Republic Act No. 2023

This Act shall be known as the "Philippine Non-Agricultural Co-operative Act."

It is hereby declared to be the policy of Congress to assist the people to develop their enterprises on a co-operative basis to strengthen their economic independence within the framework of this Act by the promotion of organized methods of industrial production, marketing, distribution and credit, the improvement of processes and other activities and the removal of conditions which hamper the growth of a rising standard of living with a view to promote the general well-being of the people and to expand the national economy.

In furtherance of this policy, the Government shall encourage and assist in the establishment of a system of co-operative banks all over the country which shall provide banking facilities and reasonable credit for the non-agricultural co-operatives and encourage the distribution of consumer requirements through co-operatives by the establishment of a system of co-operative wholesale societies all over the country which shall provide steady and wholesale source of consumer requirements and act as a link between producers and consumers co-operatives by adopting a policy of gradual transfer of the business of procurement of consumer requirements from the National Marketing Corporation (NAMARCO) to the Philippine Co-operative Wholesale Society.

To achieve this policy, the Central Bank of the Philippines, the Department of Commerce and Industry and all other departments, agencies or instrumentalities of the Government shall, in cooperation with the Administrator, provide technical guidance, financial assistance and other facilities to develop a sound and stable co-operative movement in the Philippines.

As used in this Act and unless a different meaning is intended in the context

Upon the approval of this Act, all references to existing laws affecting non-agricultural co-operatives shall be construed as references to this Act, and no proceedings instituted and pending or anything done shall be deemed to have been invalid on the ground that such laws did not refer to this Act.

Upon recommendation of the Administrator, the Secretary of Commerce and Industry may, by regulation to be published in the Official Gazette, exempt any co-operative or type of co-operatives from any of the provisions of this Act, or may direct that such provisions shall apply to such co-operative or type of co-operatives with such modifications as may be specified in the regulation: Provided, however, That no regulation shall be issued without giving to such co-operative or type of co-operatives an opportunity to present its case.

The provisions of the Corporation Law shall not apply to co-operatives.

CHAPTER II

Administrator

CHAPTER III

Organization and Registration

A co-operative may be registered for the mutual benefit of the members thereof, who have for their common objective any lawful purpose or purposes, on a co-operative basis, more particularly those noted hereunder

The object to every co-operative shall be to provide maximum service to its members, not to earn the most profit for its members nor to operate the business for charitable purposes.

No co-operative or method or act thereof which complies with this Act shall be deemed a conspiracy or combination in restraint of trade or an illegal monopoly, or an attempt to lessen competition or fix prices arbitrarily in violation of any of the laws of the Philippines.

Fifteen or more persons, citizens of the Philippines who are either ultimate consumers or primary producers and residing in the proposed area of operation of a co-operative, may organize a co-operative under this Act: Provided, That two or more co-operatives may unite to organize a federation of co-operatives.

Every group of persons or co-operatives contemplating the organization of a co-operative under this Act, shall undertake a survey to draw up a program of activities, indicating the area of operation, the field of membership initial and potential and other data as may be required by the Administrator to enable him to determine the economic need and the advisability for registering the proposed co-operative. Such group of persons or cooperatives may thereupon apply to the Administrator for the registration of the co-operative.

Subject to the provisions of this Act and of regulations issued pursuant hereunder, a co-operative which has as its purposes one or more of those specified in section nine may be registered under this Act, with or without limited liability: Provided, That the liability of a co-operative which has a co-operative as a member shall be limited.

The Administrator shall decide all questions as to whether the articles of incorporation and the by-laws comply with the provisions of this Act and the regulations and whether the purposes of the proposed co-operatives are in accordance with section nine.

iii) the purposes for which the loans may be granted,

A certificate of registration signed by the Administrator under his official seal shall be conclusive evidence that the co-operative therein mentioned is duly registered unless it is proven that the registration of the co-operative has been cancelled.

A co-operative may, subject to the provisions of this Act and to any regulations made in this behalf, change its liability by amending its articles of incorporation and by-laws, provided that:

Any co-operative registered under this Act may, by a resolution approved by a vote of three-fourths of the members present and eligible to vote at a general assembly specifically convened for the purpose, resolve to divide itself into two or more co-operatives. The procedure for such division shall be prescribed in the regulations. The new co-operatives shall become legally established upon registration by the Administrator.

