Section 5February 17, 2009, Sec./Art. 5

Articles 52, 53, 54, 55, 56, 57, 58, 59, 60, 61, 62 and 63 of Chapter V on Responsibilities, Rights and Privileges of Cooperatives of the same Code are hereby renumbered and amended to read, as follows:

CHAPTER V

RESPONSIBILITIES, RIGHTS AND PRIVILEGES OF COOPERATIVE

"ART. 51. Address. Every cooperative shall have an official postal address to which all notices and communications shall be sent. Such address and every change thereof shall be registered with the Authority.

"ART. 52. Books to be Kept Open. (1) Every cooperative shall have the following documents ready and accessible to its members and representatives of the Authority for inspection during reasonable office hours at its official address:

"(a) A copy of this Code and all other laws pertaining to cooperatives;

"(b) A copy of the regulations of the Authority;

"(c) A copy of the articles of cooperation and bylaws of the cooperative;

"(d) A register of members;

"(e) The books of the minutes of the meetings of the general assembly, board of directors and committee;

"(f) Share books, where applicable;

"(g) Financial statement; and

"(h) Such other documents as may be prescribed by laws or the bylaws.

"(2) The accountant or the bookkeeper of the cooperative shall be responsible for the maintenance of the cooperative in accordance with generally accepted accounting practices. He shall also be responsible for the production of the same at the time of audit or inspection.

"The audit committee shall be responsible for the continuous and periodic review of the books and records of account to ensure that these are in accordance with generally accepted accounting practices. He shall also be responsible for the production of the same at the time of audit or inspection.

"(3) Each cooperative shall maintain records of accounts such that the true and correct condition and the results of the operation of the cooperative may be ascertained therefrom at any time. The financial statements, audited according to generally accepted auditing standards, principles and practices, shall be published annually and shall be kept posted in a conspicuous place in the principal office of the cooperative.

"(4) Subject to the pertinent provisions of the National Internal Revenue Code and other laws, a cooperative may dispose by way of burning or other method of complete destruction any document, record or book pertaining to its financial and nonfinancial operations which are already more than five (5) years old except those relating to transactions which are the subject of civil, criminal and administrative proceedings. An inventory of the audited documents, records and books to be disposed of shall be drawn up and certified to by the board secretary and the chairman of the audit committee and presented to the board of directors which may thereupon approve the disposition of said records.

"ART. 53. Reports. (1) Every cooperative shall draw up regular reports of its program of activities, including those in pursuance of their socio-civic undertakings, showing their progress and achievements at the end of every fiscal year.

The reports shall be made accessible to its members, and copies thereof shall be furnished to all its members or record. These reports shall be filed with the Authority within one hundred twenty (120) days from the end of the calendar year. The form and contents of the reports shall be as prescribed by the rules of the Authority. Failure to file the required reports shall subject the accountable officer/s to fines and penalties as may be prescribed by the Authority, and shall be a ground for the revocation of authority of the cooperative to operate as such.

The fiscal year of every cooperative shall be the calendar year except as may be otherwise provided in the bylaws.

"(2) If a cooperative fails to make, publish and file the reports required herein, or fails to include therein any matter required by the Code, the Authority shall, within fifteen (15) days from the expiration of the prescribed period, send such cooperative a written notice, stating its non-compliance and the commensurate fines and penalties that will be imposed until such time that the cooperative has complied with the requirements.

"ART. 54. Register of Members as Prima Facie Evidence. Any register or list of members shares kept by any registered cooperative shall be prima facie evidence of the following particulars entered therein:

"(1) The date on which the name of any person was entered in such register or list of member; and

"(2) The date on which any such person ceased to be a member.

"ART. 55. Probative Value of Certified Copies of Entries. (1) A copy of any entry in any book, register or list regularly kept in the course of business in the possession of a cooperative shall, if duly certified in accordance with the rules of evidence, be admissible as evidence of the existence of entry and prima facie evidence of the matters and transactions therein recorded.

