THIRTEENTH CONGRESS OF THE 
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‘09 
L1111. -2 
A 9 :or] 
REPUBLIC OF THE PHILIPPINES 
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First Regular Session 
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!!irtll.iVEO I) 
S E N A T E  
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Introduced by Senator Rodolfo G. Biazon 
EXPLANATORY NOTE 
While there is no sufficient data to measure exactly the impact of credit and 
savings cooperatives in our financial system, the cooperative sector as a whole has 
already been recognized as instruments for marshalling resources and energies of the less 
economically fortunate. 
Republic Act No. 6938, otherwise known as the Cooperative Code of the 
Philippines was enacted to promote and support the organization of cooperatives as 
vehicles for uplifting the lives of the masses. Likewise, Republic Act No. 6939, another 
piece of cooperative legislation, creates the Cooperative Development Authority to 
rationalize government policies and agencies with cooperative functions. 
The above said laws speak well of the principle of subsidianty and 
complementation under which the cooperative s eclor will initiate, regulate, and foster 
within its own ranks cooperative promotions, organization, training, research, 
information gathering, audit and support services, with government assistance where 
necessary. However, while the Cooperative Code already provides a special chapter on 
credit cooperatives, its provisions contain no substantial treatment of the financial service 
operations in this type of cooperative. The regulatory framework needed and the 
financial discipline required is the most important policy variables to make it conducive 
for credit and savings cooperative to grow. 
Hereunder are the main reasons for this bill, namely: 
1. The absence of a clear regulatory framework for the savings and credit 
cooperatives leads to low public confidence and trust to them (nationally, 
only an insignificant percentage of all savings are in the savings and credit 
cooperatives); 
2. There is no deposit insurance/guarantee for savings in the savings and 
credit cooperatives to protect members’ money; 
3. There is a need to promote and support stronger integration and 
networking of savings and credit cooperatives to make them more 
competitive with the major banks/financial institutions; 


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4. For the country as a whole, a stronger savings and credit cooperatives 
sector will mean higher domestic savings and more accessible and 
affordable credit and other financial services. 
This bill is a product of a number of workshops and other group processes 
conducted in several cooperative sector-led regional consultations and technical working 
group meetings. Hence, the early passage of this bill is earnestly sought. 
Senator 


THIRTEENTH CONGRESS OF THE REPUBLIC 
) 
e n 4  JUL -2 
119 :OO 
OF THE PHILIPPINES 
1 
First Regular Session 
SENATE 
Introduced by Senator Rodolfo G. Biazon 
AN ACT 
WITHIN THE COOPERATIVE SECTOR OF COOPERATIVES ENGAGED IN 
FINANCIAL, SERVICES, AND DEFINING THE RESPONSIBILITIES, POWERS AND 
FUNCTIONS 
OF 
COOPERATIVES 
AND 
COOPERATIVE 
FEDERATIONS 
ENGAGED IN SAVINGS, CREDIT AND OTHER FINANCIAL SERVICES, 
AMENDING THEREFOR REPUBLIC ACT NUMBERED 6938, OTHERWISE 
KNOWN AS THE COOPERATIVE CODE OF THE PHILIPPINES, AND REPUBLIC 
ACT NUMBERED 6939, CREATING THE COOPERATIVE DEVELOPMENT 
AUTHORITY" 
PROVIDING FOR GOVERNMENT REGULATION AND SELF-REGULATION 
Be it enacted by the Senate and the House of Representatives of the Philippines in Congress 
assembled: 
CHAPTER I 
State Policy, General Concepts and Definitions 
Article 1. Title. - This Act shall be known as the " Financial Service Cooperative Act". 
Art. 2. Coverage -This Act shall apply to all savings and credit cooperatives and financial 
service cooperatives as defined herein, including all credit cooperatives registered by the CDA 
as such under Republic Acts No. 6938 and 6939. It shall also apply to all other cooperatives, 
including multi-purpose cooperatives, that provide savings, credit or other related financial 
services to their members in so far as those savings, credit and other related financial services 
are concerned. For the purposes of this Act, cooperative banks are not included as savings and 
credit cooperatives or as financial service cooperatives or as financial service cooperative 
federations and are not covered by this Act. 
Art. 3. Declaration of Policy - 
It is the declared policy of the State to recognize and 
support cooperatives as effective vehicles for promoting self-reliance, savings and accessible 
credit and other financial services, and harnessing people power towards the attainment of 
economic development, social justice and empowerment. The state shall create an enabling 
environment for the growth and development of these cooperatives and shall allow the 
cooperative sector to undertake the actual formation, organization, training and audit and other 
support services for cooperatives. 
The State shall recognize and respect the autonomy and organizational integrity of cooperatives 
while providing appropriate regulation and supervision necessary to safeguard the members' 
interests and promote trust and confidence in cooperatives. 


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economic and social needs unite to form a financial servic 
rules of cooperative action are set out in this Act. 
Savings and credit cooperatives refer to those cooperatives 
and Five Million Pesos in paid-up share capital. Financ 
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institution whose objectives and 
that have less than 150 members 
a1 service cooperatives are those 
Sec. 2. AJinancial service cooperative federation is a legal ntity registered with the CDA the 
members of which are savings and credit cooperatives andlo, financial service cooperatives and 
other cooperatives or other federations, the objectives and 
les of cooperative action of which 
are set out in this Act, and which provide financial services 1 
o their members. Such federations 
may be organized at the local, regional or national level. In tpspct, “federations” shall refer to 
local, regional and national financial service cooperative fed rations. 
A registered cooperative union that provides financial semi es to its members shall be treated 
and shall be given two (2) years after the effectivity of this ct to change their registration with 
A registered national financial service coo erative federation must have as 
the CDA into a financial service cooperative federation. 
Sec. 3. 
members a minimum of fifty primary financial service co peratives or five local or regional 
federations: Provided, that such local or regional federations must have as members a total fifky 
or more primary financial service cooperatives. Natio al financial service cooperative 
federations are also referred to in this Act as “national federations”. 
Sec. 4. 
A national federation and its members to ether with the stabilization fund 
established at the request of the national federation as well 
any other legal person directly or 
indirectly controlled by the national federation form a netwo k. 
The Cooperative Development Authority OY t e CDA is the government agency 
Internationally accepted cooperative prin 1 
, iples shall mean the body of 
Sec. 5. 
created under Republic Act No. 6939. 
Sec. 6. 
principles adhered to worldwide by cooperatives and which e also known as the International 
The Financial Service Cooperative Commi ion or FSCC is the government 
body created under this Act to undertake’the regulation an supervision of savings and credit 
Cooperative Identity Statement. 
Sec. 7. 
cooperatives, financial service cooperatives and financial se ice cooperative federations. 
as a financial service cooperative federation under this Ac 1 immediately upon its effectivity, 
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a) The number of members is not limited; 
b) A general reserve must be provided; 
The Article of Cooperation and By-Laws of the cooperative 
by: 
or federation must be accompanied 


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federation, to the national federation that has unde 
member; and 
Sec. 4. 
Send a copy ofthe certificate to the F 
Art. 8. Name of the Cooperative or Federation - The narre 
Sec. 1. Shall not be the name of another cooperat 
approved before; 
Sec. 2. Shall n ot b e the n ame o r w ords that evoke 
expression, which belittles the cooperative or federat 
Sec. 3. Shall not falsely suggest that the cooperative 
group, or falsely suggest that the cooperative or 
partnership or group; 
Sec. 4. Shall not be misleading in any manner for thyd 
Sec. 5. The name of a cooperative or federation shell 
the following expressions: “cooperative”, “savin 
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&en to admit the cooperative as a 
CC. 
of the cooperative or federation: 
ve or federation, which has been 
an immoral, obscene or o ffensive 
on; 
or federation is a purely charitable 
federation is related to another person, 
persons; 
contain one or a combination of 
and credit cooperative”, “credit 
No legal person other than a savings and credit cooperative 
financial service cooperative or a 
financial service cooperative federation may incIude in its 
the expressions “savings and 
credit cooperative” or “credit cooperative”. No legal 
than a financial service 
cooperative or a financial service cooperative federation 
its name the expression 
The CDA shall issue the necessary rules for the 
“financial service cooperative”. 


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Sec. 1. Inform the members of the approval of it 
Laws; 
Sec. 2. Subscribe for the number of founder shares 
or, in the absence of a provision in the by-laws, for 
Sec. 3. 
Committee'in the case of a federation; 
Elect the Board of Directors, Audit and 
A cooperative must also pass a resolution ratifying the 
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Articles of Cooperation and By- 
aid qualifying shares in the by-laws 
0r.e qualifying share; 
Ethics Committee or the Ethics 
memxrship of the cooperative with the 
national financial service cooperative federation that has 
This meeting shall be called by the provisional secretary. If 
or refuses to act, the meeting shall be called by at least three 
undertaken to accept it as a member. 
the provisional secretary is unable 
founding members. 