CHAPTER IV

Membership

In case membership is refused or denied by the board of directors, an appeal may be made to the general assembly of the co-operative, the decision of which shall be final.

A statement of assets and liabilities duly certified to be correct and true, in such form as may be prescribed, shall be furnished under oath:

The liability of a past member for the debts incurred by a co-operative as they existed at the date of his ceasing to be a member shall continue for a period of two years from the said date.

Provided, That the member against whom the charges are to be preferred shall be informed thereof in writing at least ten days in advance of the assembly and shall be given an opportunity to be heard in the said assembly.

A member of a co-operative may nominate a person in whose favor the co-operative shall dispose of the share or interest of such member on his death without prejudice to the rights of other persons as provided under existing laws affecting the estate of a deceased person. The nominated beneficiary of the deceased member may apply for membership and pay the required entrance fee, but the board of directors shall have the right to approve or reject the said application. If the application is rejected the co-operative shall return his entrance fee and repurchase his shares or interest, provided that the latter can be done without jeopardizing the solvency of the co-operative. In case the co-operative cannot do so upon request, the beneficiary shall have the right to dispose of the share or interest to any person who is acceptable as a member to the board of directors of the said co-operative.

All sums calculated in accordance with the regulations and by-laws to be due from a co-operative to a withdrawing member, shall be paid to him either by the co-operative or by the approved transferee, as the case may be, in accordance with this Act.

All payments and transfers made by a co-operative in accordance with this Act shall be valid and effectual against any demand made upon the co-operative by any other person.

CHAPTER V

Administration

Subject to the provisions of this Act and the regulations, the final authority in every co-operative shall be vested in the general assembly of the members or the delegates of such members elected in the prescribed manner and assembled in a general meeting.

The members' annual general assembly shall be composed of such members as are entitled to vote under the regulations and the by-laws, and when lawfully constituted, shall represent all the members. The annual general assembly shall be called by the board of directors and shall be held at least once each year within ninety days after the close of each fiscal year. The regulations shall prescribed the procedure and method of calling, holding, time, place and quorum requirement of, election and the business to be transacted in the annual general assemblies.

A special general assembly may be called at any time by a majority of the board of directors and such an assembly shall be called by the board of directors within one month after receipt of a request in writing from at least ten per centum of the total members or the Administrator or his duly authorized agent, or the federation of co-operatives of which it is a member to transact specific business covered by the call. The regulations shall prescribe the procedure and the method of calling and holding and quorum requirement of special general assemblies.

If a co-operative has provided for voting by mail, the votes cast by the members shall be deemed to include the votes cast by mail.

A co-operative shall be managed by a board of not less than five nor more than fifteen directors elected by the general assembly for a term fixed in the by-laws but not exceeding two years and shall hold office until their successors are elected and have qualified or until removed. The by-laws may provide for a method of allocating the number of directors among the units of membership into which the co-operative may be divided, and for the election of directors by the respective units to which they are allocated. The procedure for the election of directors, officers and committee members together with the method of calling and holding of the meetings may be prescribed in the regulations.

An elective officer or committee member may be removed by a vote of the majority of the members entitled to vote at an annual or special general assembly. The person involved shall have an opportunity to be heard at said assembly.

When a vacancy in the board of directors occurs other than by expiration of term, the remaining members of the board, by a majority vote, shall fill the vacancy, unless the by-laws provide for an election of directors by units of members. In such case, the board of directors shall immediately call a special general assembly of the members entitled to vote in that unit of membership to fill the vacancy.

No director, officer, committee member or employee, during the term of his office, shall be a party to a contract for profit with the co-operative. However, contracts that may be entered into by the members with the co-operatives, may be entered into by the same director, officer or committee member or employee.

A co-operative shall have the following officers: a president, one or more vice-presidents, a secretary and a treasurer, or a secretary-treasurer. The officers shall be elected annually by the directors unless the by-laws otherwise provide. The president and at least one vice-president must be directors, but no other officer need necessarily be a director.

The duties and responsibilities of directors, officers and committee members shall be as prescribed in the regulations and the by-laws of a co-operative.

The directors and committee members shall, in the discharge of their respective duties, be personally responsible, jointly and severally, for any transaction, act or omission made in violation of law, the regulations, the by-laws, the resolution of the general assemblies or the rules of the co-operative except those who entered a protest at the time when such transaction, act or omission was acted upon.

