Friday, April 3, 2015




Section 1.  Legal Basis.  The legal basis for this Rule is Art. 71 of the Code, quoted as follows:

    "Art. 71.  Capital. - The capitalization of cooperatives and the accounting procedures shall be governed by the provisions of this Code and the regulations which shall be issued."

Section 2.  Capital Sources.  Capitalization of a duly registered cooperative may be derived from any or all of the following sources:

    1.  Members' Share Capital;
    2.  Loans and Borrowings including Deposits;
    3.  Revolving Capital which consists of the deferred payments of patronage refunds, or interest on share capital; and
    4.  Subsidies, donations, legacies, grants, aids and such other assistance from any local or foreign institution whether public or private;  Provided, That capital coming from such subsidies, donations, legacies, grants, aids and other assistance shall not be divided into individual share capital holdings at any time but shall instead form part of the donated capital or fund of the cooperative.

Section 3.  Share Capital.  The Share Capital of a cooperative may consist of common share capital and preferred share capital if the latter is provided for under the cooperative's Articles of Cooperation and By-laws.  The share capital contribution of the members shall be considered as equity.  Provided, That it shall not be withdrawn and should not be used in offsetting obligations whether past due or current while the membership subsists.

Section 4.  Preferred Shares.  Issuance and limitation on Preferred Share Capital shall be prescribed in the By-laws of the cooperative.

Should preferred share capital be provided in the By-laws, it shall not exceed twenty five per centum (25%) of the total authorized capital of the cooperative.

Section 5.  Capital Build-Up.  The By-laws of every cooperative shall provide for a reasonable and realistic member capital build-up program to allow the continuing growth of the members' investments in their cooperative as their own economic conditions continue to improve.

Section 6.  Subscription Agreement.  The cooperative shall execute a subscription agreement upon admission of members and whenever additional subscription shall be made by member/s upon full payment of initial subscription.  Unless otherwise provided for in the By-laws, a cooperative shall issue Share Certificates at least every end of the calendar year based on the number of shares fully paid for the said period.

Section 7.  List of Share Capital Certificate Issued.  All cooperatives regardless of type and category, shall issue to all its members share capital certificate equivalent to their share capital contribution.  A list of Share Capital Certificates issued to members shall be maintained by the cooperative.

Section 8.  Par Value.  In a primary cooperative, the par value may be fixed at any amount but not less than Php100.00 nor more than Pph1,000.00.

Cooperatives are prohibited from issuing multiple types of Common Shares with different par value per share.  It is likewise prohibited for any cooperative to increase/decrease the par value of the share capital by way of amending their Articles of Cooperation and By-laws.

Section 9.  Limitation on Share Capital Holdings.  No member of a primary cooperative other than a cooperative itself shall own or hold more than ten per centum (10%) of the share capital of the cooperative.

Section 10.  Fines on Unpaid Subscribed Share Capital.  The By-laws of a cooperative shall prescribe a fine on unpaid subscribed share capital.  Provided, That such fine is fair and reasonable under the circumstances as determined by the Board of Directors.

Section 11.  Assignment of Share Capital Contribution or Interest.  Subject to the provisions of the Code,  no member shall transfer his/her shares or interest in the cooperative or any part thereof unless:

     1.  He/she has held such share capital contribution or interest for not less than one (1) year;
     2.  The assignment is made to the cooperative or to a person who falls within the field of operation of membership of the cooperative; and
     3.  The Board of Directors has approved such assignment.

Sectin 12.  Interest on Share Capital.  Interest on share capital shall not exceed the Rate of Return on Investment.  

Unless otherwise provided for in the By-laws of the cooperative, share capital shall earn interest.  The rate of interest shall be computed, as follows:

                                  X(Net Surplus less Statutory Reserves)
Rate of Interest =  __________________________________

                                  Monthly Average Share Capital


      X shall be a percentage to be determined by the Board of
      Directors allocated for interest on share capital

Monthly Average Share is the result obtained by adding the monthly balances of the member's share capital and dividing the sum by twelve (12) months.

No allocation of interest on share capital shall be made without the approval of the Board of Directors.

Payment of interest, unless otherwise provided for in the By-laws, must be made on such date as may be determined by the Board of Directors.  The General/Representative Assembly, however, upon the recommendation of the Board of Directors, may defer the payment of such interest including patronage refund in order to raise revolving capital.

Section 15.  Accounting Procedure.  The accounting system to be instituted/maintained in the cooperative shall be in accordance with the generally accepted accounting principles and practices.  The cooperative shall use the Standard Chart of Accounts and its accompanying Accounting Manual prescribed by the Authority.

(To be continued...)


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