STRENGTHENING THE COOPERATIVE MOVEMENT

• Number: Presidential Decree No. 175
• Sections: 12

Preamble

WHEREAS, a parallel measure to the emancipation of

tenant-farmers from feudal bondage, as provided for in Presidential

Decree No. 27, dated October 21, 1972, is a provision for a strong

social and economic organization and system to ensure that they will

enjoy on a lasting basis the benefits of agrarian reform;

WHEREAS, there arc equally less fortunate segments of our

society who are in need of social and economic amelioration and should

have the right to enjoy the privilege of self-development, social growth

and economic independence under a truly just and democratic society;

WHEREAS, there is a need to increase income and purchasing

power of the low-income sector of the population in order to attain a

more equitable distribution of income and wealth;

WHEREAS, the cooperative institution is a means of

attaining a more equitable distribution of income and wealth and

providing the common man a dignified level of existence; and

WHEREAS, the Bayanihan Spirit is an inborn trait of the

Filipino people which if properly guided can serve as a strong

foundation of cooperative institutions;

NOW, THEREFORE, in order to effect the desired changes and

reforms in the economic, social and political structure of our society,

I, FERDINAND E. MARCOS, President of the Philippines, by virtue of the

powers in me vested by the Constitution as Commander-in-Chief of all the

Armed Forces of the Philippines, and pursuant to Proclamation No. 1081,

dated September 21, 1972, and General Order No. 1, dated September 22,

1972, do hereby order and decree the following:

Section 1 Declaration of Policy.

SECTION 1. Declaration of Policy. — It is hereby

declared the policy of the State to foster the creation and growth of

cooperatives as a means of increasing income and purchasing power of the

low-income sector of the population in order to attain a more equitable

distribution of income and wealth.

Section 2 Cooperative Defined.

SEC. 2. Cooperative Defined. — Cooperative shall mean

only organizations composed primarily of small producers and of

consumers who voluntarily join together to form business enterprises

which they themselves own, control and patronize.

A small producer shall mean a self-employed individual who, by

himself or with his family provides the primary labor requirements of

his business enterprise or one who earns at least fifty percent of his

gross income from the payment proceeds or income of the labor he

provides.

Section 3 Cooperative Principles.

SEC. 3. Cooperative Principles. — A

cooperative shall be governed by the following principles:

(a) Open membership — Membership in a cooperative

should be voluntary and available without artificial restriction or any

social, political, racial or religious discrimination, to all persons

who can make use of its services and are willing to accept the

responsibilities of membership;

(b) Democratic control — In primary cooperatives

irrespective of the number of shares owned, each member can only cast

one vote in deciding upon the affairs of the cooperative. The affairs of

the cooperative shall be administered by persons elected or appointed

in a manner agreed by the members and accountable to them. In other than

primary cooperatives, administration shall be conducted in a suitable

democratic form;

(c) Limited interests to capital — Share capital shall earn

only limited interests, the maximum rate of interests to be established

by the Department of Local Government and Community Development from

time to time; and

(d) Patronage refund — Net income after the interest on capital

has been paid shall be redistributed among the members in proportion to

their patronage.

Section 4 Powers of Cooperatives.

SEC. 4. Powers of Cooperatives. — Cooperatives shall

have the following powers:

(a) To exercise the same rights and privileges given to

persons, partnerships and corporations provided under existing laws;

(b) To establish and operate business enterprises of all kinds as

their needs dictate and their capabilities allow subject to the

provisions of existing laws;

(c) To establish rural banks under the Rural Bank Act and/or to

purchase government held preferred shares of rural banks which may be

converted to voting common stocks, under the rules and regulations to be

promulgated by the Monetary Board of the Central Bank and the Agrarian

Reform Fund Commission;

(d) To enjoy all the privileges and incentives granted by the

NACIDA Act and those granted by all government agendas to business

organizations under existing laws, provided that all requirements are

met;

(e) To petition the Government to expropriate idle urban or rural

lands for agricultural production, cottage industry, business or

housing purposes; and

(f) To own and dispose of property, to enter into contract, to

sue or be sued, and to do and perform such other acts as may be

necessary in the pursuit of its objectives.

Section 5 Privileges of Cooperatives.