A co-operative may, subject to regulations, provide a fair remuneration for the time actually spent by its directors, committee members and officers in its service.

Subject to the regulations, the Administrator shall, so far as is necessary to carry out the purposes of this Act, have the following administrative powers:

When the general assembly fails to decide on the amendment, either for or against, he may register such amendment and issue by registered post to the co-operative a certified copy which shall be conclusive evidence that the amendment has been duly registered and such amendment shall be binding on all the members of such co-operative;

iii) When two-thirds in value of the obligation or liability fixed in the compromise or arrangement is paid by the co-operative or the liquidator thereof, the compromise or arrangement may be revised at the instance of the parties concerned or the Administrator;

CHAPTER VI

Duties, responsibilities and privileges of co-operatives

Every co-operative shall have an official postal address registered with the Administrator in accordance with the regulations, to which all notices and communications shall be sent, and shall send to the Administrator notice of every change thereof.

Every co-operative shall keep open to its members and representatives of the Co-operatives Administration Office for inspection free of charge at all reasonable times at its official address:

The president of a co-operative shall cause the up-to-date keeping of books, records and accounts in the manner prescribed by the regulations and shall be responsible for the production of the same at the time of audit, inspection and inquiry. All the books, records and accounts so kept shall not be removed outside of the headquarters of a co-operative, except upon orders of courts or of the Administrator.

Each co-operative shall maintain records and accounts in such a manner that the true and correct condition and the results of the operation of the business of the co-operative may be ascertained therefrom at any time, and the financial statements, audited according to regulations, shall be annually published in the prescribed manner.

If the co-operative fails to file the report within thirty days from the receipt of such notice, any member of the co-operative may, or the provincial or city fiscal of the province or city where the principal office of the co-operative is located shall, upon request made in writing by the Administrator, petition the court for mandamus to compel the co-operative and its officers to file such report and require the co-operative or the officers at fault to pay all the expenses of the proceeding, including counsel fees when the filing is made by a member.

Every director, officer and employee handling funds, securities or property on behalf of any co-operative shall, subject to regulations, execute and deliver adequate bonds for the faithful performance of his duties and obligations.

A co-operative shall receive deposits and loans from members only to such extent and under such conditions as may be prescribed by the regulations and the by-laws.

Subject to the restrictions that may be imposed by the Administrator, a co-operative shall make loans only to its members and not in excess of either the maximum or of the normal credit determined by the co-operative for that member in accordance with the regulations whichever may be prescribed. Nonmembers may obtain loans on the deposits they hold in the co-operative.

Subject to the provision of Sections fifty-six and fifty-seven, a co-operative shall not transact business with nonmembers to exceed that done with members.

A co-operative after registration under this Act shall be a body corporate by the name under which it is registered till the registration is cancelled, with perpetual succession and a common seal and with power to hold property, to enter into contracts, to institute and defend suits and other legal proceedings and to do all things necessary for the purposes of its constitution.

Agreements with members for deductions from salary to meet claims of co-operative permitted. (1) A member of a co-operative may, notwithstanding the provisions of existing laws, execute an agreement in favor of the co-operative authorizing his employer to deduct from the salary or wages payable to him by the employer such amount as may be specified in the agreement and to pay the amount so deducted to the co-operative in satisfaction of any debt or other demand owing from the member to the co-operative.

A co-operative shall have an absolute lien upon the capital, deposits or interest of a member or past member for any debt or demand due to a co-operative from such a member, either as a principal or as a surety, and may set off any sum credited or payable to a member or past member in or towards payment of any such debt or demand.

Any register or list of members or shares kept by any registered co-operative shall be prima facie evidence of the following particulars entered therein:

Co-operatives registered under this Act shall, notwithstanding the provisions of existing law to the contrary, enjoy the following exemptions:

Co-operatives registered under this Act shall, notwithstanding the provisions of any law, be accorded also the following privileges:

CHAPTER VII

Capital, property and funds

The capitalization of co-operatives and the accounting therefor shall be governed by the provisions of this Act and the regulations issued hereunder.

Co-operatives registered under this Act may, subject to the regulations derive funds from:

No member of a co-operative other than a co-operative or the Government of the Philippines or any of its subdivisions shall, unless expressly authorized in writing by the Administrator in special circumstances, own or hold more than five thousand pesos worth of shares or twenty per centum of the subscribed share capital of the co-operative as may be prescribed by the regulations.