"(2) No person or a cooperative is possession of the books of such cooperative shall, in any legal proceedings to which the cooperative is not a party, be compelled to produce any of the books of the cooperative, the contents of which can be proved and the matters, transactions and accounts therein recorded, unless by order of a competent court.

"ART. 56. Bonding of Accountable Officers. Every director, officer, and employee handling funds, securities or property on behalf of any cooperative shall be covered by a surety bond to be issued for a duly registered insurance or bonding company for the faithful performance of their respective duties and obligations. The board of directors shall determine the adequacy of such bonds.

"Upon the filing of the application for registration of a cooperative, the bonds of the accountable officers shall be required by the Authority. Such bonds shall be renewed manually and the Authority shall accordingly be informed of such renewal.

"ART. 57. Preference of Claims. (1) Notwithstanding the provisions of existing laws, rules and regulations to the contrary, but subject to the prior claim of the Authority, any debt due to the cooperative from the member shall constitute a first lien upon any raw materials, production, inputs, and products produced; or any land, building, facilities, equipment, goods or services acquired and held, by such member through the proceeds of the loan or credit granted by the cooperative to him for as long as the same is not fully paid.

"(2) No property or interest on property which is subject to a lien under paragraph (1) shall be sold nor conveyed to third parties without the prior permission of the cooperative. The lien upon the property or interest shall continue to exit even after the sale or conveyance thereof until such lien has been duly extinguished.

"(3) Notwithstanding the provisions of any law to the contrary, any sale or conveyance made in contravention of paragraph (2) hereof shall be void.

"ART. 58. Instrument for Salary or Wage Deduction. (1) A member of a cooperative may, notwithstanding the provisions of existing laws to the contrary, execute an instrument in favor of the cooperative authorizing his employer to deduct from his/her salary or wages, commutation of leave credits and any other monetary benefits payable to him by the employer and remit such amount as maybe specified in satisfaction of a debt or other demand due from the member to the cooperative.

"(2) Upon the execution of such instrument and as may be required by the cooperative contained in a written request, the employer shall make the deduction in accordance with the agreement and deduction in accordance with the agreement and remit forthwith the amount so deducted within ten (10) days after the end of the payroll month to the cooperative. The employer shall make the deduction for as long as such debt or other demand remains unpaid by the employee.

"(3) The term "employer" as used in this article shall include all private firms and the national and local governments and government-owned or controlled corporations who have under their employer a member of a cooperative and have agreed to carry out the terms of the instrument mentioned in paragraphs (1) and (2) of this article.

"(4) The provisions of this article shall apply to all similar agreements referred to in paragraph (1) and were enforced prior to the approval of this Code.

"(5) Notwithstanding the provisions of existing laws to the contrary, the responsibilities of the employer as stated in paragraphs (1) and (2) of this articles shall be mandatory: Provided, That in the case of private employer, the actual and reasonable cost deducting and remitting maybe collected.

"ART. 59. Primary Lien. - Notwithstanding the provision of any law with the contrary, a cooperative shall have primary lien upon the capital, deposits or interest of a member for any debt due to the cooperative from such a member.

"ART. 60. Tax Treatment of Cooperative. - Duly registered cooperatives under this Code which do not transact any business with non-members or the general public shall not be subject to any taxes and fees imposed under the internal revenue laws and other tax laws. Cooperatives not falling under this article shall be governed by the succeeding section.

"ART.61. Tax and Other Exemptions. Cooperatives transacting business with both members and non-members shall not be subjected to tax on their transactions with members. In relation to this, the transactions of members with the cooperative shall not be subject to any taxes and fees, including not limited to final taxes on members deposits and documentary tax. Notwithstanding the provisions of any law or regulation to the contrary, such cooperatives dealing with nonmembers shall enjoy the following tax exemptions:

"(1) Cooperatives with accumulated reserves and undivided net savings of not more than Ten million pesos (P10,000,000.00) shall be exempt from all national, city, provincial, municipal or barangay taxes of whatever name and nature. Such cooperatives shall be exempt from customs duties, advance sales or compensating taxes on their importation of machineries, equipment and spare parts used by them and which are not available locally a certified by the department of trade and industry (DTI). All tax free importations shall not be sold nor the beneficial ownership thereof be transferred to any person until after five (5) years, otherwise, the cooperative and the transferee or assignee shall be solidarily liable to pay twice the amount of the imposed tax and / or duties.

"(2) Cooperatives with accumulated reserves and divided net savings of more than Ten million pesos (P10,000,000.00) shall fee the following taxes at the full rate:

"(a) Income Tax - On the amount allocated for interest on capitals: Provided, That the same tax is not consequently imposed on interest individually received by members: Provided, further, That cooperatives regardless of classification, are exempt income tax from the date of registration with the Authority;

"(b) Value-Added Tax On transactions with non-members: Provided, however, That cooperatives duly registered with the Authority; are exempt from the payment of value-added tax; subject to Section 109, sub-sections L, M and N of Republic Act No. 9337, the National Internal Revenue Code, as amended: Provided, That the exempt transaction under Section 109 (L) shall include sales made by cooperatives duly registered with the Authority organized and operated by its member to undertake the production and processing of raw materials or of goods produced by its members into finished or process products for sale by the cooperative to its members and non-members: Provided, further, That any processed product or its derivative arising from the raw materials produced by its members, sold in then name and for the account of the cooperative: Provided , finally, That at least twenty-five per centum (25%) of the net income of the cooperatives is returned to the members in the form of interest and/or patronage refunds;

"(c) All other taxes unless otherwise provided herein; and

"(d) Donations to charitable, research and educational institutions and reinvestment to socioeconomic projects within the area of operation of the cooperative may be tax deductible.

"(3) All cooperatives, regardless of the amount of accumulated reserves and undivided net savings shall be exempt from payment of local taxes and taxes on transactions with banks and insurance companies: Provided, That all sales or services rendered for non-members shall be subject to the applicable percentage taxes sales made by producers, marketing or service cooperatives: Provided further, That nothing in this article shall preclude the examination of the books of accounts or other accounting records of the cooperative by duly authorized internal revenue officers for internal revenue tax purposes only, after previous authorization by the Authority.

"(4) In areas where there are no available notaries public, the judge, exercising his ex officio capacity as notary public, shall render service, free of charge, to any person or group of persons requiring the administration of oath or the acknowledgment of articles of cooperation and instruments of loan from cooperatives not exceeding Five Hundred Thousand Pesos (P500,000.00).

"(5) Any register of deeds shall accept for registration, free of charge, any instrument relative to a loan made under this Code which does not exceed Two Hundred Fifty Thousand Pesos (P250,000.00) or the deeds of title of any property acquired by the cooperative or any paper or document drawn in connection with any action brought by the cooperative or with any court judgment rendered in its favor or any instrument relative to a bond of any accountable officer of a cooperative for the faithful performance of his duties and obligations.

"(6) Cooperatives shall be exempt from the payment of all court and sheriffs fees payable to the Philippine Government for and in connection with all actions brought under this Code, or where such actions is brought by the Authority before the court, to enforce the payment of obligations contracted in favor of the cooperative.

"(7) All cooperatives shall be exempt from putting up a bond for bringing an appeal against the decision of an inferior court or for seeking to set aside any third party claim: Provided, That a certification of the Authority showing that the net assets of the cooperative are in excess of the amount of the bond required by the court in similar cases shall be accepted by the court as a sufficient bond.

"(8) Any security issued by cooperatives shall be exempt from the provisions of the Securities Act provided such security shall not be speculative.

"ART. 62. Privileges of Cooperatives. Cooperatives registered under this Code, notwithstanding the provisions of any law to the contrary, be also accorded the following privileges:

"(1) Cooperatives shall enjoy the privilege of depositing their sealed cash boxes or containers, documents or any valuable papers in the safes of the municipal or city treasurers and other government offices free of charge, and the custodian of such articles shall issue a receipt acknowledging the articles received duly witnessed by another person;

"(2) Cooperatives organized among government employees, notwithstanding any law or regulation to the contrary, shall enjoy the free use of any available space in their agency, whether owned or rented by the Government;

"(3) Cooperatives rendering special types of services and facilities such as cold storage, ice plant, electricity, transportation, and similar services and facilities shall secure a franchise therefore, and such cooperatives shall open their membership to all persons qualified in their areas of operation;

"(4) In areas where appropriate cooperatives exist, the preferential right to supply government institutions and agencies rice, corn and other grains, fish and other marine products, meat, eggs, milk, vegetables, tobacco and other agricultural commodities produced by their members shall be granted to the cooperatives concerned;

"(5) Preferential treatment in the allocation of fertilizers, including seeds and other agricultural inputs and implements, and in rice distribution shall be granted to cooperatives by the appropriate government agencies;

"(6) Preferential and equitable treatment in the allocation or control of bottomries of commercial shipping vessels in connection with the shipment of goods and products of cooperatives;

"(7) Cooperatives and their federations, such as farm and fishery producers and suppliers, market vendors and such other cooperatives, which have for their primary purpose the production and/or the marketing of products from agriculture, fisheries and small entrepreneurial industries and federations thereof, shall have preferential rights in the management of public markets and/or lease of public market facilities, stalls or spaces: Provided, That these rights shall only be utilized exclusively by cooperatives: Provided, further, That no cooperative forming a joint venture, partnership or any other similar arrangement with a non-cooperative entity can utilize these rights;

"(8) Cooperatives engaged in credit services and/or federations shall be entitled to loans credit lines, rediscounting of their loan notes, and other eligible papers with the Development Bank of the Philippines, the Land Bank of the Philippines and other financial institutions except the Bangko Sentral ng Pilipinas (BSP);

"The Philippine Deposit Insurance Corporation (PDIC) and other government agencies, government-owned and controlled corporations and government financial institutions shall provide technical assistance to registered national federations and unions of cooperatives which have significant engagement in savings and credit operations in order for these federations and unions to establish and/or strengthen their own autonomous cooperative deposit insurance systems;

"(9) A public transport service cooperative may be entitled to financing support for the acquisition and/or maintenance of land and sea transport equipment, facilities and parts through the program of the government financial institutions. It shall have the preferential right to the management and operation of public terminals and ports whether land or sea transport where the cooperative operates and on securing a franchise for active or potential routes for the public transport;

"(10) Cooperatives transacting business with the Government of the Philippines or any of its political subdivisions or any of its agencies or instrumentalities, including government-owned and controlled corporations shall be exempt from prequalification bidding requirements notwithstanding the provisions of Republic Act No.9184, otherwise known as, the Government Procurement Act;

"(11) Cooperative shall enjoy the privilege of being represented by the provincial or city fiscal or the Office of the Solicitor General, free of charge, except when the adverse party is the Republic of the Philippines;

"(12) Cooperatives organized by faculty members and employees of educational institutions shall have the preferential right in the management of the canteen and other services related to the operation of the educational institution where they are employed: Provided, That such services are operated within the premises of the said educational institution; and

"(13) The appropriate housing agencies and government financial institutions shall create a special window for financing housing projects undertaken by cooperatives, with interest rates and terms equal to, or better than those given for socialized housing projects. This financing shall be in the form of blanket loans or long-term wholesale loans to qualified cooperatives, without need for individual processing.

"The Authority, in consultation with the appropriate government agencies and concerned cooperative sector, shall issue rules and regulations on all matters concerning housing cooperatives."