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the FSCC. 
CHAPTER I11 
Share Capital 
Art. 13. Types of Shares - The share capital of a cooperati?e 
(1) Qualifying Shares; and 
(2) Capital Shares. 
or federation consists of: 
by the General Assembly. 
The purchase of capital share may also be done by paying it 
(1) Dividends; 
(2) Redemption or conversion of other shares; and 
(3) In accordance with a merger agreement. 
Art. 17. The cooperative or federation shall determine, 
condition and restrictions attached to each class of shares. 11 
case of a federation that is a member of a national federa.:ion, 
accordance with the standards of the national federation of 
a national federation, the determination must be in accordanae 
The Board of Directors, by resolution, and subject to the 
the c ase o f a c ooperative o r  a federation that i s a m embe:- 
FSCC in the case of a national federation, shall determine fo: 
Sec. 1. Number of authorized shares it could issue and 
Sec. 2. Number and amount that could be subscribed1 
Art. 18. The dividend payable on the capital share may no: 
by the national federation or the FSCC, whichever is lower. 
as: 
by by-laws, the rights, preferences, 
the case of a cooperative or in the 
the determination must be in 
which it is a member. In the case of 
with the standards of the FSCC. 
standards of the national federation in 
o f a national federation, and the 
each class of shares, the: 
its par value; and 
exceed the maximum determined 


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limited to the Bureau of Internal Revenue, the Social 
Customs. 
Art 19. 
qualifying shares and 
founder's shares for reimbursement in cases of 
of a cooperative or 
federation. However, deposits and other 
have to be 
In the order of priority, capital shares have 
repaid first before the capital shares are reimbursed. 
Art. 20. The Board of Directors shall determine the amoyt it shall set aside as stabilization 
reserve fund and reserves other than the general reserve fund.! 
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Security System and the Bureau of 
CHAPTERIV 
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Savings and Credit Cooperatives and Finadcia1 Service Cooperatives 
Art. 21. The purposes or objectives of a savings and cre d, 't cooperative or financial service 
Sec. 1. To receive deposits, investments and other fu ds from its members and to invest 
them for income; 
Sec. 2. In the case of a savings and credit cooperatide, to extend credit to its members; 
and, in the c ase o f a  financial s ervice c ooperative, o extend credit and s upply o ther 
financial products and services to its members and, a an ancillary activity, to any other 
person or partnership, for the benefit of its members; 
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cooperative are: 
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Sec. 3. To provide education for its members, 
and staff and to 
inform the community and the public that 
to improve 
economic conditions and social relations; and 
Sec. 4. To promote and improve cooperation 
members, the members and the 
cooperative, with other cooperatives, 
local, regional, national and 
international levels towards its programs and eventuhly towards changes for the better 
in the political, cultural, and spiritual arenas. 
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A financial service cooperative may also: 
(a) act as official depository of national agencies 
government units in the municipality, city or 
cooperative is located, subject to such guidelines 
(b) act as financial agent 
customers, shares, evidences of 
(c) make collections and p 
services for their members as are not 
business. 
of municipal, city or provincial 
ince where the financial service 
be established by the FSCC; 
and for the account of their 
of securities; and 
their financial intermediation 
and p erform such other 
In addition, a financial 
prior approval by the 
FSCC, other financial 
the following: 


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the national federation and the FSCC. 
Art. 25. Every cooperative must apply sound and prudent 
become a member of a federation to maximize its services to 
management practices. It should 
its members. 
(1) apply for membership, except in the case of a 
requirements for membership; 
(2) subscribe and pay for the number of qualifying 
or, if nor provided, one share and, in the case of a 
for the number of qualifying and founder's shares 
provided, one qualifying share; 
(3) comply with the by-laws; and 
founding member, and fulfill the 
shareis prescribed by the by-laws, 
founding member, subscribe and pay 
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prescribed in the by-laws or, if not 


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elected officer of the cooperative who becomes an associite member shall immediately be 
Art. 31. Minors and persons without the legal capacity to cdntract may only become associate 
members. Provided, That minors who are members may, ig their own right and in their own 
names, open accounts deposit funds in and withdraw from tlieir account, subject to the by-laws 
and rules of the cooperative and the national federation of dhich the cooperative is a member, 
and the rules and regulations of the FSCC, notwithstandinglthe provisions of existing laws to 
Art. 32. 
A member of a cooperative may withdraw f&om membership by requesting the 
repayment of the member's qualifying share and other shares and the withdrawal of the 
member's deposits. The member's withdrawal takes effedt upon the full repayment of the 
member's shares and deposits. 
Art. 33. Suspension and Expulsion of a Member - The board of directors may suspend or 
expel a member for: 
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deemed resigned. 
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the contrary. 
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(1) non-compliance with the by-laws of the cooperatibe; 
(2) failure to fulfill the member's financial undertaklng to the cooperative; 
(3). issuing a check with insufficient funds three cons/ecutive times; 
(4) having been absent from members' meetings three times consecutively; and 
(5) having been convicted in court for an offense in<,olving fraud and dishonesty. 
Provided that, no member may be suspended for more than six months. Provided Further that, 
suspension or expulsion can only be availed of when membe s are given due process. 
A member who is suspended loses the right to receive notic$ of, to attend or to vote at meetings 
or to hold any office of the cooperative for the duration of thp suspension. 
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B. 
GENERAL ASSE$BLY 
Art. 34. The regular members entitled to vote constitute tbe general meeting or assembly of 
the cooperative. The general assembly of the cooperrttive sh+ll be governed by the provisions of 
the Cooperative Code, the by-laws of the cooperative and the rules of the national federation to 
Provided That the cooperative must hold a special general alsembly upon the signed request of 
10% of its regular members. 
If the meeting is not called within 30 days of the request, t e national federation may call the 
meeting. Unless the members object thereto by resolution 7t the meeting, the cooperative shall 
reimburse the national federation for reasonable expenses incurred in calling the meeting. 
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which the cooperative belongs. 
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c. 
AFFILIATION I 
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Art. 35. 
Every savings and credit cooperative or finanbial service cooperative, including 
multi-purpose and other cooperatives engaged in savings,! credit and other related financial 
services must be a member of only one national financ a1 service cooperative federation. 
Membership in the national federation may be direct or may be through a federation that is in 
turn a member of the national federation. 
Provided, that all unaffiliated savings and credit cooperativ Is or financial service cooperatives, 
financial services already registered at the time this law takeb effect shall be given two (2) years 
within which to become'a member of one national federation. 
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including multi-purpose and other cooperatives engaged in 7
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savings, credit and other related 


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Provlded further, that all registered savings and credit cooperatives or financial service 
cooperatives, including multi-purpose and other cooperatives engaged in savings, credit and 
other related financial services which are members of more than one national federation shall 
be given two (2) years within which to choose one national federation of which it shall continue 
to be a member and to disaffiliate from any other national federation. Provided finally, that 
registered multi-purpose cooperatives that are covered by this Act may still affiliate wlth 
federations other than financial service cooperative federations. 
Art. 36. A cooperative which withdraws from a national federation or is expelled by a national 
federation must, within 90 days from such withdrawal or expulsion, apply for admission to 
another national federation, amalgamate or merge with another cooperative that is already 
member of a national federation or be dissolved. 
A cooperative which is a member of a national federation that is wound-up or dissolved must, 
within 90 days from notice of such winding-up or dissolution, pass a resolution to apply for 
admission to another national federation, amalgamate or merge with another cooperative that is 
already member of a national federation or be dissolved. 
A cooperative remains a member of a national federation: 
(1) until another national federation has admitted it; 
(2) until it has merged with another cooperative that is already member of a national 
federation; or 
(3) until it is dissolved. 
Art. 37. The CDA shall not accept the admission of a cooperative with another national 
federation unless the federation of which it has been a member certifies that the cooperative has 
fulfilled all its obligations toward that federation. 
D. 
MANAGEMENT AND ADMINISTRATION 
Art. 38. Apart from the general assembly of members, the principal organs of a cooperative 
are the Board of Directors and the Audit and Ethics Committee. 
Art. 39. Every regular member of a cooperative may be elected to the Board of Directors or 
the Audit and Ethics Committee, unless he or she: 
(1) has been a member for less than one year except in the case of a cooperative that is 
only two years old or less; 
(2) is an employee of the cooperative or the federation; 
(3) is a person deprived of the exercise of civil rights; an insolvent or an undischarged 
bankrupt person; and 
(4) is a person convicted of a crime with an imprisonment of six years or more 
involving fraud or dishonesty, unless the person has obtained a pardon. 
Art. 40. The term of office of a member of the Board of Directors and of the Audit and Ethics 
Committee shall be determined in the by-laws of the cooperative, but shall not in any case be 
less than two years nor more than three years. The cooperative determines, by by-law, a mode 
of rotation so that one-half or, as the case may be, one-third of the members of each of those 
organs are replaced each year, SO it will be a continuing body. Provided, that any member shall 
be qualified to be elected as a director only for three successive terms of office. Provided 
further, that upon the expiry o f t  he term of o ffice of the director o r  officer, h e  or she shall 
remain in office until reelected or until a successor has been validly elected or appointed, 


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Art. 41. A member of a board may resign ftom office by giving a notice of resignation. 
A member of a board who resigns for reasons relating to the conduct of the affairs of the 
cooperative shall declare the member’s reasons in writing to the cooperative, sending a copy of 
the declaration to the national federation of which the cooperative is a member: 
(1) where the member has grounds to believe that such course of action is in 
contravention of a provision of this Act, a government regulation thereunder, a standard 
established under this Act, a provision of any other Act or an order or written 
instruction of the national federation or the FSCC; 
(2) where the member has grounds to believe that such course of action may have an 
adverse effect on the financial position of the cooperative. 
A member of a board who in good faith makes such a declaration shall not thereby incur any 
civil liability. 
Art. 42. Dismissal of a Director or Member of the Audit and Ethics Committee - A 
member of the Board of Directors or of the Audit and Ethics Committee may be dismissed by 
the general assembly, at an annual or special meeting. The member must be given the 
opportunity to present hisher position and be given due process. 
Within 15 days, the cooperative shall send to the dismissed member and to its national 
federation a formal notice of the dismissal. 
Art. 43. A vacancy resulting from the dismissal of a Director or a member of the Audit and 
Ethics Committee may be filled by election during the meeting during which the dismissal 
takes place provided that the notice of meeting mentions the possibility that such an election 
may be held. A director or committee member so elected to fill a vacancy shall serve only for 
the unexpired portion’of the term of office of the dismissed member. 
Art. 44. Volunteer Nature of the Board - The members of the Board of Director are not 
remunerated, but are entitled to reimbursement of reasonable expenses incurred by them in the 
exercise of their functions. However, the members of a board may be remunerated by the 
national federation or by another legal person belonging to the network for the exercise of other 
functions within the national federation or a legal person controlled by the national federation. 
For the purposes of this Act, such members are deemed not to be employees on the ground that 
they have entered into a contract of employment in connection therewith. 
Art. 45. The members of the Board of Directors or of the Audit and Ethics Committee may, if 
they all consent, participate in a meeting by means of telephone or other communications 
equipment enabling all participants to hear each other. The members are deemed in that case to 
have attended the meeting. 
Art. 46. Any member of the Board or of the Audit and Ethics Committee may waive, in 
writing, the notice of a meeting. The member’s mere attendance at the meeting is a waiver, 
except when a member’s purpose is to object to the holding of the meeting on the ground that 
notice of the meeting was given irregularly. 
Art 41. 
The decisions of the Board of Directors or those of the Audit and Ethics 
Committee are taken by a majority of the votes cast. In the event of a tie, the person chairing 
the meeting breaks the tie. 
Art. 48. A member of the Board of Directors or of the Audit and Ethics Committee present at a 
meeting is deemed to have consented to any resolution passed or action taken at the meeting, 
except if the member requests that the member’s dissent be recorded in the minutes before the 
meeting is adjourned or closed. 


