“ART. 66.

Involuntary Dissolution
A cooperative may be dissolved by order
of a competent court after due hearing on
the ground of:

“(1) Violation of any law, regulation or

provisions of its bylaws; or

“(2) Insolvency.
 “ART. 67. Dissolution by Order of the Authority.
The Authority may suspend or revoke,
after due notice and hearing, the
certificate of registration of a cooperative
on any of the following grounds:

“(1) Having obtain its registration by fraud;

“(2) Existing for an illegal purpose:

“(3) Willful violation, despite notice by
the Authority, of the provisions of this
Code or its bylaws;

“(4) Willful failure to operate on a

cooperative basis; and

“(5) Failure to meet the required

minimum number of members in the
cooperative.
 “ART. 68. Dissolution by Failure to organize and
operate.
if a cooperative has not commenced business and
its operation within two (2) years after the issuance
of its certificate of registration or has not carried
on its business for two (2) consecutive years, the
Authority shall send a formal notice to the said
cooperative to show cause as to its failure to
operate. Failure of the cooperative to promptly
provide justifiable cause for its failure to operate
shall warrant the Authority to delete it name from
the roster of registered cooperative and shall be
deemed dissolved.
 ART. 69. Liquidation of a Cooperative.
Every cooperative whose charter expires by its own
limitation or whose existence is terminated by
voluntary dissolution or through an appropriate
judicial proceeding shall nevertheless continue to
exist for three (3) years after the time it is
dissolved; not to continue the business for which it
was established but for the purpose of prosecuting
and defending suits by or against it; settlement and
closure of its affairs; disposition, conveyance and
distribution of its properties and assets.
"At any time during the said three (3) years, the cooperative
is authorized and empowered to convey all of its properties
to trustees for the benefit of its members, creditors and
other persons in interest. From and after any such
conveyance, all interests which the cooperative had in the
properties are terminated.

"Upon the winding up of the cooperative affairs, any asset

distributable to any creditor, shareholder or member who is
unknown or cannot be found shall be given to the federation
or union to which the cooperative is affiliated with.

"A cooperative shall only distribute its assets or properties

upon lawful dissolution and after payment of all its debts and
liabilities, except in the case of decrease of share capital of
the cooperative and as otherwise allowed by this Code.
 "ART. 70. Rules and Regulations on Liquidation

The Authority shall issue the appropriate

implementing guidelines for the liquidation of
cooperatives."

Sec. 8. Articles 72, 73, 74, 75, 76, 77, 78, 79 and 80 of
Chapter VIII on Capital, Property, and Funds of the same
Code are hereby renumbered and amended to read, as
follows:
 CHAPTER VIII
CAPITAL, PROPERTY, AND FUNDS
"ART. 71. Capital
The capitalization of cooperatives and the accounting
procedures shall be governed by the provisions of this
Code and the regulations which shall be issued.

"ART. 72. Capital Sources

Cooperatives registered under this Code may derive
their capital from any or all of the following sources:
"(1) Member's share capital;

"(2) Loans and barrowings including deposits;

"(3) Revolving capital which consists of the deferred payment of

patronage refunds, or interest on share capital; and

"(4) Subsidies, donations, legacies, grants, aids and such other

assistance from any local or foreign institution whether public or
private: Provided, That capital coming from such subsides,
donations, legacies, grants, aids and other assistance shall not
be divided into individual share capital holdings at any time but
shall instead form part of the donated capital or fund of the
cooperative.

"Upon dissolution, such donated capital shall be subject to

escheat.
 "ART. 73. Limitation on Share Capital Holdings
No member of primary cooperative other than cooperative
itself shall own or hold more than ten per centum (10%) of
the share capital of the cooperative.

"Where a member of cooperative dies, his heir shall be

entitled to the shares of the decedent: Provided, That the
total share holding of the heir does not exceed ten per
centum (10%) of the share capital of the cooperative;
Provided, further, That the heir qualify and is admitted as
members of the cooperative: Provided finally , That where
the heir fails to qualify as a member or where his total share
holding exceeds ten per centum (10%) of the share capital ,
the share or shares excess will revert to the cooperative
upon payment to the heir of the value of such shares.
 "ART. 74. Assignment of Share Capital Contribution or
Interest
Subject to the provisions of this Code, no member shall
transfer his shares or interest in the cooperative or any part
thereof unless.

"(1) He has held such share capital contribution or interest

for not less than one (1) year.

"(2) The assignment is made to the cooperative or to a

member of the cooperative or to a person who falls within
the field of the membership of the cooperative; and

"(3) The board of directors has approved such assignment.

 "ART.75. Capital Build-Up
The bylaws of every cooperative shall be provided for a
reasonable and realistic member capital build-up program to
allow the continuing growth of the members' investment in
their cooperative as their economic conditions continue to
improve.