SEC. 5. Privileges of Cooperatives. — Cooperatives

shall enjoy the following privileges:

(a) Exemption from income taxes and sales taxes provided that

a substantial portion of the net income of the cooperative is returned

to members in the form of interests and/or patronage refunds: Provided,

further, That for income tax purposes, non-agricultural

cooperatives shall be exempt for a period of five (5) years and

agricultural cooperatives for a period of ten (10) years reckoned from

the date of registration with the Department of Local Government and

Community Development: Provided, finally, That the taxable

income shall mean that portion of the cooperative's income after

deducting the interest paid to members and patronage refunds;

(b) In areas where appropriate cooperatives exist, the

preferential right to supply rice, corn and other grains, fish and other

marine products, meat, eggs, milk, vegetables, tobacco and other

agricultural commodities produced by members of the cooperatives

concerned to State Agencies administering price stabilization programs;

and

(c) In appropriate cases, exemption from the application of the

Minimum Wage Law upon the recommendation of the Bureau of Cooperatives

Development subject to the approval of the Secretary of Labor.

Section 6 Financial Assistance to Cooperatives.

SEC. 6. Financial Assistance to Cooperatives. —

There is hereby created a Cooperative Development Loan Fund for the

development of the cooperative movement.

(a) Sources of

funds — This Fund shall be financed from the following sources:

1) General appropriations;

2) Proceeds of sales of US Public Law 480 commodities;

3) Foreign loans or proceeds of sales of commodity loans;

4) Grants and donations;

5) Levies imposed by existing laws on agricultural commodities

for the development of cooperatives; and

6) Such other sources as are now provided for by existing

laws or as may be provided for in the future.

(b) Uses — This Fund shall be utilized for the following

purposes: 1) Source of loanable funds to cooperatives; 2)

Serve as a guarantee for loans granted to cooperatives; and 3)

Source of advances to cooperatives for the purchase of equity of rural

banks.

In no case shall any portion of this Fund be utilized for

direct loans to farmer members. As far as practicable, funds shall be

channeled through existing government and private financial

institutions.

(c) Administration of Fund - For

purposes of administering the Fund, there is hereby created a Management

Committee composed of:

1) A representative of the Department of Local Government

and Community Development who shall serve as Chairman;

2) A representative of the Central Bank of the Philippines;

3) A representative of the Philippine National Bank;

4) A representative of the Department of Agriculture and

Natural Resources;

5) A representative of the Department of Agrarian Reform; and

6) Two representatives of the Cooperative Movement designated

by the Secretary of the Department of Local Government and Community

Development.

The Management Committee shall have the power to administer this

Fund and prescribe rules and regulations fur its utilization.

(d)

Other financial assistance — The Agrarian Reform Fund

Commission, Greater Manila Terminal Food Market, National Development

Corporation or their subsidiary institutions or the subsidiary

institutions of any government financial agency or any government,

agency is authorized to establish or acquire fixed facilities such as

storage facilities, processing facilities, food markets and other

facilities, requiring large long-term investment which shall be leased

or sold to cooperatives. Likewise, cooperatives shall have preferential

right to purchase or lease existing facilities as hereinabove specified

belonging to other government institutions and agencies.

Section 7 Management and Training Assistance.

SEC. 7. Management and Training Assistance. —

There is hereby established a Management and Training Assistance

Program. It shall create a Central Management and Training Pool to be

composed of top caliber managers who may be assigned to actively manage a

cooperative or cooperatives for the prime purpose of training an

understudy or understudies to assume management thereafter. In this

connection, it may contract for and defray the cost of professional

managers and/or firms who shall actively manage cooperatives as part of

the training program. Cooperative managers contracted for this purpose

shall be exempt from WAPCO salary rated. Training programs to develop

cooperative managers may be undertaken by any existing educational or

other institutions on contract basis.

Suitable and practical management training materials and

guides shall be developed for the use of cooperative managers.

The Management and Training Assistance Program shall be administered by

an Advisory Board of five members to be appointed by the Secretary of

the Department of Local Government and Community Development, at least

two of whom shall come from the cooperative system, and one from the

Department of Agrarian Reform.

The Management Training Program

shall be financed from the following sources:

(a) General appropriations;

(b) Income from the Cooperative Development Loan Fund;

(c) Grants and donations; and

(d) Contribution from cooperatives.

Section 8 Powers of Regulatory Agency.

SEC. 8. Powers of Regulatory Agency. — The

Department of Local Government and Community Development through the

Bureau of Cooperatives Development is vested with full authority to

promulgate rules and regulations to govern the promotion, organization,

registration, regulation and supervision of all types of cooperatives.

Specifically, it shall have the following powers:

(a) To call on any office, agency, instrumentality or

individuals belonging to the Government or private sector for such

assistance as may be needed;

(b) To register new cooperatives, re-register existing

cooperatives and regulate and supervise the following types of

cooperatives:

1) Barrio Associations which shall have the provisional

status of a cooperative and serve the requirements of Presidential

Decree No. 27 in the issuance of certificates of land transfer;

2) Local or primary cooperatives which shall be composed of

natural persons and/or barrio associations;

3) Federations which shall be composed of cooperatives

which may or may not perform business activities; and

4) Unions of cooperatives which shall not perform any

business activities.