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Art. 49. The affairs of a cooperative are managed by the Board of Directors, except any 
hnction that may be dev‘olved upon another organ of the cooperative. 
The by-laws of a 
cooperative may specify those powers that the Board of Directors may exercise only if SO 
authorized by the general assembly. Routine business of management cannot be made subject 
to such authorization, but are presumed within the powers of the Board. 
Art. 50. The Board of Directors shall: 
(1) observe and enforce this Act, the regulations made by the Government, the by-laws 
of the cooperative and its national federation, and the rules of ethics, standards, orders 
and written instructions issued under this Act; 
(2) establish a policy for sound and prudent management practices; 
(3) provide the Audit and Ethics Committee with any personnel it requires to carry out 
all its functions; 
(4) furnish to the FSCC, on request, a certified copy of any document of the 
cooperative; 
(5) ensure the keeping and preservation of the records of the cooperative; 
(6) set policies for determining interest rates on savings deposits and credit extended, 
and the rates of products and services provided by the cooperative; 
(7) make or control the investments of the cooperative; 
(8) insure the cooperative against the risks of fire, theft and embezzlement by its 
officers or employees, and provide the cooperative with civil liability insurance and 
directors’ and officers’ liability insurance; 
(9) designate the persons authorized to sign contracts or other documents on behalf of 
the cooperative; 
(10) at the annual general assembly, give an account of its management and submit the 
annual report; 
(11) facilitate the work of the persons responsible for the audit of its books and 
accounts. 
Art. 51. The cooperative shall determine in its by-laws the number of directors, which shall not 
be less than five. 
Art. 52. The cooperative may, in its by-laws, organize its members into groups or chapters and 
grant each group or chapter the right to elect a specified number of directors. No member of 
the board of directors thus elected shall be dismissed except by the members of the cooperative 
who have the right to elect that member. The by-laws of the cooperative may also prescribe the 
number of directors elected by the members of such a group. 
Art. 53. At its first meeting after the organizational assembly and, afterwards, after the annual 
assembly, the Board of Directors shall choose from among its members a Chairperson and a 
Vice-Chairperson. The Vice-Chairperson shall replace the Chairperson if the latter is absent or 
is unable to act. 
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Art. 54. The Board of Directors shall meet whep a meeting is called by the Chairperson or by 
at least three members of the Board of Direqtors in accordance with the by-laws of the 
cooperative. A representative of the national federation of which the cooperative is a member 
may attend and address the meeting. The national federation may also call a meeting of the 
Board of Directors of the cooperative. 
Art. 55. Unless othenvise provided in the bylaws of the cooperative, the quorum at meetings 
of the board of directors is a majority of its members. 
Art. 56. In case of a vacancy for reasons other than the dismissal of a director, the replacement 
is appointed by the remaining members of the board for the remainder of the term of the person 
replaced. 


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Art 57. 
If authorized in the by-laws of the cooperative, the Board of Directors may form 
an executive committee composed of directors, including the Chairperson, Vice-Chairperson 
the Manager of the cooperative. The number of members of the executive committee may not 
exceed half the number of directors and may not be less than three. The executive committee 
shall exercise the powers delegated to it by the board of directors. 
Art. 58. In any vacancy in the executive committee, the Board of Directors may appoint a 
substitute for the remainder of the term of office. 
Articles 46,47,48 and 55 apply, with the necessary modifications, to the executive committee. 
Art. 59. The board of directors may create special committees to examine particular matters or 
to facilitate the proper operation of the cooperative. 
Art, 60. The board of directors must set up at the request of the general assembly a special 
committee to be given a certain task. A special committee shall be composed of not fewer than 
three persons. It may be composed of officers, employees and members of the cooperative. 
The rules of ethics applicable to officers also bind the members of special committees. 
Art. 61. The board of directors shall determine the functions and powers of special committees. 
The special committees shall submit their recommendations to the board. 
However, special committees formed at the request of the general assembly must report to the 
general assembly. 
E. 
AUDIT AND ETHICS COMMITTEE 
Art. 62. The functions of the Audit and Ethics Committee are to supervise the operation of the 
cooperative and to ensure the rules of ethics and on conflict of interest are observed at all times. 
The Audit and Ethics Committee shall, in particular: 
(1) 
ensure that the operations of the cooperative is in compliance with this Act, 
regulations, by-laws, standards, orders and written instructions applicable to it; 
(2) 
ensure that the cooperative adheres to sound and prudent management practices; 
(3) 
ensure that the rules adopted by the Ethics Committee of the national federation 
of which the cooperative is a member are observed; 
(4) 
ensure that the internal affairs and activities of the cooperative are inspected in 
accordance with the provisions of this Act; 
(5) 
ensure that the admission of members and the suspension and expulsion of 
members are in compliance with the applicable legislative provisions and the by-laws of 
the cooperative; 
(6) 
ensure that the executive committee and the special committees of the 
cooperative act in accordance with their powers and duties, and, with the Acts, 
regulations, standards, rules of ethics, orders and written instructions applicable to 
them; 
(7) 
intervene at the request of the board of directors of the cooperative to resolve a 
situation of conflict of interest; 
(8) 
recommend that the board of directors take decisions in order to implement, apply 
and periodically revise the policies and orientations of the cooperative, and in particular 
any provision relating to the protection of the interests of the cooperative and its 
members. 
Art. 63. The Audit and Ethics Committee shall also receive complaints from members, inform 
the other organs of the cooperative if need be, and shall reply to the complainant. A 
complainant who is not satisfied with the committee’s reply may file the complaint with the 
national federation of which the cooperative i s  a member. The national federation may make 
recommendations to the cooperative in connection with a complaint filed with it, 


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Art. 64. The Audit and Ethics Committee shall consist of three or five members, according to 
the cooperative’s by-laws. 
Art. 65. At its first meeting after the organizational assembly and, afterwards, after the annual 
assembly, the Audit and Ethics Committee shall choose a Chairperson and a secretary from 
among its members. 
The majority of the members constitufes a quorum at meetings of the Audit and Ethics 
Committee. 
In case of a vacancy, the replacement is appointed by the remaining members of the committee 
for the remainder of the term of the person replaced. 
Art. 66. The Audit and Ethics Committee shall have access to the books of accounts, records 
and other documents of the cooperatiqe, and every person having custody of them must 
facilitate examination. 
Art. 67. The Audit,and,Ethics Committee may, where it considers it necessary, require that a 
special inspection be carried out. 
Art. 68. The Audit and Ethics Cornhittee may suspend any employee or officer of the 
cooperative or request that the national federation to which the cooperative is affiliated 
intervene to that effect. 
Before rendering its decision, the comrnhee shall give the person concerned advance notice of 
not less than three days mentioning the grounds which justify such decision, the date on which 
it will become effective and the possibility of presenting observations. Where the Committee 
is of the belief that any delay could seriously compromise the interest of the members of 
cooperative, it may render its decision without giving the person advance notice or an 
opportunity to present observations. Such suspension should not exceed two weeks. Where the 
suspended officer holds the office of general manager, the Committee shall immediately inform 
the Chairperson and ask the Chairperson to designate a replacement for the duration of the 
suspension. 
Within five days following the decision of suspension, the Committee shall notify, in writing, 
the board of directors, the national federation of which the cooperative is a member and the 
FSCC in the case of the suspension of an officer. 
Art. 69. The Audit and Ethics Committee shall report its observations to the board of directors 
and may include recommendations. The committee shall also report its observations to the 
Ethics Committee of the national federation to which it the cooperative is affiliated. 
Art. 70. If the board of directors of a cooperative fails to resolve a conflict of interest or to 
enforce a rule of ethics, the Audit and Ethics Committee may act in its stead or request that the 
national federation of which the cooperative is a member intervene to that effect, in accordance 
with the intervention procedure provided for in the rules of ethics. 
Art. 71. The Audit and Ethics Committee shall notify, in writing, the board of directors and 
the national federation to which the cooperative is affiliated if: 
(1) 
in its opinion, the cooperative is contravening a provision of this Act or the 
regulations or by-laws where the contravention relates to the operations and transactions 
of the cooperative and may have an adverse effect on its financial position; 
(2) 
it discovers management practices that may have an adverse effect on the 
financial position of the cooperative; 


15 
I 
! 
(3) 
written instructions issued under this Act. 
it observes that the cooperative is not complying with the standards, orders or 
The Audit and Ethics Committee shall submit its recommendations in writing to the board of 
directors. 
Upon receipt of the periodical inspection report, the Audit and Ethlcs Committee shall submit 
its recommendations to the board of directors. It may call a special meeting to lay any matter 
brought up in the report before the members. 
Art. 72. The Audit and Ethics Committee shall give an annual report on its activities to the 
board of directors at the end of the fiscal year of the cooperative and shall present it at the 
annual meeting. The Committee shall also provide the national federation to which the 
cooperative is affiliated a copy of its report. 
F. 
OTHERS 
Art. 73. A cooperative may, to obtain payment of any specific, liquid and eligible claim it has 
against a member or depositor, withhold any sum of money it owes to the member or depositor 
and use it to compensate its claim, except in the case of the redemption of qualifying shares 
issued by it. 
Chapter V 
Officers and Ethics of Savings and Credit Cooperatives 
and Financial Service Cooperatives 
Art. 74. The Chairperson and Vice-Chairperson and the other members of the board and 
members of the Audit and Ethics Committee of a cooperative are the elected officers of the 
cooperative. The manager, the secretary and the treasurer and other persons who are also 
designated as officers by the Board of Directors are the appointed officers of the cooperative. 
Art. 75. The members of the board may also appoint a committee of three persons who shall 
decide the credit activities of the cooperative, while the manager may recommend candidates 
for the credit committee to the board. 
Art. 76. 
traditionally or may name its officers differently. 
Art 77. The Board of Directors of a cooperative shall appoint a manager for a period based 
upon its by-laws. 
Art. 7 8. A n elected officer o€ a cooperative cannot qualify as an appointed officer of the 
cooperative for the same period. An elected officer of a cooperative must first resign before 
he/she can accept the appointment and vice versa. 
Art. 79. The manager shall function according to the direction of the Board of Directors. The 
board shall determine the remuneration of the general manager. 
Art. 80. The manager, though not a member of the Board, shall attend the meetings of the 
Board. The manager should offer hidher advice to the Board of Directors based on prudent 
management practices. 
The manager shall withdraw from a meeting when the appropriateness of the manager’s 
presence to debate a given matter i s b eing discussed. T he general manager must withdraw 
from a meeting at the request of the board. 
The Board of Directors of a cooperative may name its officers as they are called 