"ART.76. Shares
The term "share" refers to a unit of capital in a primary
cooperative the par value of which may be fixed to any figure
not more than One thousand pesos (P1,000.00). The share of
capital of a cooperative is the money paid or required to be
paid for the operations of the cooperative. The method for
the issuance of share certificates shall prescribed in its
bylaws.
 "ART.77. Fines
The bylaws of a cooperative may prescribe a fine on unpaid
subscribed share capital. Provided, that such fine is fair and
reasonable under the circumstances.

"ART.78. Investment of Capital

A cooperative may invest its capital in any of the following:

"(a) In shares or debentures or securities of any other cooperative;

"(b) In any reputable bank in the locality, or any cooperative;

"(c) In securities issued or guaranteed by the Government;

"(d) In real state primarily for the use of the cooperative or its members; or

"(e) In any other manner authorized in the bylaws.

 "ART. 79. Revolving Capital
The general assembly of any cooperative may authorize
the board of directors to raise a revolving capital to
strengthen its capital structure by deferring the payment
of patronage refunds and interest on share capital or by
the authorized deduction of a percentage from the
proceeds of products sold or services rendered, or per
unit of product or services handled. The board of
directors shall issue revolving capital certificates with
serial number, name, amount, and rate of interest to be
paid and shall distinctly set forth the time of retirement
of such certificates and the amounts to be returned."
Sec. 9. Articles 81, 82, 83, 84 and 85 of Chapter IX on Audit,
Inquiry and Members' Right to Examine of the same Code are
hereby renumbered and amended to read, as follows:

"ART. 80. Annual Audit

Cooperatives registered under this Code shall be subject to an
annual financial, performance and social audit. The financial audit
shall be conducted by an external auditor who satisfies all the
following qualifications:

"(1) He is independent of the cooperative or any of its subsidiary

that he is auditing; and

"(2) He is a member in good standing of the Philippine Institute of

Certified Public Accountants (PICPA) and is accredited by both
the Board and Accountancy and the Authority.
"The social audit shall be conducted by an
independent social auditor accredited by the
Authority.

"Performance and social audit reports which contain

the findings and recommendations of the auditor
shall be submitted to the board of directors.

"The Authority, in consultation with the cooperative

sector, shall promulgate the rules and standards for
the social audit of cooperatives.
 "ART. 81. Audit Report
The auditor shall submit to the board of directors and to
the audit committee the financial audit report which
shall be in accordance with the generally accepted
auditing standards for cooperatives as jointly
promulgated by the Philippine Institute of Certified
Public Accountants (PICPA) and the Authority.

"Thereafter, the board of directors shall present the

complete audit report to the general assembly in its next
meeting.
 "ART. 82. Nonliability for Defamations
The auditor is not liable to any person in an action for
defamation based on any act, done, or any statement made
by him in good faith in connection with any matter he is
authorized or required to do pursuant to this Code.

"ART. 83. Right to Examine

A member shall have the right to examine the records
required to be kept by the cooperative under Article 52 of
this Code during reasonable hours on business days and he
may demand, in writing, for a copy of excerpts from said
records without charge except the cost of production.
"Any officer of the cooperative who shall refuse to allow
any member of the cooperative to examine and copy
excerpts from its records shall be liable to such member
for damages and shall be guilty of an offense which shall
be punishable under Article 140 of this Code: Provided,
That if such refusal is pursuant to a resolution or order
of the board of directors, the liability under this article
shall be imposed upon the directors who voted for such
refusal: Provided, further, That it shall be a defense to
any action under this article that the member demanding
to examine and copy excerpts from the cooperative
records has improperly used any information secured
through any prior examination of the records of such
cooperative or was not acting in good faith or for a
legitimate purpose in making his demand.
 "ART. 84. Safety of Records

Every cooperative shall, at its principal office, keep

and carefully preserve the records required by this
Code to be prepared and maintained. It shall take all
necessary precaution to prevent its loss, destruction
or falsification."

Sec. 10. Articles 86 and 87 of Chapter X on Allocation and

Distribution of Net Surplus of the same Code are hereby
renumbered and amended to read, as follows:
 CHAPTER X
ALLOCATION AND DISTRIBUTION OF NET SURPLUS
"ART. 85. Net Surplus
Notwithstanding the provisions of existing laws, the net
surplus of cooperatives shall be determined in accordance
with its bylaws. Every cooperative shall determine its net
surplus at the close of every fiscal year and at such other
times as may be prescribed by the bylaws.

