    Section 10.  Notice to Respond and Request to Answer.  The Secretariat shall, within ten (10) working days from receipt of the Verified Request/Complaint, issue notice/summons and transmit a copy of the Verified Request/Complaint (including the documents annexed thereto) to the Respondent for his/her answer.

    Section 11.  Submission to CDA Institutional Voluntary Arbitration Jurisdiction.  An arbitration clause/arbitration agreement or a submission to arbitration of a cooperative dispute shall be deemed an agreement to submit an existing or future controversy to the jurisdiction of the CDA Institutional Voluntary Arbitration proceedings, notwithstanding the reference to a different arbitration institution or arbitral body in any document, contract or submission.

    An arbitration agreement or a submission to arbitration shall preferably in writing, or in some other forms, as long as the intent is clear that the parties agree to submit a present or future controversy arising from disputes mentioned in Article 137 of R.A. 9520.

    It may be in the form of exchange of letters sent by post, courier, electronic means or by telefax, teleghrams or any other mode of communication.

    Section 12.  Failure or Refusal to Arbitrate.  Where a complaining party properly invokes the jurisdiction of the Authority to resolve the dispute through voluntary arbitration by filing a Verified Request/Complaint for Arbitration in accordance with these Rules, the failure or refusal of the respondent to arbitrate shall not affect the proceedings.  In such case, the CDA, as the Appointing Authority shall appoint the Sole Arbitrator or the members of the  Arbitral Tribunal in accordance with these Rules from among the list of accredited arbitrators.  In the absence of any agreement as to the number of voluntary arbitrators who shall compose the tribunal, the default number shall be three (3) voluntary arbitrators.  However, in the case of disputes covered by small claims, the same shall be resolved by a Sole Arbitrator.  The arbitration proceeding shall continue notwithstanding the absence of lack of participation of the Respondent, and the award shall be made on the basis of the evidence presented by the claimant.  If at any time before the award, the Respondent shall appear and offer to present his evidence, the Arbitrator/s shall reopen the proceedings and allow the Respondent to present his evidence, but evidence already received and recorded in so far as the same is material and competent to establish the issues shall not be affected by the reopening of the proceedings.

    Section 13.  When Arbitration Cannot Proceed.  Where there is no existing arbitration agreement, or there was no submission for arbitration by the parties in the manner provided by these Rules, the arbitration cannot proceed and the claimants shall be informed of that fact.

    Section 14.  Time to Answer.  The Respondent shall, within fifteen (15) days from receipt of the summons and verified request/complaint, file his/her Answer containing statements of defense and including counterclaims as he/she may assert.  The Complainant shall be furnished a copy of the Answer.  In exceptional circumstances, the Respondent may apply to the Secretariat for an extension of time to file his defense and documents but which extension shall in no case exceed ten (10) days.  If Respondent fails to file his Answer, arbitration shall proceed in accordance with these Rules.

    Section 15.  Reply to Counterclaim.  The Complainant shall file a reply to the counterclaim and shall furnish respondent a copy thereof within ten (10) days from date of receipt of the Answer with Counterclaim.

    Section 16.  Number of Copies. All pleadings and written statements submitted by the parties, as well as the documents attached thereto, shall be filed in four (4) original/duplicate original copies, with proof of prior service to the adverse party.

    Section 17.  Mode of Service and Filing.  All pleadings and written statements submitted by parties, may be filed and served upon the other party preferably through personal service.  Service and submission through registered mail or courier may be allowed provided that there is sufficient explanation why resort to such mode of service and submission was made.  If a party is represented by Counsel, service of notice and other pleadings and communications to Counsel is proper notice and service to the party concerned.

    Section 18.  Notices.  Notifications or communications from the Secretariat and/or the Arbitrator(s) shall be validly made if they are delivered against receipt or forwarded by registered mail to the address or last known address on record of the party/ies for which the same are intended.

    Section 19.  Confidentiality of Proceedings.  The Artibration Proceedings shall be confidential and shall not be published, except:  (i) with the consent of parties, or (ii) when necessary in case resort to the court is made under the Rules of Court.

    The term "arbitration proceedings" shall include communications to or from the institution and/or Voluntary Arbitrator, the pleadings, applications and other papers filed with the institution, and/or voluntary arbitrator, sworn statements, documentary and testimonial evidence, reports and minutes taken of the proceeding, and other orders, award or resolution issued by the Arbitrator(s).