16 
Art. 81. The Board of Directors of every cooperative shall ftuiiish the FSCC the names and 
addresses of all officers of the cooperative within 30 days after their election or appointment. 
Art. 82. T he powers and duties of the officers shall be determined by the by-laws of the 
cooperative. The officers must comply with this Act, the regulations made under this Act, the 
Articles of Cooperation, By-Laws and standards of the cooperative. The rules of ethics of the 
national federation of which the cooperative is a member, and its orders and written 
instructions under this Act must be observed. 
Officers must act with prudence and diligence. They must also be honest and fair in the best 
interest of the cooperative. 
Art. 83. An officer is presumed to have acted with prudence and diligence where the officer 
acted in good faith based on an expert’s opinion and report. 
Art. 84. The mere fact that an investment or credit has been made or extended in compliance 
with this Act does not release any officer of the cooperative from the obligation to act in 
accordance with Articles 82 and 83. 
Art. 85. A cooperative must purchase according to market conditions liability insurance for the 
benefit and protection of an officer or director of the cooperative to cover any liability that may 
be incurred by such persons except liability resulting from a failure to act with honesty and 
fairness. 
Art. 86. No officer may communicate information concerning the cooperative or one of its 
members except to the extent determined by the rules adopted by the Audit and Ethics 
Committee of a cooperative or the Ethics Committee of the national federation of which it is a 
member. 
Art. 87. A cooperative shall assume the defense of any officer or any person who has acted for 
the cooperative and is prosecuted by a third person for an act done in the performance of the 
officer’s or person’s duties, except when such officer or person has committed gross 
negligence. 
In criminal cases, the cooperative shall assume the expense where the case has been dismissed, 
withdrawn or the officers of persons have been acquitted. If the cooperative only wins in part, 
the court may determine the amount of expense the cooperative shall assume. 
Art. 88. The officers of a cooperative who authorize the redemption or the repurchase of 
shares in contravention of this Act are jointly liable for the payment to the cooperative of any 
sum disbursed by it for the redemption or the repurchase. 
The officers of a cooperative who authorize an investment or an extension of credit in 
contravention of this Act, of the regulations, of the by-laws, of the standards or of the rules of 
ethics applicable are jointly liable for any resulting losses to the cooperative. 
Every person who accepts a deposit or who extends credit in contravention of this Act is liable 
for the sums lost by the cooperative by reason of the more favorable terms granted. 
Art. 89. Any right of action arising from Article 88 may be exercised by: 
(1) the cooperative; 
(2) the national federation, in case the cooperative which is its member has neglected to 
exercise its right Of action, after having been foiinally notified by the national federation 
or when the federation itself is personallv affected; 
(3) the FSCC, if the national federationhas neglected to act after having been formally 
notified by the FSCC. 


17 
Art. 90. A person is related to an officer if he/she is: 
(1) The spouse of the officer; 
(2) Related to the officer by affinity or consanguinity up to the third civil degree; 
(3) A partnership in which the officer is a partner or a member of such partnership; 
(4) A legal person controlled by the officer or the spouse; and 
(5) A person of which the officer is a trustee. 
Art. 91. In this Act, a spouse as designated in Article 90 (1) means a person: 
(1) Who is manied to the Officer, or 
(2) 
relationship. 
Who has been living with the officer for at least three years in a common law 
Art. 92. Officers must act in the interest of the members and avoid placing themselves in 
situations where their personal interest, or the interest of persons related to them, is in conflict 
with their obligations. 
Every officer who is in a situation of conflict of interest must, on pain of dismissal, disclose the 
situation, abstain from voting on any matter concerning the situation and avoid influencing any 
decision relating thereto. The officer must also withdraw from a meeting while the situation is 
being discussed or voted on. The disclosure of the situation of conflict of interest must be 
mentioned in the minutes of the meeting. 
An officer who is dismissed for having contravened this Article also loses the right to be 
elected as officer of a cooperative for a period of five years from the dismissal. A cooperative 
must in respect of persons related to an officer act in the same manner as when dealing at arms 
length. 
Art. 93. A person is a restricted party with respect to a cooperative where that person is: 
' 
(1) 
an officer of the cooperative or an officer of the national federation of which the 
cooperative is a member, and any person related to any such officer; 
(2) 
a legal person belonging to the network of which the cooperative or its national 
federation is part of; 
(3) . 
a legal person a majority of the directors or officers of which are officers referred 
to in paragraph 1; 
(4) 
any other person whose interests or dealings with the cooperative might, in the 
opinion of the FSCC, influence in that person's favor the investments, credit or 
transactions that may be made or extended by that cooperative. 
The FSCC shall, when designating a person as being a restricted party, notify the person 
designated and the cooperative concerned of the decision. The decision may be revised by the 
FSCC at the request of the person so designated or of the cooperative concerned. Before 
rendering or refusing to revise a decision, the FSCC must give the person .and the cooperative 
concerned an opportunity to present their observations. 
Art. 94. All contracts and transactions of a cooperative must be consistent with the provisions 
of this Act and with the rules adopted by the Ethics Committee of the national federation to 
which it is affiliated. 
All service contracts between a cooperative and a restricted party must be made on favorable 
terms for the cooperative, or at least on competitive terms. All such contracts must be approved 
by the board of directors of the cooperative upon the advice of the Audit and Ethics Committee. 


18 
Art. 95. The FSCC or any person having a sufficient interest may apply to the court for the 
cancellation of the contract made with a restricted party in contravention of the provisions of 
this Act. 
Art. 96. No cooperative may accept deposits from its employees or from a restricted party nor 
extend credit to them on more favorable terms than those applicable in the normal cowse of its 
business. Provided However, that this provision does not apply: 
(1) 
(2) 
has no authority over the person extending credit of the cooperative. 
to credit extended by way of a credit card; and 
to credit extended to an officer or a person related to an officer where the officer 
CHAPTER VI 
Books of Accounts, Register, Audit and Reports of 
Savings and Credit Cooperatives and Financial Service Cooperative 
Savings and credit cooperatives and financial service cooperatives shall keep a 
Art. 97. 
register containing: 
1) Its articles of cooperation, its by-laws, related certificates of the CDA and any notice 
concerning the address of its principal office; 
2) Minutes and resolutions of its meetings; 
3) Minutes of the meetings and resolutions of the board of directors, executive 
committee, special committees, and Audit and Ethics Committee; 
4) List of names of all officers, stating their terms of office; 
5) List containing the name and address of each member of the cooperative; 
6) Number of qualifying shares, founder’s shares and capital shares; 
7) Subscription of each share; 
8) List of fees charged by the cooperative for the various services it offers; 
9) Management agreements between the cooperative and the national federation of 
which it is a member; 
10) Compliance programs of the cooperative; 
11) Orders of the FSCC and the CDA, and of the national federation to which the 
cooperative is affiliated; and 
12) The written instructions issued under this Act. 
Art. 98. A cooperative shall keep the following: 
1) the books of accounts and accounting records for preparing financial statements; and 
2) statements of accounts on a daily basis for each depositor and deposit ledger for all 
depositors. 
In cases where the cooperative also provides other non-financial services, separate books of 
accounts, records and statements shall be prepared for its financial service operations. The 
books of accounts, registers and other financial documents may be kept on any electronic 
information storage device capable of reproducing information in intelligible written form. 
Savings and credit cooperatives and financial service cooperatives must keep the books of 
accounts, registers and other accounting documents dating back less than 10 years, or a copy 
that is admissible as evidence in proceedings. Financial service cooperatives must keep every 
check issued for five years. 
A cooperative must comply with the standards of the national federation to which it is 
affiliated, and a national federation must comply with the standards of the FSCC pertaining to 
its books of accounts, statements of assets and liabilities and operation as well as keeping them 
for a certain period. 


19 
Art. 99. Any member may examine during usual business hours, on the premises of a 
cooperative, the documents described in sections 1, 2, 4 and 8 of Art. 97. The member may 
also obtain copies of the documents described in sections 1, 2, 4 and 8 of the said Article, but 
the cooperative may require payment of the cost of reproduction and transmission of such 
documents. 
The cooperative may require a member to declare under oath that the information obtained by 
the member under this section will be used solely for the exercise of the member’s rights under 
this Act and shall not violate the confidentiality protected under this Act. 
Art. 100. Cooperatives shall cause their books of accounts to b e audited e very year b y an 
auditor. The audit of a cooperative shall be conducted by the audit service of the national 
federation of which the cooperative is a member. Provided, that in case the national federation 
i s  unable to do the audit, it shall be done by a certified public accountant accredited by the 
national federation. 
A national federation has, in exercismg its functions as auditor, the powers and obligations of 
an auditor set out in Article 103. 
Provided that, if a cooperative fails to came its books of accounts to be audited, the FSCC may 
appoint an auditor whose remuneration shall be charged to the cooperative. 
Provided Further, That the auditor of a cooperative must be a member in good standing of the 
Philippine Institute of Certified Public Accountants (PICPA), and that in no case may the 
auditor be an employee or a member of the cooperative being audited or a person related to any 
such employee or member as defined in Article 90. Provided Finally, That the appointment of 
an auditor is terminated if the auditor ceases to qualify to act as auditor in accordance with 
Article 127 or if the auditor ceases to meet the requirements of this Article. 
Art. 101. The FSCC or any interested person may apply to the proper court to obtain the 
dismissal of an auditor who does not meet the requirements of Article 100. 
Art, 102. A national federation shall notify the FSCC, within 10 days, of the resignation of the 
auditor or of the decision to propose the auditor’s dismissal before the expiry of the auditor’s 
appointment. 
Art. 103. Powers and Obligations of the Auditor - The auditor shall have access to all the 
books of accounts, registers, and other accounting records of the cooperative. Every person 
having custody of those documents and records must allow and facilitate their examination by 
the auditor. 
The auditor may require from any officer or employee of a cooperative the 
information and documents required for the performance of the auditor’s duties. 
The auditor may also require the holding of a meeting of the board of directors and address all 
questions related to the auditor’s duties. 
The auditor shall send a copy of the auditor’s report to the Board of Directors and Audit and 
Ethics Committee of the cooperative, the national federation of which the cooperative is a 
member, and the FSCC. 
The Board of Directors shall give the audit report to the members meeting without any change. 
The auditor shall indicate, in the report, 
1) Whether the audit conforms to the generally accepted auditing standards; 
2) Whether, in hidher opinion, the financial statement of condition and the statement of 
operation present fairly the financial position of the cooperative and the results of its 


20 
operations, based upon the generally accepted accounting principles, practices, and 
accounting rules prescribed by the FSCC; and 
3) Any other information prescribed by regulation of the Government. 
The auditor in hisiher report shall in writing give to the board of directors necessary 
infomation of any operation, transaction or situation of the cooperative that needs rectification 
and satisfactory operation. 
The report of the auditor shall indicate transactions of the 
cooperative and restricted parties noticed by the auditor in the course of the audit to be in 
contravention o f  this Act or the regulations. 
An auditor who makes a report in good faith shall not thereby incur any civil liability. 
The auditor also has the right to attend any meeting of the cooperative and address the meeting 
on any matter brought up in the auditor's report. The secretary shall give notice to the auditor 
for all relevant meetings. 
Art. 104. 
can require the presence of the auditor to attend the general assembly of the cooperative. 
Art. 105. If a director or the manager becomes aware of an error or misstatement in the 
financial statements on which the auditor reported, he shall immediately notify the auditor 
thereof and, if necessary, send the auditor revised financial statements. 
If an auditor is notified or becomes aware of an error or misstatement in the financial statement 
on which shehe reported, and if in her/his opinion the error or misstatement is material, shehe 
shall inform each director of the cooperative of the error or misstatement. 
The directors who are informed of the error or misstatement shall, within 60 days, prepare and 
issue revised financial statements or inform the members, the national federation of which the 
cooperative is a member and the FSCC of the error or misstatement. 
Art. 106. The 
FSCC may order that the annual audit of the cooperative be repeated or 
that a special audit be made, and for that purpose, the auditor shall be appointed by the FSCC 
and the corresponding remuneration shall be charged to the cooperative concerned. 
Art. 107. Cooperatives and federations will have December 31" as the ending of their fiscal 
year. 
Art. 108. At the end of the fiscal year, the cooperatives shall prepare an annual report 
containing: 
(1) 
the name of the cooperative and the address of its principal office; 
(2) the names of its officers; 
(3) the number of its members; 
(4) 
a statement of condition and operation, with, in the case of cooperatives that also 
offer their members non-financial services, a separate statement for its financial services 
operation; 
(5) 
a statement of the community development fimd, a statement of the net surplus, a 
statement of the general reserve, and a statement of provisions to cover credit losses and 
investment losses, presented on a comparative basis with the corresponding statements 
for the immediately preceding fiscal year; 
(6) 
total amount of credit extended to restricted parties; 
(7) the auditor's report; 
(8) 
a statement showing the cooperative's participation in the investment h d  of the 
national federation to which the cooperative is affiliated; 
(9) 
report of any Special committee formed at the request of the general assembly of 
members; 
(10) other information required by the by-laws of the cooperative; and 
Three directors or fifteen (15) members, by means of a notice of at least five days, 


21 
(1 1) any other information required by the FSCC. 
The annual report shall be submitted to the board of director for approval. The approval of 
board of directors must be certified by at least two of the directors. 
Every member is entitled to receive a copy of the annual report of the cooperative free of 
charge. The member is entitled to a copy of its articles of cooperation and its by-laws within 
30 days after he/she has become a member. The cooperative may ask for a fee to shoulder the 
cost of reproduction. 
Cooperatives shall, within 90 days after the end of the fiscal year, transmit a copy of the annual 
report to the FSCC and to the national federation of which they are a member. 
The FSCC shall, upon request, send to a national federation a copy of the documents and 
information sent under the preceding paragraph by a cooperative that is its member. 
CHAPTER VI1 
Deposits, Other Funds, Credit, Security and Net Surplus of 
Savings and Credit Cooperatives and Financial Service Cooperatives 
Art. 109. 
Deposits, investments and other funds can be received by savings and credit 
cooperatives and financial service cooperatives from regular and associate members. A 
financial service cooperative may receive deposits from a minor or from a person who does not 
have the capacity to enter into contracts. 
Provided However, That a financial service cooperative may also receive deposits from: 
1) a federation; 
2) a savings and credit cooperative or another financial service cooperative with 
the 
authorization of the national federation of which the cooperative is a member; 
3) The Philippine government and local governments (provinces, cities, municipalities 
and barangays); and 
4) Government owned or controlled corporations. 
Art. 110. In this Act, credit includes all forms of financing or suretyship. 
Art. 111. No cooperative shall extend credit to another cooperative belonging to the same 
network without the consent and authority of the national federation of which it is a member. 
Art. 112. No cooperative may mortgage property or give property as a security except: 
1) To secure a loan to meet a short term need for liquid fund; and 
2) To acquire or improve an immovable property intended mainly for its own use. 
Art. 113. The annual net surplus of a cooperative shall be allocated to the following: 
Sec. 1. Maintaining the general reserve; 
Sec. 2. Patronage refund; 
Sec. 3. Paying dividends on capital shares; 
Sec. 4. The education and training fund; 
Sec. 5 .  Establishing and maintaining a community development fund; and 
Sec. 6. Other approved allocations. 
Provided, That the first priority of a cooperative shall be to maintain its general reserve at five 
percent (5%) of its total assets, and no other allocation shall be made unless this has been 
attained; Provided further, That such other allocation of the net surplus shall be in accordance 


22 
\ 
with Article 87 of Republic Act No. 6938. Provided finally, That the allocation of the surplus 
earnings of a cooperative must also be consistent with the standards of the national federation 
of which it is a member. 
Art. 114. In no case may the general reserve of a cooperative be drawn upon for the payment 
of dividends or to be shared between the members. 
Art. 115. The dividends paid to the member of a cooperative may be in cash or in shares as 
provided in the by-laws of the cooperative, which have to be consistent with the standards 
adopted by the national federation of which the cooperative is a member. 
CHAPTER VI11 
Liquid Assets and Investments of Savings and Credit Cooperatives 
And Financial Service Cooperatives 
A. 
LIQUID ASSETS 
Art. 116. Every cooperative must at all times maintain such liquid assets as are adequate to 
ensure sound and prudent management, in accordance with the standards of the national 
federation of which it is a member. 
Art, 117. The national federation shall administer the liquid assets maintained by the member 
cooperatives, in accordance with the by-laws that the national federation must pass in that 
regard. 
B. 
INVESTMENTS 
Art. 118. Every cooperative shall exercise its powers to make investments with prudence and 
care in accordance with any applicable standards of the national federation of which it is a 
member and the regulations of the Government. Every cooperative shall also practice sound 
and prudent management in its investments. 
Art. 119. A cooperative may not acquire, by itself or jointly with a cooperative or any legal 
person belonging to its network, directly or indirectly, more than 30% of the assets or the 
voting rights attached to the shares o f a  1 egal p erson. The voting rights m ay n ot enable the 
cooperative to elect more than one-third of the directors of the legal person. 
Provided However That, a cooperative may acquire directly, by itself or jointly with other 
members of its network, all or part of the shares of a legal person carrying on activities that are 
similar to those of the cooperative. The cooperative may also acquire such shares through a 
holding company established under the Philippine laws for the sole purpose of holding those 
shares. 
Art. 120. The provisions of Article 119 allow the acquisition of shares of a legal person only 
where the legal person is or becomes, as a result of that acquisition, a legal person controlled by 
the acquirer. 
The first paragraph does not apply in the cases determined by regulation of the FSCC. 
Art. 121. 
No cooperative may, by itself or jointly with another member of its network, 
directly or through a holding company it controls, acquire shares of a legal person for the 
purpose of acquiring control of it unless the legal person, by a resolution of its board of 
directors, a copy of which shall be sent to the FSCC, makes an undertaking to the cooperative 
and the FSCC within 60 days after the acquisition: 


23 
, 
(a) 
acquisition, unless it has obtained authorization in writing from the FSCC; 
(b) 
statement or information the FSCC may request. 
not to engage in any activity other than those it was carrying on at the time of the 
to submit its annual financial statements to the FSCC together with any other 
Art. 122. No provision of this Act shall be construed as limiting the powers of a cooperative to 
realize a security by acquiring property or otherwise. However, the cooperative shall, subject to 
market conditions, take the measures required, within a reasonable time, to comply with the 
provisions applicable to the investments it may make. 
Art. 123. Where, after a merger or consolidation, the replacement of securities held by a 
cooperative or federation causes it to cease to comply with the provisions applicable to it in 
relation to investments that may be made by it, the cooperative or federation must take such 
action as is necessary to ensure its compliance with the said requirements within five years 
from the merger/ consolidation. 
CHAPTER IX 
Merger and Consolidation of Savings and Credit Cooperatives 
and Financial Service Cooperatives 
Art. 124. The merger or consolidation of savings and credit cooperatives and financial service 
cooperatives shall be in accordance with Articles 21 and 22 of Republic Act No. 6938 and the 
guidelines issued by the CDA in accordance with these provisions of law. 
CHAPTER X 
Dissolution of Savings and Credit Cooperatives 
and Financial Service Cooperatives 
Art. 125. The voluntary and involuntary dissolution, and liquidation of savings and credit 
cooperatives and financial service cooperatives shall be in accordance with Articles 65, 66, 67, 
68,69,70 and 71 o f  Republic Act No. 6938, other applicable laws and the rnles and regulations 
issued by the CDA in accordance with the provisions of this F A  No. 6938. 
CHAPTER XI 
Financial Service Cooperative Federations 
Art. 126. Except where incompatible, the provisions of the preceding Articles applicable to 
savings and credit cooperatives and financial service cooperatives and of the regulations made 
thereunder apply to financial service cooperative federations, adapted as required. 
A. 
MISSION AND MEMBERS 
Art. 127. The mission of a local financial service cooperative federation is, in addition to those 
of a savings and credit cooperative or financial service cooperative: 
to protect the interests of savings and credit cooperatives and financial service 
(1) 
cooperatives, and foster the fulfillment of their objectives; 
(2) to promote their development; 
(3) 
to provide services to savings and credit cooperatives, financial service 
cooperatives, cooperative members, network members and, as an ancillary activity, to 
any other person. 
Art. 128. The mission of a national financial service cooperative federation is, in addition to 
those of a savings and credit cooperative or financial service cooperative and those of a local 
federation: 