Interest on share capital shall not exceed eight per centum per annum upon the fully paid-up shares and such interest shall be non-commutative.

Subject to the provisions of section seventy, a member shall not transfer any share held by him or his interest in the co-operative or any part thereof unless:

The term "share" refers to a unit of capital, the par value of which may be fixed at any figure of not less than one peso. The share capital of a co-operative with capital stock is the money paid or authorized or required to be paid for conducting its operations, whereas the share capital of a co-operative without capital stock is the money pair or required to be paid and is not limited by any authorized amount. The method of issuing and the contents of stock or membership certificates may be prescribed in the regulations.

The by-laws of a co-operative may prescribed interest or fine on unpaid capital contribution.

A co-operative may, by resolution of the members of a general assembly recall the holdings of any member in excess of the amount requisite for membership: Provided, That no purchase shall be made when the debts of the co-operative exceed fifty per centum of the assets thereof. All shares that shall be purchased under sections thirty-one, thirty-two, seventy-two and seventy five shall be reissued or cancelled.

The general assembly of members of any co-operative may by a majority vote decide to raise a revolving capital to strengthen the capital structure of their co-operative by deferring the payment of patronage refunds or by the authorized deduction if a percentage from the proceeds of products sold or per unit of product handled. The board of directors shall issue revolving-fund certificates with serial number, name, and amount and shall distinctly set forth that the time of retirement of such certificates and the amounts to be returned are at the discretion of the directors. The rate of interest to be paid on capital raised by this method shall not exceed five per centum per annum.

CHAPTER VIII

Allocation and distribution of savings

Notwithstanding the provisions of existing laws or other regulations, the computation of savings for co-operatives shall be as may be prescribed in the regulations. Every co-operative shall compute the savings at least once at the close of every business year and at such other time as may be prescribed by the Administrator.

The net savings shall not be construed as profit but shall be construed as excess payments made by patrons which shall be deemed to have been returned to them if the net savings are distributed as prescribed in section eighty-one, eighty-two, eighty-three, eighty-four and eighty-five.

Whenever the reserve fund does not equal the subscribed capital, it shall be replenished by regular appropriations in such amounts or in such percentages required to equal the subscribed capital;

If the members do not meet or cannot decide upon the disposal of the reserve fund, the Administrator shall dispose of it in accordance with the purpose of this subsection.

The general assembly of the members of a co-operative may set aside a land and building fund, community development fund and any other necessary fund the total of which may not exceed ten per centum of the net savings of each year.

The sums allocated for patronage refunds shall be distributed at the same rate to all patrons of the co-operative in proportion to their individual patronage: Provided, That:

When a sum equal to this amount has accumulated at any time within a period of time specified in the by-laws, such patron shall be deemed and become a member of the co-operative if he so agrees or requests and complies with the provisions of the by-laws for admission to membership; and

CHAPTER IX

Audit, inquiry and inspection

If at the time of audit the accounts of a co-operative are not complete, the Administrator or his duly authorized representative may cause the accounts to be written up at the expense of the co-operative or the employees, as he deems fit.

The auditor shall, on such date as may be prescribed, submit to the co-operative and to the Administrator an audit report in the prescribed form and manner, including a statement of:

If the result of audit under Section eighty-six or an inquiry under Section ninety or an inspection under Section ninety-one discloses any defects or irregularities in the working of a co-operative, the Administrator shall bring such defects or irregularities to the notice of the co-operative, and if the co-operative is a member of a federation of co-operatives to the notice of it, and shall afford them an opportunity of explaining such defects or irregularities pointed out in audit, inquiry or inspection, and thereafter if the co-operative or its proper officers or the federation of co-operatives fail to remedy such defects or irregularities, then the Administrator may proceed to take action as provided under Section ninety-four.

CHAPTER X

Supersession

CHAPTER XI

Liquidation and arbitration

iii) has paid in capital below that prescribed in this Act or the regulations; or

vii) has persistently neglected orders duly issued under the provisions of this Act, the regulations or the by-laws; or

viii) has not been able to be traced and no member, depositor, creditor and others with interest in it fail to show cause within one year after due notice has been given in the prescribed manner; or

When an order is issued under Section ninety-five for the winding up of the affairs of a co-operative, the Administrator shall, the provisions of the Rules of Court or of any law to the contrary notwithstanding, appoint a competent person or persons to be liquidator of the co-operative and such other assistance and may retain such of the officers or employees of the co-operative as he deems necessary and fix their remuneration to be paid out of the funds of the co-operative. He may remove any such person and appoint another in his place.

Provided, That the liquidator shall not determine the contribution, debt or dues to be recorded from any person unless an opportunity has been given to such person to answer the claim.

Save in so far as is expressly provided in this Act no court shall take cognizance of any civil matter connected with the liquidation or dissolution of a co-operative under this Act and when a liquidation order has been made no suit or other legal proceeding shall lie or be proceeded with against the co-operative except by leave of the Administrator and subject to such terms as he may impose.

Notwithstanding the provisions of section twenty-nine, when a co-operative is directed to be liquidated under Section ninety-five, the liability of a past member and the estate of a deceased member of the co-operative, as it existed on the date of the winding up order, shall continue until all the liabilities of the co-operative are settled.

A controversy shall include claims by a co-operative for debts or demands due from persons noted under this subsection whether such debts or demands be admitted or not.

Provide, That if the controversy between parties is one involving complicated questions of law and fact, the Administrator may, if he thinks fit, suspend the proceedings and advise the parties to file a regular suit in a court having jurisdiction. If no proceedings are instituted by either of the parties within six months from the date of such advice, the Administrator shall decide the controversy himself.

Notwithstanding the provisions on arbitration, the Administrator may, on his own initiative or on the written request of his assistants appointed under Section eight hereof, or of a co-operative or of a federation of co-operatives for the recovery of any loan or amount due by a defaulting member, after due inquiry, make an award directing payment by such member of the amount found to be due.

The Administrator, subject to any restrictions prescribed in the regulations, the auditor under section eighty-six, the liquidator under section ninety-six the arbitrator under section one hundred one, the person appointed under section ninety-four or any person conducting an inquiry under section ninety, or an inspection under section ninety-one, shall at all reasonable times have free access to the books, accounts, vouchers, documents, securities, cash and other properties belonging to or in the custody of a co-operative and shall, in so far as is necessary for carrying out of any of the purposes of this Act, have power to summon and enforce attendance of witnesses and parties concerned who, he has reason to believe, can give valuable information in regard to any transaction of the co-operative or the management of its affairs and to compel them to give evidence upon oath and to compel the production of any books, accounts, vouchers, documents, securities, cash and other properties relating to the affairs of the co-operative at any place at the headquarters of the co-operative or at the office of the Administrator, by the same means and, as far as possible, in the same manner as that provided for the courts in civil cases.

CHAPTER XII

Surcharge and attachment of property

When in the course of an audit under section eighty-six, or an inquiry under section ninety or an inspection under section ninety-one, or the liquidation of a co-operative, it appears that any person who has taken part in the organization or management of the co-operative or any past or present officer, director or committee member of the co-operative has at any time after the effectivity of this Act and within a period of four years prior to the date of such audit, inquiry, inspection or winding up, as the case may be, or within two years of the date on which it comes to the notice of the Administrator, whichever is earlier:

Whenever it shall appear to the Administrator that any person or co-operative with intent to defeat or delay the execution of any order that may be issued under Chapters XI, XII or XIV

CHAPTER XIII

Regulations

The Administrator, subject to the previous approval of the Secretary of Commerce and Industry, shall prescribe the necessary regulations to carry out the provisions of this Act. Such regulations shall be published in the Official Gazette before they become effective.

CHAPTER XIV

Offenses and penalties

shall, upon conviction be punished by fine of not less than fifty pesos nor more than five hundred pesos, in the discretion of the court, without prejudice to other legal remedies.

Notwithstanding the provisions of this Act, where a co-operative or a person required to take action under this Act, under the regulations or the by-laws and such action is not taken

Where it appears to the Administrator, that any person has contravened the provisions of this Act, the regulations or the by-laws

the Administrator may apply to the court for an order, which shall after affording such person an opportunity to be heard, directing such person to pay to the assets of the co-operative by way of penalty such sum as the court deems fit in respect of every such contravention.

Any member or past member, or the heir or legal representative of a deceased member who, in violation of the provisions or section sixty-one, fraudulently disposes of any property over which a co-operative has charge under that section or doing any other act and to the prejudice of such charge, shall, in addition to other legal remedies, be punished by a fine of not exceeding five hundred pesos in the discretion of the court after hearing the party concerned.