    Section 20.  Qualifications of Arbitrators.  All Arbitrators must possess all of the following qualifications:

    a.  Filipino, of legal age;
    b.  In full enjoyment of his/her civil rights;
    c.  Know how to read and write;
    d.  Not related by blood or marriage within the sixth degree to either party in the controversy;
    e.  Must not have financial, fiduciary or other interest in the controversy;
    f.  Has no personal bias which might prejudice the right of any party to a fair and impartial award;
    g.  Possess the competence to resolve the cooperative issues involved, and
    h.  Must be accredited by the Authrity.

    The Authority shall constitute a list of Accredited Voluntary Arbitrators.  The Voluntary Arbitrators shall render service only when called upon to arbitrate a cooperative dispute.

    Any employee or officer of the Authority may likewise be appointed as Voluntary Arbitrator if he/she possess the necessary qualification.

    Section 21.  Exemptions from Liability for Official Acts.  Voluntary Arbitrators shall not be liable for acts done in the performance of their official duties except in a clear case of bad faith, malice or gross negligence, as provided in Section 38 (1), Chapter 9, Book 1, of the Revised Administrative Code of 1987.

    Section 22.  Exclusive and Original Jurisdiction of the Voluntary Arbitrator/Arbitrators.  The Voluntary Arbitrator/Arbitrators mutually chosen by the parties, or appointed by the Appointing Authority in accordance with these Rules, shall have exclusive and original jurisdiction over the dispute, and their decision shall be appealable to the Office of the President of the Republic of the Philippines.  The Appeal is taken by filing a Notice of Appeal within fifteen (15) days after receipt of the copy of the Award appealed from.  If no appeal is filed within the time as provided herein, such Award becomes final and executory.

    Section 23.  Powers/Authority of the Voluntary Arbitrator/s.  The Voluntary Arbitrator/s shall have the following powers/authority:

    a.  To hold hearings and to receive evidence necessary to resolve the issue/s subject of the dispute;
    b.  To require any person to attend hearing/s as witness or to cause the production of documents when the relevancy and the materiality thereof are vital to the resolution of the case;
    c.  To administer oath;
    d.  To cite in contempt any person disturbing the proceeding and/or who willfully defy lawful orders of the Voluntary Arbitrator/Arbitrators;
    e.  To render an Award;
    f.  To order any party to take or observe interim measures of protection, subject to the provision of R.A. 9285 and its implementing Rules and Regulations;
    g.  To issue a Writ of Execution, if necessary, and if allowed under the circumstances; and
    h.  To exercise such other powers and functions as may be necessary to resolve the dispute.

    Section 24.  Number of Arbitrators.  A Sole Arbitrator or an an Arbitral Tribunal of three (3) arbitrators shall resolve a dispute.  The CDA, as the Appointing Authority, shall confirm the appointment of the Arbitrator/s as agreed upon by the parties as specified in the arbitration agreement, in the agreement to arbitrate, or submission to arbitration.

    In the absence of any stipulation or agreement by the parties, the CDA as the Appointing Authority, taking into consideration the complexities and intricacies of the dispute/s, has the option to appoint a Sole Arbitrator or an Arbitral Tribunal.  If the parties are unable to agree to the method of constituting the Arbitral Tribunal within fifteen (15) days from receipt by the parties of the notice sent by the Secretariat, the CDA shall appoint the Voluntary Arbitrators in accordance with these Rules.

    Section 25.  Sole Arbitrator.  Where the parties have agreed that the dispute(s) shall be resolved by a Sole Arbitrator, each party shall have the right to nominate three (3) qualified Voluntary Arbitrators from the list of CDA-Accredited Arbitrators in the order of their preference for appointment as Voluntary Arbitrators.  The nomination may likewise be stated in the submission agreement.  If any or both of the parties fail to submit the names of their nominees within the period prescribed by these Rules, a Sole Arbitrator shall be appointed by CDA.

    If there is a common nominee, the CDA as the Appointing Authority shall appoint him/her as the Sole Arbitrator, provided he/she is not disqualified and has declared his/her availability, in the absence of a common nominee or in cases where the common nominee is disqualified or is not available, the CDA, as the Appointing Authority, may appoint a Sole Arbitrator.  If the CDA decides to appoint a Sole Arbitrator, it shall select the appointee who is not a nominee of one of the parties and who is not disqualified and is available for appointment.

    Section 26.  Arbitral Tribunal.  Where the parties agree that the dispute shall be resolved by an Arbitral Tribunal, each party shall have the right to nominate four (4) Arbitrators from the list of CDA-Accredited Arbitrators in the order of their preference for appointment as Voluntary Arbitrators.  The nomination may be stated in the submission agreement.  If there is no common nominee, the CDA as the Appointing Authority shall choose and appoint, as members of the Tribunal, one (1) Arbitrator from the Complainant's nominees and another Arbitrator from Respondent's nominees.  The third Arbitrator shall be selected by the two (2) Arbitrators first chosen within fifteen (15) days from acceptance of their appointment.  The three (3) Arbitrators shall decide among themselves who will be the Chairperson.  In case of failure to agree on the third members within such period, the CDA as the Appointing Authority shall, within fifteen (15) days thereafter, appoint the third member from its list of accredited arbitrators.

    If there is a common nominee, the CDA as the Appointing Authority shall appoint the common nominee and one (1) from each list submitted by the parties.  The three (3) arbitrators appointed shall designate the Chairperson.  If there are two (2) common nominees, the CDA as the Appointing Authority shall appoint them and the third member who shall be selected by the first two (2) appointees within the period prescribed above.  If there are three (3) common nominees, all of them shall be appointed.  The appointees so constituted as Arbitral Tribunal shall designate the Chairperson from among themselves.

    Section 27.  Disqualification of or Non-acceptance by Nominees.  If the the nominee/s of a Party shall be disqualified or fail or refuse to accept appointment, the CDA as the Appointing Authority shall choose and appoint any accredited and qualified Arbitrator who is willing to be appointed.

    Section 28.  Challenge.  An Arbitrator may be challenged by a party at any time after his appointment but before the lapse of the period of time to file memoranda under Section 65 of these Rules, on the ground of his/her partiality, bias, incompetence, professional misconduct or other grounds for the disqualification of an Arbitrator.  A party may also request the inhibition of an Arbitrator upon the same grounds.

    A motion for inhibition or a request for the disqualification and replacement of an Arbitrator shall be treated as a challenge.

    The challenge, motion, or request shall be in the form of a separate complaint under oath , stating distinctly and concisely the facts complained of, supported by affidavits, if any, or persons having personal knowledge of the facts therein alleged and shall be accompanied with copies of such documents as may substantiate said facts.

   Within fifteen (15) days from receipt of the challenge, the challenged arbitrator shall decide whether he/she shall accept the challenge or reject it.  If he/she accepts the challenge, he/she shall voluntarily withdraw as Arbitrator.  If he/she rejects it, he/she shall communicate, within the same period of time, his/her rejection of the challenge and state the facts and arguments relied upon for such rejection.  In case of Arbitral Tribunal, the challenge shall be decided by the Tribunal itself.  If the Sole Arbitrator or Arbitrator concerned rejects the challenge, the challenging party may request the CDA as the Appointing Authority, in writing to decide on the challenge within thirty (30) days after having received notice of the decision rejecting the challenge.  The CDA shall decide on the challenge within fifteen (15) days from receipt of the request.  The decision of the Arbitral Tribunal or the CDA as the Appointing Authority, to accept or reject a challenge is not subject to appeal or motion for reconsideration.

    In case the challenged arbitrator voluntarily inhibits himself/herself or is removed, the CDA as the Appointing Authority shall promptly appoint his/her replacement.  If the Arbitrator concerned is the third member of the Arbitral Tribunal, the first two (2) members thereof shall select his/her replacement.  The decision of the CDA as the Appointing Authority retain, remove, or replace a Voluntary Arbitrator shall be final.

    Section 29.  When Arbitrator Previously Acted as Conciliator/Mediator.  A Voluntary Arbitrator who previously acted as conciliator/mediator in the same controversy cannot act as Arbitrator for the same case when brought to arbitration, unless all the parties consent to his appointment in writing.

    Section 30.  Communication of Appointments.  The Secretariat shall communicate to the Arbitrator/s their appointment.

    Section 31.  Disclosure by Arbitrator of Disqualification.  Upon acceptance of appointment, the Arbitrator/s shall disclose in writing to the institution the circumstance likely to create in either party a presumption of bias or which he/she believes might disqualify him/her as an impartial arbitrator.  Such written disclosure shall be communicated to the parties immediately by the Secretariat.  The purpose of such disclosure shall enable either party to investigate and ascertain whether there is a substantial legal basis to file a motion for inhibition/challenge of the arbitrator concerned or seek his/her replacement.

    Section 32.  Acceptance or Refusal.  The Sole Arbitrator must communicate to the Secretariat his/her acceptance or refusal of the appointment within five (5) working days from receipt thereof.  If no communication is received within the prescribed period, the CDA as the Appointing Authority shall appoint another from the list of the party who nominated him/her or, if none is available or qualified, from the list of CDA-Accredited Arbitrators.  The parties shall be notified in writing by the Secretariat of such acceptance.

    Section 33.  Vacancies.  If any Arbitrator should resign, be incapacitated, refuse or be unable, or be disqualified for any reason to perform the duties of his/her office, the institution shall, within five (5) working days from the occurrence of a vacancy or refusal/inability to accept appointment, appoint a substitute/s to be chosen from a list, the CDA as the Appointing Authority shall fill the vacancy from the list of CDA-Accredited Voluntary Arbitrators.

    Section 34.  Preliminary Conference.  In any cooperative dispute, after the Respondent has filed his/her Answer, the Arbitrator/Arbitral Tribunal shall set the case for preliminary conference and a notice to the parties thereof shall be sent at least five (5) days before the date set but not later than fifteen (15) days after the acceptance of the appointment of Arbitrator to consider the following:

    a.  Possibility of amicable settlement;
    b.  Necessity or desirability of amendments to pleading;
    c.  Possibility of obtaining stipulations or admission of facts and/or documents to avoid unnecessary proof;
    d.  Limitation of the number of witnesses;
    e.  Simplification of the issues; and
    f.  Such as other matters as may aid in the just and speedy disposition of the case.

    Section 35.  Effect of Non-Appearance/Non-Compliance.  The notice shall be served on Counsel, or on the party who has no Counsel.  It shall be the duty of the parties or their Counsel to appear at the Preliminary Conference.  The non-appearance of a party may be excused only if a valid cause is shown therefor or if a Representative shall appear in his/her behalf fully authorized in writing.  The unjustified failure of the Complainant to appear in the Preliminary Conference shall be a cause for dismissal of the complaint.  Nothwithstanding the non-appearance of the Respondent, the proceedings shall continue in accordance with Section 13 of these Rules, by filing a motion to that effect to be made during the preliminary conference.  The proceedings shall continue at the expense of the Complainant.

    Whenever the Respondent's whereabouts are unknown or cannot be ascertained by diligent inquiry, the notice may be effected by publication in a newspaper of general circulation at the expense of the Complainant, otherwise the complaint shall be dismissed.  However in such case, a Certificate of Non-Resolution may be issued to the Complainant.  In the same vein, if the Complainant opts to continue with the proceedings in accordance with Section 13 of these Rules, a motion to that effect shall be made during the preliminary conference and the Artbitrator/Arbitral Tribunal ay continue with the proceedings at the initial expense of the Complainant.

    Should the parties appear in the Preliminary Conference, the parties shall be required to sign a Submission Agreement, unless such intent to submit to arbitration has been manifested and conveyed in some other form of communication as expressed in Section 5 (b) (i) and (ii) of these Rules.

    Section 36.  Terms of Reference and its Contents.  Before proceeding with the hearing of the case, the Arbitrator(s) shall formulate the Terms of Reference (TOR) on the basis of the documents submitted and agreements reached in the preliminary and subsequent conferences with the parties.  The TOR shall include the following particulars:

      1.  The full name of the parties and their personal circumstances;
      2.  The addresses of the parties to which notifications or communications arising in the in the course of the arbitration may validly be made;
     3.  A summary of the parties' respective claims;
     4.  Definition of the issues to be determined;
     5.  The Arbitrators' full names, and addresses;
     6.  The place of arbitration;
     7.  Application for interim relief;
     8.  Language to be used;
     9.  The breakdown, schedule of payment, and sharing of arbitration fees; and
     10.  Such other particulars as may be required to make the arbitral award enforceable in law, or may be regarded as helpful by the institution or the Arbitrator/s.

    Section 37.  Signing of the Terms of Reference.  The Terms of Reference mentioned in Section 36 hereof shall be signed by the parties and the Arbitrator/s within fifteen (15) days from the date of the preliminary conference or from the date of the last meeting held for the purpose or finalizing the TOR as the case may be.  The same shall then be transmitted to the Secretariat within three (3) days after the signing.  Upon the Arbitrator's request, the institution, through the Secretariat, may, in exceptional circumstances, extend this time limit.