"Any provision of law to the contrary notwithstanding, the net surplus shall not be
construed as profit but as an excess of payments made by the members for the loans
borrowed, or the goods and services availed by them from the cooperative or the
difference of the rightful amount due to the members for their products sold or
services rendered to the cooperative including other inflows of assets resulting from
its other operating activities and which shall be deemed to have been returned to
them if the same is distributed as prescribed herein.
 "ART. 86. Order of Distribution
The net surplus of every cooperative shall be distributed as follows:

"(1) An amount for the reserve fund which shall be at least ten per centum (10%)
of net surplus: Provided, That, in the first five (5) years of operation after
registration, this amount shall not be less than fifty per centum (50%) of the net
surplus:

"(a) The reserve fund shall be used for the stability of the cooperative and to
meet net losses in its operations. The general assembly may decrease the
amount allocated to the reserve fund when the reserve fund already exceeds the
share capital.

"Any sum recovered on items previously charged to the reserve fund shall be
credited to such fund.

"(b) The reserve fund shall not be utilized for investment, other than those
allowed in this Code. Such sum of the reserve fund in excess of the share capital
may be used at anytime for any project that would expand the operations of the
cooperative upon the resolution of the general assembly.
"(c) Upon the dissolution of the cooperative, the reserve fund shall not
be distributed among the members. The general assembly may resolves:

"(i) To establish a usufructuary trust fund for the benefit of any

federation or union to which the cooperative is affiliated; and

"(ii) To donate, contribute, or otherwise dispose of the amount for the

benefit of the community where the cooperative operates. If the
members cannot decide upon the disposal of the reserve fund, the same
shall go to the federation or union to which the cooperative is affiliated.

"(2) An amount for the education and training fund, shall not be more
than ten per centum (10%) of the net surplus. The bylaws may provide
that certain fees or a portion thereof be credited to such fund. The fund
shall provide for the training, development and similar other cooperative
activities geared towards the growth of the cooperative movement:
"(a) Half of the amounts transferred to the education and training fund
annually under this subsection shall be spent by the cooperative for
education and training purposes; while the other half may be remitted to a
union or federation chosen by the cooperative or of which it is a member.
The said union or federation shall submit to the Authority and to its
contributing cooperatives the following schedules:

"(i) List of cooperatives which have remitted their respective Cooperative

Education and Training Funds (CETF);

"(ii) Business consultancy assistance to include the nature and cost; and

"(iii) Other training activities undertaken specifying therein the nature,

participants and cost of each activity.

"(b) Upon the dissolution of the cooperative, the unexpended balance of

the education and training fund appertaining to the cooperative shall be
credited to the cooperative education and training fund of the chosen
union or federation.
"(3) An amount for the community development fund, which shall not be less than
three per centum (3%) of the net surplus. The community development fund shall
be used for projects or activities that will benefit the community where the
cooperative operates.

"(4) An optional fund, a land and building, and any other necessary fund the total
of which shall not exceed seven per centum (7%).

"(5) The remaining net surplus shall be made available to the members in the
form of interest on share capital not to exceed the normal rate of return our
investments and patronage refunds: Provided, That any amount remaining after
the allowable interest and the patronage refund have been deducted shall be
credited to the reserve fund.

"The sum allocated for patronage refunds shall be made available at the same
rate to all patrons of the cooperative in proportion to their individual patronage:
Provided, That:

"(a) In the case of a member patron with paid-up share capital contribution, his
proportionate amount of patronage refund shall be paid to him unless he agrees
to credit the amount to his account as additional share capital contribution;
"(b) In the case of a member patron with unpaid share capital
contribution, his proportionate amount of patronage refund shall
be credited to his account until his account until his share capital
contribution has been fully paid;

"(c) In the case of a non-member patron, his proportionate

amount of patronage refund shall be set aside in a general fund
for such patrons and shall be allocated to individual non-member
patrons only upon request and presentation of evidence of the
amount of his patronage. The amount so allocated shall be
credited to such patron toward payment of the minimum capital
contribution for membership. When a sum equal to this amount
has accumulated at any time within a period specified in the
bylaws, such patron shall be deemed and become a member of
the cooperative if he so agrees or requests and complies with the
provisions of the bylaws for admission to membership; and
"(d) If within any period of time specified in the bylaws, any
subscriber who has not fully paid his subscribed share
capital or any non-member patron who has accumulated the
sum necessary for membership but who does not request nor
agree to become a member or fails to comply with the
provisions of the bylaws for admission to membership, the
amount so accumulated or credited to their account together
with any part of the general fund for nonmember patrons
shall be credited to the reserve fund or to the education and
training fund of the cooperative, at the option of the
cooperative."
Sec. 11. Articles 88, 89, 90, 91, 92, 93, 94 and 95 of Chapter XI on the
Special Provisions Relating to Agrarian Reform Cooperatives of the
same Code are hereby renumbered retitled and amended to read, as
follows: