Cooperatives Flashcards by Paul Robert CPA

Cooperative
- members must
(1) have commonality (e.g. same occupation)
(2) equitable contributions to capital
(3) patronize cooperative products or services

PRINCIPLES
- autonomy
- voluntary and open → no discrimination
- member economic participation
- democrative member control → 1 member = 1 vote
- education and training → cooperative + member = both grow
- cooperation among cooperatives
- concern for community

Yes

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Types of Cooperatives
- Advocacy → advocates cooperativism
- Workers → by workers (including self-employed)
- Agriculture → agriculture activity
- Agrarian Reform → for members of agriculture
- Consumers → commodities (trading)
- Marketing → supply of inputs and market products
- Producers → production and processing (manufacturing)
- Transport → for land and sea only (no air)

Yes

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Types of Cooperatives

Cooperative Bank
- wide range of financial services
- clients → ?

Credit Cooperative
- savings and lending services
- clients → ?

Financial Service Cooperative
- savings, credit, and other financial services
- clients → none specified

clients → members + cooperative itself
clients → members

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Federation vs Union

Union
- geographical (any types of cooperative)

Federation
- same type of cooperative

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Laboratory Cooperative
- all members → should be minors
(1) if become legal age → removed

affiliated → with a guardian cooperative
(1) students → affiliated with school cooperative
(2) out of school → affiliated with anyone

NOTE : Laborary Cooperative → has no juridical personality
- Guardian is dissolved = Laboratory is dissolved
- Guardian → may have more than 1 laboratory cooperative

“Laboratory Cooperative of (Guardian)”

Yes

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Cooperative Name
- must include “cooperative”, “kooperatiba”
- ✗ incorporated, partnership
- ✗ federation / union → for primary cooperatives
- ✗ all caps

NOTE : integrated / development → discouraged only

Can we use acronym?

Yes, only if nasabi na yung full name tsaka pa lang yung acronym

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Requirements for Registration
- economic survey
- by-laws
- articles of cooperation → common bond, whether primary, secondary or tertiary
- general statement → describing structure of cooperative which must include a bookkeeper

submitted to CDA. How many days for the CDA to decide?

within 60 days from application
- approved → COR = juridical personality
- inaction → deemed approved = juridical personality
- denied → file appeal to president (90 days to appeal, 90 days for president to decide)

President
- approved → COR = juridical personality
- inaction → deemed approved = juridical personality
- denied → cannot appeal anymore (final decision)

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Requirements for Registration

What is the # of Organizers? What is the minimum Paid-up Capital?
- Primary (Single-purpose and Multi-purpose)
- Secondary (Federation and Union)
- Tertiary (Federation and Union)

Primary
- Single-purpose = 15 or more natural persons, P15,000
- Multi-purpose = 15 or more natural persons, P100,000 or FS ↑

Secondary
- Federation = 3 primary, P1,000,000 or FS ↑
- Union = 10 primary, none

Tertiary
- Federation = 3 secondary, P5,000,000 or FS ↑
- Union = 10 secondary, none

Natural Person → kasi dati sa old CC, natural persons lang pwede maging incorporators (now a corp can create another corp)
- eh diba kinopya lang ng coop yung corp

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Requirements for Registration

Qualifications of Organizers (for Primary)
- filipino → whether naturalized or not
- legal age
- commonality
- residence → in area of operation
- pre-membership education seminar

Can a single-purpose transform to multi-purpose?

Yes, after 2 years muna
- Agriculture and Agrarian → magwwait din ng 2 years pero exempt sa minimum PUC na 100K

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Rules on Government Officers and Employees
- of CDA → X any position in a cooperative
- of Government (elected) → X officer or director in a cooperative

Yes

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Membership
- Regular → complied with all requirements
- Associate → cannot vote, cannot be voted upon

Can an associate transform to regular?

Yes
- meet requirement for regular member
- patronize cooperative for 2 years
- intention to remain as member

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Termination of Membership
- voluntary → notice of ?
(1) contribution will be returned (Assets are enough to cover liabilities)
- involuntary → by vote of ?
(1) not patronizing
(2) violation of by-laws and rules
(3) failed to comply with requirements
(4) acts → prejudicial to cooperative

Valid Grounds
- for primary cooperatives → death or insanity
- for secondary / tertiary → insolvency or dissolution

60 days
majority BOD

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Termination of Membership

Majority BOD (involuntary)
1. Opportunity to be heard
2. Decision of BOD → written
3. Appeal (30 days) → to General Assembly / Grievances Committee
4. Decide (30 days) → inaction = deemed approved

Kahit by termination → contribution will be returned based on by-laws

Yes

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Board
- composition and term

Qualification
- must be a member (same in nonstock)
- Special Director for Technical Knowledge → as if consultant, no voting powers
- cannot hold other positions (different in corp)
- no conflict of interest

different to corporation

5 to 15
2 years

Sa corp pwede mag conflict of interest (e.g. interlocking directors)

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Filling up of Vacancies

By the GA
- expiration
- other causes (no quorum anymore)

By the board itself
- other causes (if still constitutes a quorum)

different to corporation

Yes

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Compensation of BOD

General Rule : X
- XPN : reasonable per diems
(1) if net loss or inflation rate is higher = no compensation
(2) if suspended = not cumulative (no recovery)
- XPN : in by-laws
- XPN : ?

NOTE : in first year of corporations → no compensation

Majority GA

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Self-Dealing Directors are valid. True or False?

same in corp

False, voidable

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Cases where Self-Dealing Director is VALID
- presence of such director → not necessary for quorum
- vote of such director → not necessary for approval
- contract is fair and reasonable

All must be met. If either of the first 2 are not met, it can be ratified through vote of ?

Cases where Self-Dealing Officer is VALID
- authorized by BOD

same in corp

3/4 members

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Qualification of Officers
- bawal magkamag anak (within 3rd degree)

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Yes

Election of Officers
- within the BOD, mamimili sila
- removal → only after due hearing
(1) loss of confidence is not a ground (XPN : related to honesty and integrity)

same in corp

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Yes

Removal of Officers
- by vote of ?

walang ganto sa corp (removal of BOD lang)

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3/4 of members
- BOD mag rerecommend lang hindi mang reremove

Executive Committee
- may act on matters delegated in by-laws or by majority BOD

Appointed by GA
- Audit → internal auditors
- Election

Appointed by BOD
- Mediation
- Ethics
- Others

same in corp

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Yes

General Assembly
- like shareholders in corporation
- delegate to smaller body → by vote of
XPN : amendment of AOC and by-laws
XPN : BOD → election and removal
XPN : approve developmental plans

think of executive committee

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3/4 of members

Board (Regular Meeting)
- when?

like board meeting in corp

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monthly

Board (Special Meeting) - when? - when to give notice? ## Footnote like board meeting in corp

When - any time as necessary When to give notice - 1 week prior meeting (sa corp pag board = 2 days)

General Assembly (Regular Meeting) - when? ## Footnote like stockholders meeting

annually (or **90 days** after December 31)

General Assembly (Special Meeting) - when? - when to give notice? ## Footnote like stockholders meeting

When - any time as necessary When to give notice - 1 week prior meeting

Special Meeting - by vote of ? IF NOT - **10%** members → may request (written) - **10%** members → petition (if request is not granted) - newly approved committee → within ? - CDA → after audit ## Footnote Notice must be written - may be waived → expressly or impliedly

- Majority BOD - 90 days

Voting - 1 member = 1 vote - XPN : Secondary / Tertiary → max of **6 votes** (in by-laws)

Yes

Quorum for BOD - majority (by-laws cannot give lower requirement) Quorum - 25% of members EXCEPTIONS - Cooperative Banks → ? - **E**lectric Cooperative → ?

- majority - 5% of members

Proxy Voting - allowed in Board meeting. True or False? - allowed in GA meeting. True or False? ## Footnote same sa corporation

- False (since di napapasa yung qualifications) - True (XPN : primary → cannot be proxy)

Keeping of Records - up to ? Reports - submitted to CDA within ? - failure to submit → ground for dissolution Right to Inspect Books - must be during reasonable hours on business days - not included → subsidiary ledgers, info about other members Requirements - information → must be used properly - person → in good faith and not a competitor

- 5 years - 120 days after December 31

Annual Audit - FS audit → independent CPA - Performance audit - Social audit → independent auditor (impact to society) Auditor (whether individual or firm) - audit for 5 consecutive years → 2 years → pwede na ulit ## Footnote auditor → no liability for defamation

Yes

Tax Exemption of Cooperatives Is there transaction with non members? - no → only with members = **EXEMPT** Yes, is accumulated reserves > 10M? - no → not for profit = **EXEMPT** - yes → **TAXABLE** (1) XPN : income tax (2) XPN : business tax (VAT and OPT) (3) XPN : local tax

Capital "Funds" - donated capital → forfeited to government (in case of liquidation) Limit on Holdings - **10%** of Share Capital per member (1) if heir becomes a member → with right of succession (2) if not → treasury shares of cooperative Assignment of Interest - allowed only if (1) held for 1 year (2) transferee → cooperative itself or qualified to be a member (3) approval of BOD ## Footnote What is the maximum par value for a share?