No prosecution for offenses under sections one hundred seven, one hundred eight, one hundred nine, one hundred ten and one hundred eleven of this Act shall be lodged without the previous written sanction of the Administrator, who shall not give sanction until after hearing the party concerned: Provided, That if the offenses constitute criminal acts punishable under the Revised Penal Code, the same may be prosecuted even without the previous sanction of the Administrator.

CHAPTER XV

Special Provisions relating to co-operative banks

The special provisions under this Chapter are applicable only to co-operative banks registered under this Act and the other provisions of this Act will apply to them only in so far as they are not against the express provisions contained in this Chapter.

As used in this Act, unless a different meaning is intended in the context

No co-operative bank shall be registered by the Administrator unless the articles of incorporation and the by-laws of such bank have been approved by the Secretary of Commerce and Industry and the Central Bank of the Philippines and the co-operative bank satisfies all the provisions for registration of federations of co-operatives. There may be registered one co-operative bank at the national level to serve as the chief bank for non-agricultural and other types of co-operatives together with their federations, and one Provincial Co-operative Bank in each province.

The co-operative bank at the national level may be known as "The Philippine National Co-operative Bank." The co-operative banks at the provincial level may be known as "The Provincial Co-operative Bank" and shall include in their names the name of the province for which they are registered. The jurisdiction of the Philippine National Co-operative Bank may extend to the entire country with its headquarters at Manila while the jurisdiction of the provincial co-operative banks may extend to the province for which each one is registered unless necessary sanction is obtained under subsection (3) of section twenty-five of this Act and their headquarters shall be in the capital or any city of the province concerned as determined by the Administrator.

Membership of co-operative banks may include co-operatives, federations of co-operatives and individual members who join in the articles of incorporation of the co-operative bank and co-operatives, federations of co-operatives and individual members admitted to membership by the board of directors of such bank after registration. Affiliated co-operatives shall be known as class "A" members and individual members shall be known as class "B" members.

The general assembly of every co-operative bank shall elect a board of directors, whose number and proportionate representation between class "A" and class "B" members shall be determined from time to time by the Secretary of Commerce and Industry in the regulations or by special order in writing, but in no case shall the directors representing the class "B" members be more than one third of the entire board of directors. Each class of members shall exercise their right to elect their share of representatives in the board of directors. The President, Secretary, Treasurer and Manager of every co-operative bank shall be appointed, their salaries determined and paid by the Secretary of Commerce and Industry in consultation with the board of directors of the co-operative bank concerned and the Administrator, until such time as, but not earlier than five years after registration of, the co-operative bank concerned, through a resolution of its general assembly, expresses to the Secretary of Commerce and Industry that it can elect or appoint, as the case may be, all or any of the said persons and pay their or his salary out of its fund without jeopardizing the co-operative bank's financial stability and thereafter the Secretary of Commerce and Industry shall withdraw all or any of the persons appointed by him and requested to be withdrawn by the co-operative bank and allow the co-operative bank to fill in the post according to its by-laws. The persons appointed by the Secretary of Commerce and Industry and the Administrator or his representative shall be ex officio directors of the board and ex officio members of the executive committee, if any, created. The president shall be the chairman of the general assembly, board and the executive committee.

The board of directors shall not recommend a budget to the general assembly nor shall the general assembly approve a budget which shall involve an expenditure exceeding such percentage of the gross earnings of the previous year or the anticipated realizable gross earnings of the next year whichever is lower as shall be determined by the Administrator and the Central Bank of the Philippines.

All loans which shall be granted by the co-operative banks to the affiliated co-operatives shall be for short and intermediate terms, the former not to exceed a maximum period of fifteen months and the latter not to exceed a maximum period of three years and shall be brought to the notice of the Administrator, except loans on investments held or deposited by the affiliated co-operatives in the co-operative banks. Loans which are declared to be risky by the Administrator shall not be granted by the board of directors of the co-operative banks. Class "B" members shall not be eligible for loans except on deposits they hold in the co-operative banks and other securities that may be approved by the board of directors.

The co-operative banks registered under this Act shall submit to the supervision of the Administrator so far as the provisions of this Act are concerned and the Monetary Board of the Philippines on banking transactions so far as the supervision of the Monetary Board of the Philippines is not inconsistent with the provisions of this Act.

Subject to the provisions of Section eighty-six the general assembly of every co-operative bank shall also make separate arrangement for audit of their accounts and shall appoint an auditor to audit the accounts of the bank and to submit report to the board of directors and the general assembly as often as is required by them.

The provisions under Chapter VIII Allocation and Distribution of savings of this Act shall apply to the distribution of savings of co-operative banks except that the Reserve Fund to be set apart shall at least be twenty-five per cent of the net saving and the general assembly shall decide whether to allow patronage refund or not; and if to be allowed, the amount to be utilized for patronage refund.

In addition to the privileges granted in Chapter VI, the co-operative banks shall be granted the following privileges:

CHAPTER XVI

Special provisions relating to co-operative wholesale societies

The special provisions under this Chapter are applicable only to co-operative wholesale societies registered under this Act and the other provisions of this Act will apply to them only in so far as they are not against the express provisions contained in this Chapter.

No co-operative wholesale society shall be registered by the Administrator, unless the articles of incorporation and the by-laws of such co-operative wholesale society have been approved by the Secretary of Commerce and Industry and the co-operative wholesale society satisfies all the provisions for registration of federations of co-operatives. There may be registered one co-operative wholesale society at the national level to serve as the chief source of supply and marketing of goods required and produced by the affiliated co-operatives and one provincial co-operative wholesale society in each province.

The co-operative wholesale society at the National level may be known as "The Philippine Co-operative Wholesale Society" with its jurisdiction all over the country and headquarters at Manila. The co-operative wholesale societies at the provincial level may be known as "The Provincial Co-operative Wholesale Society" and shall include in their names the name of the province for which they are registered. The jurisdiction of the provincial co-operative wholesale societies shall extend to the province for which each one is registered unless necessary sanction is obtained under subsection (3) of Section twenty five of this Act and their headquarters shall be in the capital or any city of the province concerned as determined by the Administrator.

Membership of co-operative wholesale societies may consist of consumers and producers co-operatives together with their federations and retailers or their associations or corporations and shall include all those of the above description who join in the articles of incorporation of any co-operative wholesale society and all those of the above description admitted to membership by the board of directors of such co-operative wholesale society after registration. Affiliated co-operatives shall be known as class "A" members and retailers and their associations or corporations shall be known as class "B" members.

Each member attending the general assembly shall have one vote as a member and shall have as many votes in addition according to the scale to be prescribed in the by-laws, giving weight for the business done with the co-operative wholesale society concerned.

The general assembly of every co-operative wholesale society shall elect a board of directors, whose number and proportionate representation between class "A" and class "B" members shall be determined from time to time by the Secretary of Commerce and Industry in the regulations or by special order in writing. Each class of members shall exercise their right to elect their share of representatives in the board of directors. The President, Secretary, Treasurer and Manager of every co-operative wholesale society shall be appointed, their salaries determined and paid by the Philippine Government in consultation with the board of directors of the co-operative wholesale society concerned and the Administrator, until such time as, but not earlier than five years after registration of, the co-operative wholesale society concerned through a resolution of its general assembly, express to the Secretary of Commerce and Industry that it can elect or appoint, as the case may be, all or any of the said persons and pay their or his salary out of its fund without jeopardizing its financial stability and thereafter the Secretary of Commerce and Industry shall withdraw all or any of the persons appointed by him and requested to be withdrawn by the co-operative wholesale society and allow the co-operative wholesale society to fill in the post according to its by-laws. The persons appointed by the Secretary of Commerce and Industry, the Administrator or his representative and the General Manager of the National Marketing Corporation or his representative so long as the National Marketing Corporation exists, shall be ex officio directors of the board and ex officio members of the Executive committee, if any, created. The President shall be the chairman of the general assembly, board and the executive committee.

The Manager of the co-operative wholesale society shall be responsible for the day-to-day management of the business in accordance with the decisions of the board and the executive committee. The duties of the manager shall be specified in the by-laws of every co-operative wholesale society.

The board of directors shall not recommend a budget to the general assembly nor shall the general assembly approve a budget which shall involve an expenditure exceeding such percentage of the gross earnings of the previous year or the anticipated realizable gross earnings of the next year whichever is lower as shall be determined by the Administrator.

Subject to the regulations, the general assembly shall fix a maximum limit of borrowings for each year. As far as possible, all the banking transactions shall be done with the co-operative banks.

All sales to members shall be on cash basis: Provided, however, That the members may order supplies on indent basis with a deposit of a percentage of the value as determined by the board of directors at the time of order and payment of the balance on delivery: Provided, further, That when a member refuses to receive and pay for the supplies after order, the said deposit may be forfeited in whole or in part at the discretion of the board.