24 
(1) 
to act a s  a supervisory body over savings and credit cooperatives and financial 
service cooperatives that are its members, to the extent provided for in this Act; 
(2) to see to the orderly development of the network; 
(3) to establish and administer funds in accordance with this Act; and 
(4) to define common objectives for the network and to coordinate its activities. 
Art. 129. A minimum of fifty member primary financial service cooperatives or five member 
regional federations and Five Million Pesos paid-up capital is required for a national financial 
service cooperative federation to be registered. Provided that the national federation must have 
at least One Hundred Million Pesos in total assets within three years after its registration. 
Provided further, That national cooperative federations engaged in savings, credit and other 
related financial services already registered at the time of the approval of this Act shall be given 
three years from such approval to comply with the required minimum number of members and 
total assets. 
Art. 130. Only savings and credit cooperatives and financial service cooperatives may be 
regular members of a local financial service cooperative federation while savings and credit 
cooperatives, financial service cooperatives and local financial service cooperative federations 
as well as national cooperative federations may be regular members of a national financial 
service cooperative federation. 
Any other cooperative or any other legal person or a partnership recommended by a member 
cooperative may also be admitted as an associate member of a financial service cooperative 
federation. 
Art. 131. To become a founding member of a federation, a cooperative must be so authorized 
in a resolution of its board of directors, which must contain the name of the representative of 
the cooperative for the purposes of the establishment of the federation. The resolution must be 
ratified by the vote of two-thirds of the members present at a special meeting or, provided that 
the notice of meeting sets out the object of the resolution, at an annual general meeting. 
Art. 132. A federation may, by by-law, establish one or several classes of associate members, 
prescribe the conditions of admission applicable to such members, and define the rights and 
obligations and prescribe criteria or conditions applicable to the withdrawal, suspension or 
expulsion of regular and associate members. 
A financial service cooperative federation may provide in its by-laws that associate members of 
the federation have the right to vote. Provided that representatives o€ associate members shall 
not be eligible to be elected as officers of the federation. 
Art. 133. Members of financial service cooperative federations may have a maximum of only 
five (5) voles. A cooperative or a legal person may be represented only by a natural person. 
No representative may act for more than one member. Provided however that the by-laws of a 
federation may allow a representative of a cooperative or a legal person to vote in behalf of 
another representative of the same cooperative or legal person. 
Every decision of a federation concerning the admission, suspension or expulsion of a 
cooperative or federation shall be transmitted to that cooperative or federation and to the FSCC. 
B. 
GENERAL MEETING OF A FEDERATION 
Art. 134. The general assembly of a federation is attended by the persons designated by the 
members and by the other persons determined in a by-law of the federation. 
The 
organizational meeting shall, however, consist of the persons who signed the articles of 
cooperation in their capacity as representatives. 
Art. 135. A federation shall determine, by by-law: 


25 
(1) 
(2) , criteria for determining the number of representatives and votes to which 
(3) 
(4) 
Art. 136. 
representatives for each group. 
Art. 137. The by-laws of a federation are adopted by the general meeting by a two-third 
majority of the votes cast 
Art. 138. The annual meeting of a federation shall be held within five months from the end of 
its fiscal year. The members shall be convened to: 
the manner in which members are to be represented at meetings; 
each member is entitled; 
rules for the calling of members to meetings; and 
rules for the annual meeting and for special meetings. 
A federation may organize its members into groups and establish a council of 
(1) examine the annual report; 
(2) examine the report on activities of the Ethics Committee; 
(3) decide upon the allocation of the net surplus; 
(4) determine, where applicable, the dividends payable on capital shares out of 
(5) elect the members of the Board of Directors and the Ethics Committee; and 
(6) appoint an auditor. 
the stabilization reserve and the surplus earnings; 
Art. 139. A federation must hold a special meeting upon the request of thirty percent (30%) of 
all its members entitled,to vote or upon the request of the FSCC. If the meeting is not called 
within thirty days of the request, at least two of the members who signed the request or the 
FSCC may call the meeting. Unless the members object thereto by resolution at the meeting, 
the federation shall reimburse those who called the meeting for reasonable expenses incurred 
by them. 
C. 
MANAGEMENT AND ADMINISTRATION 
Art. 140. A federation shall fix thru its by-law the number of directors, which shall not be less 
than five. 
In no case may of managers of c ooperatives comprise more than fifty percent (50%) of the 
members of the board of directors. 
Art. 141. The by-laws of a federation shall establish the procedure for electing the members of 
its Board of Directors and of the Audit and Ethics Committee, or, in the case of national 
federations, of the Ethics Committee, and the officers of the Board of Directors and of the 
Audit and Ethics Committee or Ethics Committee, as the case may be. 
Art. 142. The members of a board may receive, in addition to the reimbursement of reasonable 
expenses they incur in the exercise of their functions, an attendance allowance or honorarium in 
an amount fixed by the board of directors. The total amount paid in that respect shall not 
exceed the amount fixed by the general assembly of members. No allowance shall be paid 
before the maximum amount has been fixed by the general assembly. 
The directors may be remunerated in accordance with the by-laws of the federation. The board 
of directors shall, however, determine the remuneration to be paid to the Chairperson of the 
federation. For the purposes of this Act, the directors, Chairperson, Vice-Chairperson of the 
federation are deemed to not be employees of the federation, 
Art. 143. The function of the Ethics Committee of a national federation is to: 


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(1) ensure the independence and impartiality of the inspection and audit of the national 
federation; 
(2) ensure that the rules it adopts are observed; 
(3) intervene at the request of the board of directors or the Audit and Ethics Committee 
of a cooperative or local federation to resolve a situation of conflict of interest; 
(4) perform any mandate concerning ethics entrusted to it by the board of directors; and 
(5) advise the board of directors to take or implement any decision, apply and review 
the .policies and orientation of the national federation, particularly the arrangements 
made for protecting the interest of the national federation and its members. 
Art. 144. Rules of Ethics - The Ethics Committee of a national federation shall adopt rules to 
protect the interests of the federation, the cooperatives and legal persons that are its members 
and their members. 
The rules shall concern contracts, credit extended, confidential information held by the national 
federation and its member cooperatives, the conduct required of and the standards and ethics to 
be observed b y the federation and its m embers, and the procedures to be to b e followed i n  
correcting situations of conflict of interest. 
The Ethics Committee shall also adopt rnles of ethics applicable to persons in charge of the 
inspection or auditing of the cooperatives and federations affiliated to the national federation. 
The rules of ethics adopted by Ethics Committee must be submitted for approval to the board of 
directors of the federation, which may not amend them. The federation shall submit a copy to 
the FSCC within 30 days from its approval. 
Art. 145. The Ethics Committee shall, in addition to its main function, receive complaints 
from the members of the national federation, including associate members, inform the other 
organs of the national federation if necessary, and reply to the complainant. 
Art. 146. The Ethics Committee shall notify the board of directors promptly, if: 
(1) the rules of ethics are not observed; 
(2) in its belief, the national federation is contravening a provision of this Act or the 
regulations or by-laws and the rules on conflict of interest. 
The Ethics Committee may notify the FSCC where it considers that the national federation is 
neglecting to take the necessary measures timely. 
Art. 147, The Ethics Committee has access to the books of accounts, records and other 
documents of the national federation, and every person having custody of them must facilitate 
examination, 
Art. 148. The Ethics Committee shall report its observations and r ecommendations to the 
board of directors. 
The Ethics Committee shall each year transmit to the FSCC, within four months of the closing 
date of the fiscal year of the national federation, a report of its activities in matters of ethics, 
The report shall indicate the cases where the rules of ethics were not observed. 
Art. 149. 
The Ethics Committee may suspend any employee or officer of the national 
federation, but before suspension, the Ethics Committee shall give due process to the employee 
or officer. Where the suspended officer holds the office of general manager, the Committee 
shall immediately inform the Chairperson and request that the Board of Directors or the 
Chairperson designate a replacement for the duration of the suspension. 


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Art. 150. Upon receipt of the regular inspection report, the Ethics Committee shall submit its 
recommendations to the board of directors and may call a special meeting to bring up the report 
before the members. 
Likewise, the Ethics Committee shall submit a general report on its activities to the board of 
directors at the end of the fiscal year of the national federation and shall present this report to 
the annual general meeting of the members. The report shall make particular mention of the 
measures taken by the national federation to prevent or resolve conflicts of interest and, where 
credit has been extended to restricted parties, the report shall show compliance wlth the 
applicable provisions of this Act and rules of ethics and standards. 
Where the board of directors fails to resolve a conflict of interest or to apply a rule of ethics, the 
Ethics C ommittee may act i n  its stead, according t o the procedure p rovided b y the rules o f 
ethics. 
Art, 151. A national federation shall, thru its by-laws, fix the number of members of the Ethics 
Committee, which must be three or five. 
Art. 152. The term of office of a member of the Ethics Committee shall be determined in the 
by-laws of the national federation, but shall not in any case be less than two years nor more 
than three years. The by-laws shall also establish a mode of rotation so that one-half or one- 
third of the members of the Committee are replaced each year, so it will be a continuing body. 
Provided, that any member shall be qualified to be elected only for three successive terms of 
office. Provided further that upon the expiry of the term of office of the member, he or she 
shall remain in office until a successor has been validly elected or appointed. 
D. 
FUNCTIONS AND POWERS 
Art. 153. In addition to the other powers it may exercise under this Act, a national federation 
may: 
(1) 
examine the books of accounts of any affiliated cooperative or federation; 
(2) 
enter into an agreement with the board of directors of any member cooperative 
or federation entrusting the national federation with the supervision, direction or 
administration of the affairs of the cooperative for a specified period; 
(3) 
develop and provide any service for the b enefit o f affiliated cooperatives and 
federations and their members; 
(4) 
act, for the purposes of this Act and upon the approval of the FSCC, as the 
temporary or provisional administrator or as the liquidator of a member cooperative or 
federation; and 
(5) 
act as the liquidator or sequestrator for the performance of an obligation secured 
by a mortgage of which a member cooperative or federation is a creditor. 
A national federation may also enter into a contract with a third party that binds cooperatives 
and federations that are its m embers where the cooperatives avail themselves o f t he b enefit 
stipulated in the contract. 
Art. 154. 
federations that are its members with respect to: 
A national federation shall adopt standards applicable to cooperatives and 
(1) 
(2) 
documents issued or received by them; 
(3) 
(4) 
(5) 
the requirements relating to accounting procedure; 
the management, preservation and destruction of book of accounts, records, 
the place and manner of keeping records to be preserved; 
a system in a computerized register for the registration ofthe shares they issued; 
the exercise of their powers in matters of credit and investmeni; 


(6) 
(7) 
other funds established by the cooperative or federation; and 
(8) 
the reports that they are required to submit for the purpose of determining the 
amount to be assessed by the national federation. 
(9) 
the reserves to be maintained for doubtful debts and contingent losses; 
(10) 
the allocation of surplus earnings; 
(1 1) 
the classes and series of shares that may be issued; 
(12) 
the repurchase or redemption of capital shares; and 
(13) 
any matter related to sound and prudent management where required in the 
interest of the national federation and its members. 
the adequacy of their liquid assets; 
the management of the community development fund, the reserve fund, and 
Art. 155. A national federation may adopt standards applicable to its members with respect to: 
(I) 
regular members and associate members; 
(2) 
any other administrative practice. 
(3) 
(4) 
( 5 )  
(6) 
Art. 156. 
connection with financial products and services, including: 
the type of persons that a member cooperative or federation may recruit as 
the allocation and form of dividends; 
the allocation of any amount to the general reserve; 
risk management, including credit risk management; and 
sound and prudent management practices. 
A national federation may also adopt standards applicable to its members in 
(1) 
the issue, endorsement, accepting and discounting of promissory notes or other 
negotiable instruments, and the accepting of deposits transferable by order to third 
persons; 
(2) 
(3) 
travellers' checks; 
(4) 
debit and credit cards; 
(5) 
the administration of savings plans or trust deposit agreements between 
cooperatives and members or federations and members with relevance to the regulations 
of the Bureau of Internal Revenue; 
(6) 
(7) 
(8) 
Government; and 
(9) 
distribution of financial products and services, especially micro-credit. 
cash management and electronic cash commands (ATMs); 
the distribution of the shares it issues; 
the distribution of the securities of a member of the network; 
the. sale of bonds or other debt securities issued or guaranteed by the 
the exercise of activities and commercial practices connected with the 
Art. 157. 
transmitted to the FSCC. 
Art. 158. Where the national federation considers that a cooperative or federation that is its 
member does not practise sound and prudent management, that it has failed to resolve a conflict 
of interest, that its financial position is not satisfactory or that its assets are not sufficient to' give 
adequate protection to its depositors, creditors and members, it may: 
(1) give written instructions to the cooperative or federation' to undertake measures 
considered appropriate to remedy the situation and to specify the period within which 
the cooperative or federation is required to comply therewith; 
(2) order the cooperative or federation, within the period prescribed and for the reasons 
specified by the national federation, to adopt and implement a compliance program in 
accordance with its directives; and 
The by-laws of federations and the standards of national federations shall be 


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(3) enter into an agreement with the Audit and Ethics Committee of the cooperative or 
federation entrusting the national federation with the supervision, direction or 
administration of the cooperative or federatron for a specified period. 
The national federation shall submit to the FSCC, within 14 days, a copy of the instructions or 
orders given or issued under this article. 
Art. 159. The national federation shall notify the FSCC of any failure of a member cooperative 
or federation to comply with its instructions or orders. The FSCC may, after giving the 
national federation and the cooperative or federation an opportunity to be heard, approve the 
instructions or orders of the national federation with or without amendment. Once approved, 
the instructions or orders are deemed to be written instructions of the FSCC. 
If in its opinion, the FSCC a national federation neglects to exercise the powers to give written 
instructions or orders given to it by sections 1 and 2 of Art. 158, the FSCC may, after giving the 
national federation an opportunity to be heard, issue the instruction or order to the concerned 
cooperative or federation. 
Art. 160. The national federation has all the powers necessary to correct any operating deficit 
of a member cooperative or federation in case of a deficiency in its general reserve, where the 
stabilization fund of which it is a member does not do so. The national federation shall make 
up the deficit out of its own funds or by means of a special assessment collected from its 
cooperatives and federations. 
E. 
ASSESSMENTS 
Art. 161. A national federation may, by by-law, fix for each fiscal year a regular assessment 
and any other assessment it considers necessary. A cooperative or federation is bound to pay 
the assessments of the national federation of which it is a member. 
A national federation may also, by r esolution of its board of directors, fix an assessment in 
respect of a member cooperative or federation which agrees to avail itself of special services 
offered by the national federation. 
Art. 162. Cooperatives and federations shall furnish to the national federation of which they 
are a member any report that the national federation may require pursuant to its standards to 
determine the amount of assessments. 
F. 
AUDITS, INSPECTIONS, EXAMINATIONS AND INVESTIGATIONS 
Art. 163. A national federation must establish and maintain a service to audit the financial 
statements of its mcmber cooperatives and federations as well as an inspection service for its 
members. These services must be established by a registered national federation within three 
years from the approval of this Act or, in the case of a national financial service cooperative 
federation registered after the effectivity of this Act, within one year from its registration; 
Art. 164. The board of directors of a national federation must form an audit and inspection 
commission composed of members of the board of directors and of persons of known integrity. 
Provided that the commission should not have less than three members. Provided further That 
the m ajority o f t he members o f t he c ommission should c ome from the national federation’s 
directors. 
Art. 165. The audit and inspection commission shall appoint on the recommendation of the 
Ethics Committee, a person to be in charge of audits and a person to be in charge of 


30 
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inspections, or appoint one person to be in charge of both. They may only be removed from 
office by the audit and inspection commission, with the approval of the FSCC. 
Art. 166. The audit and inspection commission must examine the following before they are 
approved by the board of directors: 
(1) 
(2) 
every audited report; 
(3) 
(4) 
every financial statement and every report transmitted to the FSCC; 
every matter prescribed by the by-laws of the national federation; and 
every matter prescribed by government regulation. 
Art. 167. The audit and inspection commission must submit to the FSCC each year, a report 
on its activities. 
Art. 168. A national federation shall periodically inspect the internal affairs and the activities 
of the cooperatives and federations affiliated to it. Inspections shall be conducted at least once 
every year for financial service cooperatives and federations, and at least once every three years 
for savings and credit cooperatives. Provided that the FSCC may determine an interval of more 
than a year for financial service cooperatives with good track records. Provided further that the 
FSCC may order a national federation to inspect, or the national federation on its own may 
inspect at anytime a member cooperative or federation. 
Art. 169. A national federation must inspect the internal affairs and the activities of a member 
cooperative or federation at the request of the Audit and Ethics Committee of the cooperative 
or federation. 
Art. 170. Any person making an inspection or examination and investigation under this Act 
may: 
(1) 
under inspection or examination and investigation; 
(2) 
documents; 
(3) 
(4) 
or conflicts of interest involving its officers. 
enter, at any reasonable time, the establishment of a cooperative or federation 
examine and make copies of the books of accounts, registers, records and other 
require any information or document relating to the administration of this Act; 
require &y information or document concerning the cooperative or federation 
Every person having custody, possession or control of the books, registers, accounts, records 
and other documents shall, at the request of the person making the inspection or the 
examination and investigation, permit access to and facilitate the examination of these 
documents. 
The person making an inspection or examination and investigation shall, on request, identify 
himself or herself and produce a certificate of the federation attesting the person’s capacity. 
Art. 171. No one may hinder the work of any person making an inspection or examination and 
investigation by misleading that person. 
Art. 172. A national federation shall inform the board of directors and the Audit and Ethics 
Committee of the cooperative or federation of the results of the inspection. It shall also transmit 
a copy of its inspection report to the FSCC. The report transmitted to the FSCC shall only 
pertain to matters within the FSCC’s jurisdiction. 
Art. 173. A national federation may convene the board of directors and the Audit and Ethics 
Committee of the cooperative or federation to present the inspection report to them. 


31 
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A national federation may also order that a special meeting of the cooperative or federation be 
called to inform the members of the results of the inspection. 
Art. 174. The person making the inspection of a cooperative or federation in behalf of a 
national federation shall not be the person conducting the audit of that cooperative or 
federation. 
G. 
PROVISIONAL ADMINISTRATION 
Art. 175. A national federation may suspend the powers of the board of directors or the Audit 
and Ethics Committee of a cooperative or federation that is its member for a maximum period 
of 60 days and appoint a provisional administrator to exercise the responsibilities of the board 
or committee temporarily, as soon as the national federation has reason to believe: 
(1) 
(2) 
obligations on the part of an officer of the cooperative or federation; 
(3) 
adequately protect the rights of its members. 
that there has been misappropriation or embezzlement; 
that there has been a grievous offence or serious lapse in the performance of 
that control over the property of the cooperative or federation is insufficient to 
The national federation may extend the period of 60 days upon prior approval of the FSCC. 
Provided however, That the suspended Board or C ommittee m ay appeal the decision o f t he 
national federation to the FSCC which shall rule on such appeal within 5 days from receipt 
thereof. 
Art. 176. Before granting the authorization for extension under Article 175, the FSCC shall 
inform the members of the board of directors or the Audit and Ethics Committee whose powers 
have been suspended of the reasons advanced by the national federation and give them the 
chance to explain their side. However, the FSCC, when faced with the urgency of the situation, 
may grant authorization even if the board or committee members have not been given the 
opportunity to present their observations. 
Art. 177. The provisional administrator cannot be prosecuted by reason of any act done in good 
faith in the exercise of the provisional administrator’s functions. 
Art. 178. The provisional administrator shall, as soon as practicable, submit a detailed report 
to the national federation and to the FSCC, informing them that the situation referred to in 
Article 175 has been corrected or cannot be corrected. 
After receiving the report, the national federation may: 
(1) 
lift the suspension, or 
(2) 
Board or Audit and Ethics Committee. 
Art. 179. The costs, fees and expenses of the provisional administration are chargeable to the 
concerned cooperative or federation. 
order the holding of a general assembly of the cooperative to elect new members of the 
H. 
FINANCIAL DISCLOSURE 
Art. 180. At least ten (10) days before the date of the annual meeting of a local or national 
federation, the board of directors shall send to each member a copy of the annual report, 
Art. 181. A national federation shall transmit to the FSCC, every three months, a report on the 
adequacy of the capital base of its network, a report on the adequacy of its liquid assets and any 
other report required by the FSCC. 


