STRENGTHENING THE COOPERATIVE MOVEMENT

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. — 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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.