Thursday, April 2, 2015
CO-OP LIQUIDATION: 2015 REVISED IRR OF RA 9520
GUIDELINES FOR THE LIQUIDATION OF COOPERATIVES
Section 1. Legal Basis. The legal bases for the Rule are Art. 69, 70 and par. 2, Art. 72 (4) of the code, quoted as follows:
"Art. 69. Liquidation of Cooperatives. - Every cooperative whose charter expires by its own limitation or whose existence is terminated by voluntary dissolution or through an appropriate judicial proceedings shall nevertheless continue to exist for three (3) years after the time it is dissolved, not to continue the business for which it was established but for the purpose of prosecuting and defending suits by or against it; settlement and closure of its affairs, disposition, conveyance and distribution of its properties and assets.
At any time during the said three (3) years, the cooperative is authorized and empowered to convey all its properties to trustees for the benefit of its members, creditor and other persons in interest. From and after any such conveyance, all interests which the cooperative had in the properties are terminated.
Upon the winding up the cooperative affairs, any asset distributable to any creditor, shareholder or member(s) who is unknown or cannot be found shall be given to the federation or union to which the cooperative is affiliated.
A cooperative shall only distribute its assets or properties upon lawful dissolution and after payment of all its debts and liabilities, except in the case of decrease of share capital of the cooperative and as otherwise allowed by this Code."
"Art. 70. Rules and Regulations on Liquidation. - The Authority shall issue the appropriate implementing guidelines for the liquidation of cooperatives."
"Art. 72. Capital Sources - xxx
(b) 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 holding at any time but shall instead form part of the donated capital or fund of the cooperative.
Upon dissolution, such donated capital shall be subject to escheat."
Section 2. Coverage of Liquidation. These guidelines shall cover the following:
1. Cooperatives whose charter expires by its own limitation.
2. Cooperatives whose existence is terminated by voluntary dissolution.
3. Cooperatives whose existence is terminated by appropriate judicial proceedings.
4. Cooperatives whose existence is dissolved by Order of the Authority.
Section 3. Mode of Liquidation. The liquidation or winding up of cooperatives shall be in the manner provided for in the By-laws unless it is inconsistent with law.
In this jurisdiction, the cooperative may avail of the following modes of liquidation:
1. Liquidation by the cooperative itself through a Board of Liquidators. The members of the cooperative entitled to vote shall elect from among themselves their Board of Liquidators; and/or
2. By conveying all the cooperative assets to the Board of Trustees which will take charge of liquidation.
Section 4. Procedure of Liquidation. The following procedure shall be observed in liquidation:
1. Constitution of the Board of Liquidators/Trustees.
2. Inventory of Assets and Liabilities of the Cooperative.
3. Payments of Creditors in accordance with the Provisions of the New Civil Code on the Preference and Concurrence of Credits.
4. Transfer of the Statutory Funds to the intended beneficiaries.
5. Distribution of the remaining assets.
6. Submission by the Board of Liquidators/Trustees of the Liquidation's Final Report.
7. Cancellation of the Certificate of Registration and delisting of the name of the cooperative in the Cooperative Registry.
Section 5. Board of Liquidators/Trustees. Within sixty (60) days from receipt of the Order of Dissolution from the Authority or competent Court, the Board of Directors shall select/constitute the Board of Liquidators/Trustees. In the event the Board of Director fails or refuses to constitute the Board of Liquidators/Trustees, at least twenty five per centum (25%) of the members entitled to vote shall convene and select/appoint the Liqudators/Trustees. In case the Board of Directors and the General/Representative fail to select the Board of Liquidators/Trustees, the Authority shall appoint the same.
The Board of Liquidators/Trustees shall not be less than three (3) but not more than five (5) members. They shall take their oath of office before the Authority prior to assumption of their functions and responsibilities.
The Board of Liquidators/Trustees shall post an adequate bond as may be fixed by the Authority during the period of liquidation, to be paid out of the funds of the cooperative.
The Board of Liquidators/Trustees shall be allowed to receive a reasonable honorarium to be paid out from the funds of the cooperative which shall be equal to but not less than the honorarium being received by the Board of Directors of the cooperative before its dissolution.
Section 6. Functions, Powers and Obligations of the Board of Liquidators/Trustees. The Board of Liquidators/Trustees shall:
1. Make an inventory of all assets and determine all liabilities including Share Capital holdings;
2. Preserve the existing assets of the cooperative;
3. Convert all assets of the cooperative into cash;
4. Pay the outstanding obligations including any and all valid claims against the cooperative;
5. Distribute remaining assets pursuant to the provision of the Code and this Rules;
6. Make final report on the liquidation and submit the same to the Authority.
Section 7. Power to Sue and Be Sued. In the discharge of the above-mentioned functions, the Board of Liquidators/Trustees may sue and be sued under the name of the cooperative in order to protect and defend its rights and interests.
Section 8. Payment of Creditors. Payment of creditors shall be in accordance with the contract upon which it is based and the provision of the New Civil Code on the Preference and Concurrence of Credits.
Section 9. Statutory Funds. All the statutory funds established by the cooperative shall be disposed of in accordance with the provisions of Art. 86 of the Code.
Section 10. Treatment of Donated Capital. All subsidies, donations, legacies, grants aids and such other assistance from any local or foreign institutions whether public or private shall be subjected to escheat.
Section 11. Distribution of Assets. Subject to the preceding sections and upon written approval from the Authority, any assets remaining after the payments of the cooperative's obligations to its creditors shall be distributed to the members in payments of their respective share capital. If the remaining asset is not sufficient to pay the full share capital contribution of the members, the distribution shall be done in proportion to their capital.
Section 12. Undistributed Assets. After the winding up of the affairs of the cooperative, the assets distributable to a creditor or member whose whereabouts is unknown or cannot be found shall be given to the federation/union to which the cooperative is affiliated with, for cooperative development, at the option of the Board of Liquidators/Trustees. In case of non-affiliation, the undistributed assets shall be given to the community where the cooperative operates.
Section 13. Periods Allowed for the Winding Up of the Affairs of the Cooperative. The dissolved cooperative shall continue to exist for three (3) years from the issuance of the Order of Dissolution. The purpose of which is not to continue the business for which it was established but for the purpose of prosecuting and defending suits filed by or against the cooperative, settlement and closure of its affairs, disposition, conveyance and distribution of its assets.
Nevertheless, at any time during the said three (3) year period, the cooperative is authorized and empowered to convey all its properties to Trustees for the benefits of its members, creditors and other persons in interest, after which, all interests which the cooperative had in the properties are terminated.
Section 14. Submission of the Board of Liquidators/Trustees' Final Report. The Cooperative Board of Liquidators/Trustees shall submit a final report to the members of the liquidated cooperative and to the Authority, Federation, or Union to which the cooperative is affiliated with.
Upon receipt of the Final Report of the Board of Liquidators/Trustees and upon a finding that said final report is complete and in order, the Authority shall release the Liquidators/Trustees from their duties and functions. Thereafter, the Authority shall effect the cancellation of the Certificate of Registration of the subject cooperative and the delisting of its name in the Cooperative Registry.
Until and unless the Board of Liquidators/Trustees submits the Final Report, it shall not be released from its duties and functions and the Authority shall issue no clearance for each of the members thereof.
Section 15. Summary Proceedings. For cooperatives with asset of not more than One Hundred Thousand Pesos (Php100,000.00) as shown in the Audited Financial Statements and with no known creditors, the Authority may choose to initiate summary proceedings.
The following documents shall be required to be submitted by the Board of Directors to the Authority:
1. Schedule of Assets;
2. Proposal of Distribution of Assets to its members;
3. List of intended beneficiaries of the Statutory Funds;
4. Affidavit of No Creditors; and
5. Audited Financial Statement.
After due evaluation by the Authority, the same shall issue a written authority to the Board of Directors to distribute the assets of the cooperative. After which, the Board of Directors shall submit a final report on the Summary Proceedings.
Section 16. Suppletory Laws. The provisions of Chapters 2 and 3 Title 19 on the Concurrence and Preference of Credit under the New Civil Code and Rule 104 of the Revised Rules of Court on Voluntary Dissolution of Corporations shall apply suppletorily.
Section 17. Outright Cancellation of Certificate of Registration. The Authority, at its own discretion, may outright cancel the Certificate of Registration of a cooperative which has been proven to have no assets, or its whereabouts is unknown, despite diligent efforts to ascertain it. Such facts shall be stated in the Order of Cancellation.
In either case, winding up the affairs of cooperative shall no longer be observed.
(To be continued...)