    Section 38.  Arbitration to Proceed Even Without the Terms of Reference.  Except in cases where arbitration cannot proceed under Section 13 of these Rules, arbitration shall proceed despite the absence of the TOR due to the refusal of any of the parties to sign, participate despite a valid arbitration complaint or for reasons other than the exceptions stated above.  In the absence of a TOR, all of the issues and related matters in the pleadings filed by the parties and admitted by the Sole Arbitrator or the Arbitral Tribunal, as the case may be, shall be deemed submitted for resolution by the appointed arbitrator/s.  In this instance, the Sole Arbitrator/Arbitral Tribunal shall have full control of the proceedings.

    Section 39.  Venue, Date and Time of Hearing.  The venue, date and time of the arbitral proceedings shall be mutually agreed upon by the parties and the Arbitrator/s or an Arbitral Tribunal.  In case of disagreement, the choice of the Arbitrator/s shall prevail.

    Section 40.  Recording of Proceedings.  Proceedings before an Arbitrator or an Arbitral Tribunal may be recorded by a personnel designated by the institution or the Arbitrator/s by means of any audio and/or audio visual recording equipment, such as, but not limited to, tape recorders, compact discs and video cameras, or if a stenographer is available, either through stenographic notes or minutes taken of the proceedings.  All recordings on tape, films, cassettes, discs, or diskettes shall be done by a personnel designated by the institution.  However, custody, safekeeping and eventual disposal of such recordings after the resolution of the case shall be with the Secretariat.  Copies of such recordings including transcripts and minutes of proceedings shall be made available to the parties upon request for a nominal fee.  The Sole Arbitrator or the Chairperson of the Arbitral Tribunal, as the case may be, may opt to dispense with the use of recording devices or stenographic services and take down notes of the proceedings himself/helself/themselves.  Such notes taken shall be filed with the institution and shall be part of the records of the case.  Copies of the notes filed shall be made available to the parties, upon request, at reproduction cost.

    Section 41.  Control over Proceedings.  The Arbitrator or Arbitral Tribunal shall exercise complete control over all proceedings to ensure speedy, adequate and justifiable disposition of all dispute/s and case/s submitted to them for resolution.

    Section 42.  Extent of Power of Arbitrator.  The Arbitrator or Arbitral Tribunal shall decide only such issues and related matters as are submitted to them for adjudication.

    They have no power to add, subtract from, modify, or amend any of the terms of the contract or any supplementary agreement thereto, or any rule, regulation or policy promulgated by the institution.

    Section 43.  Appointment of Experts.  The service of technical or legal experts may be engaged in the settlement of disputes if requested by any of the parties or by the Sole Arbitrator/Arbitral Tribunal.  If the request for an expert is done by either or by both of the parties, it is necessary that the engagement of the expert be confirmed by the Sole Arbitrator/Arbitral Tribunal.

    Whenever the parties request for the services of an expert, they shall equally shoulder the expert's fees, half of which shall be deposited with the Secretariat before the expert renders service.  When only one party makes the request, he/she shall deposit the whole amount required.

    If the engagement of an expert is required by the Arbitrator/s, the cost of such service/s shall be considered part of the arbitration expenses which may be ordered to be paid by the losing party or by both parties as the arbitrator/s in his/her/their award may adjudge, in the absence of a provision in the Terms of Reference signed by the parties relative to the sharing of these expenses; provided, however, both parties consented to the engagement of an expert.

    Section 44.  Interpretation and Application of Rules.  The Sole Arbitrator or the Arbitral Tribunal shall interpret and apply these Rules in so far as they relate to his/her powers and duties.  Where there is an Arbitral Tribunal, and a disagreement arises among the Arbitrators concerning the meaning or application of these Rules, the same shall be decided by a majority vote.

    Section 45.  Attendance during Hearings.  Persons having direct interest in the arbitration are entitled to attend the hearings.  It shall be discretionary upon the Sole Arbitrator/Arbitral Tribunal to determine the propriety of the attendance of any other person.  The Sole Arbitrator/Arbitral Tribunal shall have the power to require the exclusion of any witness.

    Section 46.  Adjournments.  The Sole Arbitrator/Arbitral Tribunal for good cause shown may adjourn the hearing upon his/its own initiative or upon the request of one of the parties.  Adjournment, as far as practicable, shall not be more than fifteen (15) working days.  Hearings may be adjourned for more than fifteen (15) days when such have been suspended due to payment defaults or any or both of the parties.  The Arbitrator/s shall order the suspension of hearings upon advice by the institution of non-payment of arbitration fees by one or both parties.  Hearings shall resume upon notice by the institution of compliance by the non-complying party/ies.