Provided, That, in the case of re-registration, the

cooperative shall file its application or petition for re-registration

within a period of six (6) months from the date of promulgation of this

Decree, and its corporate existence shall be deemed to continue until

the application or petition is approved or denied: And provided,

further, That for purposes of re-registration, Sections 2 and 5 (a)

hereof shall not be applicable to existing cooperatives which do not

meet the qualification requirements provided for in this Decree.

(c) To determine the manner and extent by which powers,

privileges, assistance and support granted to cooperatives provided by

this Decree shall be exercised or enjoyed by cooperatives;

(d) To suspend the operation or cancel the registration of any

cooperative after hearing and when in its judgment and based on

findings, such cooperative is operating in violation of this Decree,

rules and regulations, existing laws as well as the by-laws of the

cooperative itself;

(e) To liquidate and to determine disposal of assets and

settlement of liabilities of any cooperative which has been inoperable,

inactive or defunct or any cooperative violating the penal provisions

herein provided;

(f) To recommend charges to be filed against any official of any

cooperative who has committed crimes against the cooperative or who has

violated the penal provisions herein provided; and to establish rules

and regulations governing the suspension and/or expulsion of any members

of a cooperative;

(g) To condone the principal and/or accumulated interest on past

due production and/or farm improvement loans extended by the

Agricultural Credit and Cooperative Financing Administration and the

Agricultural Credit Administration to farmer members of agricultural

cooperatives, and to authorize writing off of bad debts or bad accounts

of agricultural-cooperatives arising from loans granted by the

Agricultural Credit and Cooperative Financing Administration or the

Agricultural Credit Administration subject to the rules and regulations

to be promulgated jointly by the Department of Local Government and

Community Development and the Department of Finance;

(h) To recommend charges to be filed against non-farmers who through

misrepresentation have secured loans from the Agricultural Credit and

Cooperative Financing Administration or the Agricultural Credit

Administration through agricultural cooperatives;

(i) To authorize the collection by barrio associations and

cooperatives past due loans granted by the Agricultural Credit and

Cooperative Financing Administration or the Agricultural Credit

Administration on a commission basis; and

(j) To authorize cooperatives to collect amortizations on lands

under Presidential Decree No. 27.

Section 9

SEC. 9. Penal Provisions —

(a) No person or group of persons other than cooperatives

registered pursuant to the provisions of this Decree shall use in its

name the word "cooperative" or its equivalent in the vernacular with

intent to defraud. Violators shall be fined two thousand pesos

(P2,000.00). In case of insolvency, a subsidiary imprisonment of not

more than six (6) months shall be imposed.

(b) Any official of

the cooperative, elected or appointed, who commits crimes against the

cooperative shall be penalized in the same way as if such official were a

civil servant, with disqualification of holding any elective or

appointive office.

(c) Any official of the State, elected or

appointed and not belonging to the Department of Local Government and

Community Development, who willfully and unduly interferes with the

business activities and internal affairs of any cooperative shall be

penalized by a fine of not more than five thousand pesos (P5,000.00)

and/or imprisonment of not more than six (6) months.

(d)

Individuals who are found to have organized cooperatives for the evident

purpose of taking advantage of the privileges granted to cooperatives

under this Decree and who operate such organizations in clear violation

of cooperative principles herein set forth as adjudged by a competent

court shall be subject to attachment of all their assets in such

organizations and such organizations shall summarily be stopped from

operating, without prejudice to other penalties as provided for by

existing laws.

Section 10 Separability Clause.

SEC. 10. Separability Clause. — If any

provision, provisions, part or parts of this Decree is declared

unconstitutional, such declaration shall not invalidate the other

provisions hereof.

Section 11 Repealing Clause.

SEC. 11. Repealing Clause. — All past cooperative

laws are hereby repealed. Portions or parts of any other laws

inconsistent herewith are likewise repealed. The Department of Local

Government and Community Development through the Bureau of Cooperatives

Development shall promulgate within thirty (30) days from date hereof

the rules and regulations for the effective implementation of this

Decree and upon approval by the President of the Philippines shall have

the force and effect of law. These rules and regulations may be amended,

modified or abrogated as the circumstances may so demand.

Done in the City of Manila, this 14th day of April, in the

year of Our Lord, nineteen hundred and seventy-three.

(Sgd.) FERDINAND E. MARCOS

President

Republic of the Philippines

By the President:

(Sgd.) ALEJANDRO MELCHOR

Executive Secretary

In order to facilitate the implementation of this Presidential

Decree No. 175, the Office of the President issued the following:

Letter of Implementation No. 23, dated July 9, 1973, organizing

the Samahang Nayon and Kilusang Bayan.