Yes ## Footnote P1,000

Distribution of Funds (RECO) - Reserve Fund - Education and Training Fund - Community Development Fund - Optional Fund ## Footnote 10-10-3-7

- Reserve → **minimum** 10% of net surplus (1) first 5 years → **minimum 50%** of net surplus - Education and Training Fund → **maximum** 10% of net surplus - Community Development Fund → **minimum** 3% of net surplus - Optional Fund → **maximum** 7% of net surplus

Reserve Fund - for absorbing losses - if RF > SC → can be used for expansion projects, or lower allocation - if losses then profit → recover muna yung RF - if dissolved → RF go to federation / union **or community** Education and Training Fund - 50% → activities of cooperative - 50% → ETF go to federation / union - if dissolved → ETF go to federation / union Remaining Surplus - for dividends and patronage refunds - amount → maximum normal rate of return

Yes

Patronage Refund Member - fully paid SC → give fully in cash - unpaid → credited to unpaid amount Non Member - set aside in a general fund - if non member requests (1) qualified to be a member → allocated for payment of contribution (2) if not → to reserve fund (RF) or education fund (ETF)

Yes

Dissolution and Liquidation When a cooperative is dissolved - still continue for **3 years** → for liquidation and winding-up If after liquidation, there are still excess, where does the excess go? ## Footnote same in corp

Yes XPN : If through a trustee or receiver → 3-year period don't apply to federation / union **(different to corp)**

Dissolution and Liquidation Voluntary Dissolution - send notice to stockholders → **30** days before meeting - publication in a newspaper → once in 3 consecutive weeks No Creditors Affected - file to CDA → **request** for dissolution - what is the vote required? With Creditors Affected - file to CDA → **petition** for dissolution - what is the vote required? ## Footnote different to corp

- Majority + 3/4 - Majority + 3/4

Dissolution and Liquidation Date of Incorporation → **within 2 years** - failed to formally organize - Effect → ground to dissolve only **(!!!)** Inoperative for **2 consecutive** yrs - Effect → ground to dissolve only **(!!!)** ## Footnote different to corp

Yes

Voting Requirement - Majority Members - 2/3 Members ## Footnote Majority Member → isa lang 2/3 Member → only one with 2/3 members na requirement

Majority Members - Compensation of BOD (same with corp) 2/3 Members - Amendment of AOC - Amendment of by-laws

Voting Requirement - 3/4 Members (DRR DMC) ## Footnote think of 2/3 OCS in corp

- Delegate to smaller body → powers of GA - Removal of Officer → upon recommendation of BOD - Ratification of SDD - Division → into 2 or more cooperatives - Merger and Consolidation ## Footnote Sa corp → removal of BOD lang meron, walang removal of officers

Voting Requirement - Majority BOD (SET)

- Special Meeting - Executive Commitee - Termination (removal) of Membership

Voting Requirement - Majority + 3/4 (VV)

- Voluntary Dissolution (no creditors affected) - Voluntary Dissolution (with creditors affected)

Similar to a corporation... - limited liability - separate personality - right of succession - compensation of BOD → X, majority GA - self-dealing directors → voidable - election of officers → by BOD - election of executive commitee → by majority BOD - proxy voting → bawal if BOD Different to a corporation... - term - 25/25 rule → minimum **P15,000** - Quorum for GA → 25% - BOD → composition, term, vacancies - BOD → cannot hold other positions - ratification of SDD → vote of 3/4 - dissolution (voluntary and inoperation) ## Footnote What to remember in case of preferred shares?

Term → 50 years Extension of Term - must be within **5** years from expiry date - earlier than that → ✘ (XPN : justifiable reason) Preferred Shares - not subject to 25/25 rule - maximum 25% of total authorized SC BOD → 5 to 15, 2 years, GA → only expiration of term ## Footnote Corporation → 3 years

Cooperatives Flashcards

(46 cards)