    Section 47.  Arbitration in the Absence of the Party.  After the preliminary conference, the Arbitration may proceed despite the absence of any party who after due notice fails to be present or fails to obtain an adjournment.  An award, however, shall not be made solely on the default of a party but on the basis of the evidence submitted and proven.

    Section 48.  Waiver of the Rules.  Any party who proceeds with the arbitration after knowledge that any provision or requirement of these Rules has not been complied with and fails to state his objection thereto in writing prior to the rendition of the award, shall be deemed to have waived his right to object.

    Section 49.  Expenses and Deposit.  Arbitration expenses shall include the filing fee, administrative charges, arbitrator's fees, fee and expenses of the expert, and others which may be imposed by the institution.

    The administrative charges and arbitrator's fees shall be in accordance with the Schedule of Administrative Charges and Arbitrator's Fees as promulgated by the CDA.

    There shall be a filing fee of Three Hundred Pesos (P300.00) plus a deposit equivalent to 10% of expected arbitrator/s' fees (based on the claim) or P5,000.00 whichever is higher upon filing of the claim.  The Respondents shall likewise pay the deposit as specified.

    The institution may fix the Arbitrator/s' fees at a figure higher or lower than that which would result from the application of the Table of Fees if in the exceptional circumstances of the case, the same appears to be necessary.

    Section 50.  Freedom to Settle.  The parties shall be free to settle the dispute/s anytime even if the same is under arbitration.  In such case, the actual expenses incurred for arbitration shall be charged against the deposit.  If the deposit is insufficient, the parties shall equally shoulder the balance.  The parties may either jointly withdraw or submit their compromise agreement to the arbitrator/s for the rendition of an award, if the arbitrator/s have already been appointed.  Where the arbitrators have been appointed and proceedings have commenced, the arbitration fees to be charged the parties shall be in accordance with the stage of proceedings.

    Section 51.  Quorum.  Two members of a tribunal shall comprise a quorum for the purpose of conducting a hearing.

    Section 52.  Briefing on Rules and Procedures.  At the initial hearing, the Arbitrator/Arbitral Tribunal shall inform the parties of the general rules and procedures that will be adopted to ensure a speedy and adequate disposition of the issues.

    Section 53.  Opening Statements. The initial proceedings may start



Thursday, April 9, 2015


Newly-appointed Chairman Orlando R. Ravanera of the Cooperative Development Authority (CDA) will present his major programs for the cooperative movement and for the CDA, during the MONTHLY KAPIHAN SA APEX, on April 16, 2015, 2-5 p.m. at the Philippine Cooperative Center (PCC), Manahan Hall, 3/F, PCC Bldg., #90 Balete Drive Extension, Q.C.

    It  was announced by Daniel R. Ang, PCC Board Secretary.  The Kapihan is hosted by the PCC.

    This is an opportunity for leaders of the Philippine Cooperative Movement to hear Chairman Ravanera's programs and policy directions, as well as react to them, said Daniel R. Ang.

    Invited Chairpersons, Chief Executive Officers, General Managers and other officers of cooperatives are advised to confirm their attendance at tels. (02) 723-7392; (02) 416-6458.

Saturday, April 4, 2015




Section 1.  Legal Basis.  The legal basis of this Rule is Art. 121 and (14) of the Code, quoted as follows:

    "Art. 121.  Regulation and Supervision. - The Authority shall exercise lead regulatory powers and supervision over the operations of the financial service cooperatives, to wit:

    (1)  Issue rules and regulations for the safe and sound operations of financial service cooperatives. xxx

    (2)  Appoint a conservator or a receiver as may be necessary subject to the rules and regulations to be promulgated by the Authority in coordination with the BSP, taking into consideration the grounds, powers and procedures under Sections 29 and 30 of Republic Act No. 7653 as may be deemed appropriate to financial service cooperatives.

    The Authority shall include in its rules and regulations appropriate sanctions and penalties, on the financial service cooperatives, its members, and officers and responsible persons, for any action that fails to adhere to sound and prudent management practices, or are inconsistent with the provisions of this Code xxx"

    Section 2.  Functions of Financial Service Cooperative.  A Financial Service Cooperative (FSC) is a financial organization owned and operated by its members and authorized to provide the following services, exclusively to its members:  (a) the functions of credit cooperatives and other cooperatives, including multipurpose cooperatives that provide savings and credit to their members; and (b) other financial services subject to the regulation by the BSP.