The Government of the Philippines through any of its agencies may provide long term loans to any or all co-operative wholesale societies or authorize them issue debentures to finance the building of warehouses, provided that such co-operative wholesale societies finance at least twenty per centum of the cost of the warehouse. The security for the loans or the debentures shall be the warehouse built.

Subject to the provisions of Section eighty six the general assembly of every co-operative wholesale society shall also make separate arrangement for audit of their accounts and shall appoint an auditor to audit the accounts of the co-operative wholesale society and to submit report to the board of directors and the general assembly as often as in required by them.

The provisions under Chapter VIII Allocation and Distribution of Savings of this Act shall apply to the distribution of savings of co-operative wholesale societies except that the Reserve Fund to be set aside shall at least be twenty-five per cent of the net savings.

Subject to the provisions of Chapter XI, every co-operative wholesale society shall seek liquidation when one half of its paid-capital has been lost. The Philippine Government shall have first charge on the assets of the co-operative wholesale society under liquidation.

In addition to the privileges granted in Chapter VI, the co-operative wholesale societies shall be granted the following privileges:

CHAPTER XVII

Miscellaneous

Every order issued for the recovery of any sum granted or transferred under this Act in respect of which no specific mode of recovery is provided, shall, if not carried out, on a certificate signed by the Administrator or liquidator which shall be deemed as a decree of court, be executed by any court having jurisdiction in the same manner as a decree of such court, or on a certificate signed by the Administrator and forwarded to the Collector of Internal Revenue who shall proceed to recover the amount in the same manner as if it were an arrears of internal revenue and the collection handed over to the Administrator for disposal to the proper authority, provided that all sums due from a co-operative to the Government or otherwise recoverable from a co-operative may be recovered firstly, from the property of the co-operative; secondly, in the case of a co-operative with limited liability from the members, past members, estates of deceased members or their sureties subject to the limit of their liability and thirdly, in the case of other co-operatives from the members, past members or estates of deceased members or their sureties to such extent or in such proportion as may be determined by the Administrator.

Every order issued under Chapters IX, XI and XII, in addition to any other method of enforcement under this Act, shall be submitted to a court of competent jurisdiction for approval and enforcement as in any ordinary case.

The Administrator shall maintain a register wherein he shall chronologically note every co-operative registered or cancelled under this Act together with information required under Section sixteen and any other information considered useful by him. He shall publish every year a list of co-operatives in existence, under dissolution and whose registration is cancelled during the year together with such information on each of them as may be prescribed in the regulations.

No suit shall be instituted against a co-operative or persons representing it in respect of any act touching the business of the co-operative until the expiration of two months after notice in writing has been delivered to the Administrator, stating the cause of action, the name and postal address of the person giving notice and the relief he claims, together with a statement that such notice has been delivered.

Any private transfer or delivery of, or encumbrance or charge in, property made or created after the issue of the certificate of the Administrator or liquidator, as the case may be, under section one hundred forty-four shall be null and void as against the co-operative on whose application the said certificate was issued.

The composition of the board of directors of the National Co-operative Union shall be such as to consist of all interest representing the Co-operative Movement and the Government of the Philippines.

Provided, That, before any order is made under subsections (1) and (2) the Secretary of Commerce and Industry or the Administrator, as the case may be, shall afford to any person, likely to be affected adversely by such order, an opportunity to be heard.

All acts, executive orders, rules and regulations or parts thereof in conflict with the provisions of this Act, are repealed. If any provision of this Act shall be held invalid the remainder shall not be affected thereby.

To carry out the provisions of this Act, there is hereby authorized to be appropriated, out of any funds in the National Treasury not otherwise appropriated, the sum fifty million pesos (P50,000,000.00), which shall be known as the Non-Agricultural Co-operative Fund: Provided, however, That of the said sum, two million two hundred fifty thousand pesos (P2,250,00) shall be made immediately available from the proceeds of the bonds authorized to be issued under Republic Act Numbered One Thousand for the following purposes:

The Administrator, through the Secretary of Commerce and Industry, shall submit to Congress copy of the rules and regulations promulgated by him in accordance with the provisions of this Act, as well as an annual report of the nonagricultural co-operatives program established under this Act.

This Act shall take effect upon its approval.