Cooperative Membership and Capital Subscription

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Joining cooperative is fun and full of excitements. As a member, you meet people from all walks of life without discrimination against gender, religion, race, social class, political belief or affiliations. It is one form of social enterprise that brings together people to pool their resources with the end goal of achieving a common bond of interest.

In this issue, we will share information related to membership and capital subscription. In order for us to have a common understanding, let us look into some provisions about membership under Philippine laws. Article 5 of Republic Act 9520 (RA 9520), otherwise known as Philippine Cooperative Code of 2008, defined a member and I quote “Member includes a person either natural or juridical who adhering to the principles set forth in this Code and the Articles of Cooperation has been admitted by the cooperative as a member.”

Additionally, Section 26 of RA 9520 provided the kinds of membership when it stated “A cooperative may have two kinds of members, to wit: (1) regular members and (2) associate members. A regular member is one who has complied with all the membership requirements and entitled to all the rights and privileges of membership. An associate member is one who has no right to vote nor be voted upon and shall be entitled only to the rights and privileges as the by-laws may provide.”

This definition reminds me of my first encounter in the early 90’s when I assisted cooperatives in Benguet as an NGO worker. It is worth reminiscing to honestly disclose that my understanding on cooperatives was limited. Though I had some units in Extension subjects related to cooperatives, it was not enough gear to do fieldwork related to cooperatives. However, when I became a cooperative member, my knowledge started to grow and until now, I am still learning and studying the dynamics of cooperatives.

The definition above and as clearly stated in most cooperative by-laws provided that only regular members are entitled to vote and be voted upon, hence, they constitute the General Assembly. Also, regular members are entitled to subscribe common and preferred shares in the case of primary cooperatives. Regular members apply to all types and categories of cooperatives and serve as the basis in determining the quorum.

In the case of electric and water service cooperatives, some provisions on associate members have been provided under the implementing rules and regulations. Associate members can subscribe to preferred shares only and they may attend General Assembly Meetings but can only exercise their rights and privileges as provided in the by-laws of their respective cooperatives. In some cooperatives, associate members are mere observers during business meetings.

For new cooperative members and stakeholders, we can easily determine when a cooperative has regular and associate members by looking into the approved registration documents of the cooperative specifically under the Articles of Cooperation on the heading or Article on Authorized Capitalization. The amount for common shares and preferred shares are provided and the succeeding title or heading presents the subscribed and paid-up capital. When percentage of the Authorized Capitalization is offered for subscription as preferred shares, it is one indication that the cooperative has associate members.

In addition, provisions on the kinds of membership, qualifications, minimum share capital subscription, duties of members, members entitled to vote, liabilities of members, termination of membership and refund of share capital contributions are found in the by-laws usually under the title “Article II-Membership”. To our readers who are not familiar with the provisions of cooperatives, Articles of Cooperation, and By-laws, you can find some model forms in the CDA website:

Further, membership in cooperative requires minimum subscription. The payment to the said subscription is often referred to as paid-up share capital.  This usually receives interest at the end of the year when results of operation is favorable. As pointed out earlier, only regular members can subscribe common and preferred shares. The amount of subscription varies from one cooperative to another but the Code provided a 10% limitation on share capital holdings (Article 73, RA 9520).

In 2013, when CDA issued a directive to inspect all registered cooperatives, I noticed that most of the inspected cooperatives don’t have Subscription Agreement Forms issued to members who pay their respective share capital contributions. During the exit conference, the findings and observations were presented to the officers and management. One of the recommendations presented was for cooperatives to adopt a system of monitoring cooperative membership and come up with Membership Subscription Agreement, Membership Registry and Share Book. Likewise, RA 9520 and its Implementing Rules and Regulations have a special provision for associate members that complied and met the requirements of regular membership. After two years of membership, they may signify their intentions to become regular members.

As of this writing, the Supervisory and Examination of CDA-CAR is currently preparing notices to various cooperatives that failed to comply with CDA issuances on amendment. Part of the provisions to be amended is on membership and subscription specified in the by-laws to be reconciled with provisions in the Articles of Cooperation. We encourage those affected cooperatives to comply with the notice and recommendations of our inspectors concerning this issue. We have technical persons assigned in each province and we urge every cooperative to approach them. Another option is to visit our CDA-CAR Regional Office for us to assist and guide you in the amendment of your Articles of Cooperation and by-laws.

Furthermore, cooperative members, officers, management and staff must ensure that the amendments to their respective Articles of Cooperation and by-laws be approved by 2/3 vote of all members with voting rights. The provisions for amendment must be presented to the members in a Regular or Special General Assembly Meeting called for the purpose.

Lastly, we heard that Benguet State University MPC and Lagawe Multi-purpose Development Cooperative (LMDC) will have their General Assembly Meetings on February 28, 2015. La Trinidad Vegetable Trading Post MPC slated its General Assembly on March 7, 2015 while Bad-ayan Buguias Development MPC is on March 14, 2015.To all regular members, you must attend your GA Meeting in order to participate, be informed, vote and be voted upon. As members, your presence is crucial for the growth of the cooperative.