    Section 3.  Coverage.  (1) All Financial Service Cooperatives organized for the primary purpose of engaging in savings and credit services and other financial services, and (2) Existing cooperatives with savings and credit facilities which have formally notified the Authority of their intention to exercise enhanced functions and have satisfied the requirements of the Authority for conversion to Financial Service Cooperative.

    Section 4.  Registration.  The Articles of Cooperation and By-laws of any FSC, or any amendment thereto, shall be registered with the Authority only if accompanied by a Certificate of Authority issued by the BSP.  Any existing cooperative engaged in credit and multi-purpose activities, after it has notified the Authority of its decision to exercise enhanced functions and satisfied the requirements for the conversion to FSC, shall, upon approval of the Authority and favorable certification of the BSP, register its amended Articles of Cooperation and By-laws by the Authority.

    Section 5.  Documentary Requirements.  In addition to the documents required by the Authority for registration of new cooperative/amendments, the following shall likewise be submitted:

    1.  Certificate of Authority from BSP;
    2.  Resolution of the Board stating that:

        2.1  The function or one of the functions of the cooperative shall be savings, credit and other financial services;

        2.2  The amount of paid-up capital allocated for such purposes shall be at least Ten Million Pesos (P10,000,000.00);

        2.3  Undertaking to accomplish within a year from the issuance of Certificate of Registration to establish the business site equipped with facilities, forms, stationeries, and vault and provide required special training/seminar for officers of the cooperative;

        2.4  Audited Financial Statement for the immediately preceding year in case of existing cooperative; and

        2.5  Other documents, which may be required by the Authority.

Section 6.  Minimum Capitalization Requirements.  Only those cooperatives with minimum paid-up capital of at least Ten Million Pesos (P10,000,000.00) shall qualify to register as FSC without prejudice to additional capital requirements that maybe prescribed by the BSP for a particular financial service regulated by the BSP that will be offered by the FSC.

Section 7.  Reportorial Requirements.  The FSC shall submit the regular reports as required under Rule 8 of this IRR.

Section 8.  Membership and Affiliation.  An FSC shall have two (2) types of members:  (1)  Regular members, who are natural persons; and (2) Associate members who are natural persons but who do not immediately qualify under the requirements for membership set out in the By-laws of the cooperative.  All associate members who are natural persons shall be given two (2) years to become regular members.  Failure to convert within the said period shall mean automatic withdrawal of their associate membership.  They, may, however reapply as regular members after two (2) years.  Minors who are dependents of regular members can qualify as associate members.  When they reach the age of majority and within two (2) years from acceptance of their associate membership, they have the option to convert into regular members.  As associate members, they may open accounts, deposit funds and withdraw from their account, subject to the By-laws and rules of the cooperative, and the rules and regulations of the Authority, notwithstanding the provisions of existing laws to the contrary.

Section 9.  Officers.  The officers of the FSC shall be composed of the Members of the Board of Directors, Committee Members, General Manager or Chief Executive Officer, Secretary, Treasurer and Members holding other positions as may be provided for in their By-laws.

Section 10.  Bond of Accountable Officers.   Every Director, Officer, and Employee handling funds, securities, or property on behalf of the FSC shall be covered by a surety bond to be issued by a duly registered insurance or bonding company for the faithful performance of his/her respective duties and obligations.  The Board of Directors shall determine the adequacy of such funds.

Section 11.  Compensation.  In the absence of any provision in the By-laws fixing their compensation, the Director shall not receive any compensation except for reasonable per diems:  Provided, however, That the Directors and Officers shall not be entitled to any per diem when, in the preceding calendar year, the cooperative reported a net loss or had dividend rate less than the official inflation rate for the year.  Any compensation other than per diems may be granted to Directors by a majority vote of the members with voting rights at a regular or special general assembly meeting specifically called for the purpose:  Provided, further, That no additional compensation other than per diems shall be paid during the first year of existence of the FSC.  Provided, finally that the immediately preceding proviso shall not apply to cooperatives which converted into Financial Service Cooperatives.  The compensation of Officers as well as the Members of the Committees created pursuant to the Code or its By-laws maybe fixed in the By-laws.

Section 12.  Removal of Officers.  All complaints for the removal of any elected officer shall be filed with the Board of Directors.  Such officers shall be given opportunity to be heard.  Majority of the Board of Directors may place the officer concerned under preventive suspension pending the resolution of the investigation which period shall be specified in the By-laws or policies of the cooperative duly approved by the General/Representative Assembly.  Upon findings of a prima facie evidence of guilt, the Board of Directors shall present its recommendation for removal to the General/Representative Assembly.

An elective officer may be removed by three-fourths (3/4) votes of regular members present and constituting a quorum in a regular or special general assembly meeting called for the purpose.  The officer concerned shall be given an opportunity to be heard at said assembly.

Section 13.  Net Worth.  The Net Worth of the FSC shall not, at all times, be less than an amount equal to eight percent (8%) of its risk assets.  The net worth position should be sufficient to meet competitive pressure and adverse economic conditions as they arise.  It should enhance the safety of members' share and keep pace with the growth of the FSC assets.

Section 14.  Deposit and Borrowing Operations.  Savings and Time Deposits with FSC may be opened with a minimum amount to be determined by the Board of Directors.  Only members and its affiliate laboratory cooperative may open savings and/or time deposit accounts.  The FSC, through the Board of Directors as authorized by the General Assembly, may borrow from any source at the best terms and conditions available and in such amount that may be needed.

Section 15.  Reserve Requirements Against Deposit Liabilities.  FSC shall maintain a liquidity Reserve Fund that will be restricted in nature equivalent to at least two (2) per centum of their savings and time deposit liabilities. 

Section 16.  Loans.  The Board of Directors shall be responsible for setting loan policies and lending procedures.  It shall comply with the provisions of R.A. 3765, otherwise known as the "Truth in Lending Act" and shall make the true and effective cost of borrowing, an integral part of every loan contract.

Section 17.  Investment Program.  A sound investment program shall be the sole responsibility and accountability of the Board of Directors.  The scope of the program will depend largely on the FSC size and the extent of its surplus funds.  Investment policies should be in writing and should address the safety, liquidity and yield, diversification, delegation of authority, and valuation/assessment of securities.  The FSC shall not invest in any single entity more than twenty per centum (20%) of its net worth.

Section 18.  Internal Control.  The FSC shall adopt a proper plan of organization, accounting control, accounting system, administrative control, internal control standards, accounting records procedures and other measures to safeguard the FSC's assets, check the accuracy and reliability of accounting data, promote operational efficiency, and encourage adherence to prescribed managerial policies.

Section 19.  Performance Standards.  A policy of transparency and opennes must be always maintained whereby the Book of Accounts, General/Representative Assembly Board Resolutions and Committee Reports are properly kept and made accessible to members, and the regular financial statements are periodically prepared and made known to the members, to the Authority and to other parties interested in the FSC's operations.

Section 20.  Standard Chart of Accounts.  All FSCs shall adopt the Standard Chart of Accounts and its accompanying Accounting Manual for Credit and Other Types of Cooperatives with Credit Service issued by the Authority.

Section 21.  Manual of Rules and Regulations.  The Authority shall develop a Manual that will cover:  (1) the Rules and Regulations for the safe and sound conduct of operations of FSCs; (2) Rules and Regulations for the appointment of a Conservator or a Receiver as may be necessary in coordination with the BSP, taking into consideration the grounds, powers and procedure under Section 29 and 30 of Republic Act No. 7653 as may be deemed appropriate to FSCs; and (3) the appropriate sanctions and penalties on the FSCs, its members, officers and responsible persons, for any action that fails to adhere to sound and prudent management practices or are inconsistent with the provisions of the Code, other applicable laws on cooperatives, rules, regulations, circulars or orders issued by the Authority, and require the cooperative to undertake corrective or remedial measures relative thereto.

The appropriate prudential Rules and Regulations applicable to FSCs will be developed by the BSP, in coordination with the Authority.

Section 21.  Revocation of Authority.  The Authority granted, may be revoked by the BSP if any of the grounds for receivership mentioned under Section 30 of Republic Act No. 7653, otherwise known as The New Central Bank Act and Sections 53 and 56 of Republic Act No. 8791, otherwise known as An Act Providing for the Regulation of the Organization and Operations of Banks, Quasi-Banks, Trust Entities and for Other Purposes are present or if the FSC has willfully violated the Code or any of the related rules and regulations.

Section 22.  Prohibition.  The terms 'Credit Cooperatives', 'Financial Service Cooperative', and 'Financial Service Cooperative Federation' shall be used exclusively by those who are duly registered under the Code, and no person, group of persons shall use the said terms unless duly registered with the Authority.  Violations of this prohibition shall be punishable in accordance with Art. 140 of the Code.

(To be followed by Rule 13:  Voluntary Arbitration).

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