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Art. 182. A national federation shall submit to the FSCC its consolidated financial statements 
accompanied by the annual financial statements of each holding company controlled by it and, 
every three months, its consolidated and unconsolidated financial statements. 
I. CAPITAL BASE 
Art. 183. A national federation must ensure that its network maintains an adequate capital base 
consistent with sound and prudent management. 
The national federation shall adopt standards applicable to its member cooperatives and 
federations respecting: 
(1) 
(2) 
(3) 
the adequacy of their capital base, 
the elements which compose their capital base, and 
the proportion represented by each element. 
These standards must be consistent with government regulations. 
Art. 184. The FSCC may give written instructions to a national federation concerning the 
adequacy of the capital base of its network, the elements which compose that capital base and 
the proportion represented by each element. 
Where the F SCC c onsiders that the c apital b ase o f a n etwork i s inadequate, the F SCC may 
order the national federation to adopt a compliance program for the national federation and the 
cooperatives and federations that are its members. 
Before exercising these powers, the FSCC shall notify the national federation and give it an 
opportunity to present its position. 
The compliance program shall describe the appropriate measures to be implemented by the 
national federation to ensure the adequacy of the capital base of the network, within the time 
limits indicated therein. The compliance program adopted by the national federation shall be 
submitted for approval to the FSCC, who may approve it with or without amendment. A 
national federation and its member cooperatives and federations are bound to implement the 
compliance program approved by the FSCC. In addition, the national federation shall be 
responsible for seeing to it that the program is implemented by the cooperatives and federations 
that are its members. 
Art. 185. A national federation and its member cooperatives and federations must furnish to 
the FSCC any report the FSCC may require on the implementation of the compliance program 
at such intervals, in such form and of such tenor as may be determined by the FSCC. 
Art. 186. . The FSCC may implement a compliance program that a national federation has 
neglected to implement. 
J. 
FUNDS OF A NATIONAL FEDERATION 
General Provisions 
Art. 187. The national federation may make by-laws to establish funds such as liquidity fund, 
loan fund, investment €und and other funds. 
Art. 188. The amounts that may be deposited in the funds and the assets that may be paid into 
them could also be determined in the by-laws. The sums deposited in a fund and the assets 
paid into it shall be used and managed in accordance with the powers of the national federation. 
Art. 189. Any deposit made into a fund constitutes a claim against the national federation 


33 
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i 
Art. 190. The deposits made into a fund become payable upon the dissolution of the national 
federation. Any deposit made by a cooperative or federation becomes payable upon the 
dissolution of that cooperative or federation or upon its ceasing to he a member of the national 
federation. 
Art. 191. The assets of the funds are not separate from those of the national federation. 
However, the national federation may, by by-law, establish a fund whose assets are separate 
from those of the national federation and shall alone serve to guarantee the obligations 
contracted for the purpose for which the fund was created. 
Where the by-laws of the national federation so provide, the assets of a fund may constitute a 
trust fund appropriated to a specified purpose. The national federation may acquire the assets of 
such a fund. 
A national federation may, with the authorization of the FSCC, entrust all or part of the 
management of the funds it has established to any other person. The person so designated must 
undertake to submit a report annually to the FSCC along with any other document or 
information required by the FSCC. 
Liquidity Fund 
Art. 192. The liquidity fund of a national federation shall consist of the sums that its member 
cooperatives are required to deposit into to the fund pursuant to Articles 116 and 117 and the 
income derived from the transactions made by the fund. The fund constitutes a liquid asset 
reserve for the member cooperatives of the federation. 
Investment Fund 
Art. 193. An investment fund of the national federation shall consist of the sums entrusted to 
the fund as deposits and the revenues’derived from the operations of the fund. The investment 
fund shall consist o f the assets determined b y  the b y-laws applicable to i t, including all the 
federation’s investment in shares, subordinated securities and preferred equity shares. 
Art. 194. The national federation may issue capital shares in relation to an investment fund. 
The shares shall have no par value. 
Art. 195. The deposits constitute the participating interest of the depositors in the net assets of 
the fund and shall not bear interest. The net revenue from the fund shall be shared between the 
depositors in accordance with the by-laws of the national federation. 
Art. 196. Only the net value of deposits made into an investment fund constitutes a claim on 
the fund. The criteria used to establish a depositor’s interest in an investment are determined 
by the by-laws fund of the national federation. 
CHAPTER XI1 
Stabilization Fund 
A. 
ESTABLISHMENT AND REGISTRATION 
Art. 197, The FSCC may, upon the application of a national federation, register a stabilization 
fund, the mission of the fund being: 
(1) 
a member of the fund; 
to assist in the payment of losses sustained by a cooperative or federation that is 


34 
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I
 
(2) 
fund for the benefit of the cooperatives or federations that are members of the fund; 
(3) 
to establish and administer a stabilization fund, liquid assets fund or assistance 
to take part in the funding operations of the network. 
A national federation wishing to obtain the establishment of a stabilization fund shall send to 
the FSCC an application together with a certlfied copy of the resolution authorizing the 
application and indicating the name and the 1 ocation o f t he p rincipal o ffce o f t he p roposed 
fund. Every cooperative and federation that is a member of the federation is a member of the 
stabilization fund. 
The FSCC shall deposit a copy of the certificate of the registration of the stabilization fund in 
the register and shall send a copy to the national federation immediately, 
Art. 198. The name of a stabilization fund shall include the expression “stabilization fund”. It 
shall also include the name of the national federation establishing the fund. The name of a 
legal person shall not include the expression “stabilization fund” unless the legal person has 
been constituted under this Act. 
Art. 199. The stabilization fund is a legal person. The FSCC shall refuse to recognize and 
register the stabilization fund if the provision of Article 198 is not observed, 
B. 
ADMINISTRATION 
Art. 200. The affairs of the fimd are administered by a board of directors, the composition of 
which shall be defined by the by-laws of the fund, but which shall include, among others the 
Chairperson, the General Manager and the Chairperson of the Ethics Committee of the national 
federation. 
Art. 201. The members of the board of directors of the fund shall, within three months after 
receipt of the certificate of registration provided for in Article 197, elect the Chairperson and 
Vice-Chairperson of the fund and every other officer whose election is provided for by the by- 
laws of the fund. 
Art. 202. The board of directors of the fund may establish an executive committee from 
among its members. This committee shall include the Chairperson of the fund. The executive 
committee exercises the powers delegated to it by the board of directors. 
Art. 203. The term of office of the members of the Board is three years. The by-laws shall 
establish a mode of rotation so that one-third of the members of the Board are replaced each 
year, so it will be a continuing body. Provided, that any member shall be qualified to be 
elected only for three successive terms of office. Provided further that upon the expiry of the 
term of office of the member, he or she shall remain in office until a successor has been validly 
elected or appointed. 
Any vacancy occurring during the course of the term of a member of the board of directors is 
filled by the Board of Directors of the national federation. 
Art. 204. The board of directors of the fund may determine the remuneration and allowances 
of its members. 
Art. 205. A majority of the members of the board of directors of the stabilization fund 
constitutes a quorum at meetings, Decisions shall be made by a majority of the quorum. 


35 
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Art. 206. The board of directors of the fund may, by by-laws, change the name of the fund and 
the location of its principal office. Every such by-law must be approved by the FSCC and the 
approved by-laws must be filed with the office of the FSCC and comes into effect on the date 
the by-laws is registered. 
Art. 207. The Chairperson of the stabilization fund carries out the decisions of the board of 
directors. If the Chairperson is absent or is unable to act, the Vice Chairperson shall act in his 
or her place. 
Art. 208. Any member of the board of directors of the fund having any direct or indirect 
interest in an undertaking or a cooperative or federation with which the fund has or intends to 
have business relations, must, under pain of forfeiture of office, disclose the interest and refrain 
from voting on any matter concerning that undertaking or cooperative or federation. 
Art. 209. The fnnd may: 
(1) 
make loans and grants to the cooperatives or federations that are members of 
the fund; 
(2) 
guarantee the commitments o f  a cooperative or federation that is a member of 
the fund; 
(3) 
guarantee the repayment of an advance or of a loan made to a cooperative or 
federation that is a member of the fund; 
(4) 
make an agreement with a cooperative o r  federation that i s  a member oft he 
fund under which the affairs of that cooperative or federation will be managed by the 
fund for a fixed period; 
(5) 
,acquire some of the assets of a cooperative or federation that is a member of the 
fund; 
(6) 
act as the liquidator or sequestrator of a cooperative or federation that is a 
member of the fund; and 
(7) 
act as the provisional administrator of a cooperative or federation that is a 
member of the fund for the purposes of this Act. 
Art. 210. The fund may, when making a loan or a grant to a cooperative or federation that is a 
member of the €und, determine the measures to be implemented by the cooperative or 
federation in order to correct certain of its management practices. 
Art. 211. The fund may, for each of its fiscal years, fix the assessment payable by the 
cooperatives and federations that are members of the fund. 
Provided That, when the fund finds or is informed by the national federation that a cooperative 
or federation is not practising sound and prudent management, the fund may fix and require 
from that cooperative or federation a special assessment for each of the fiscal years determined 
by the fund. 
Art, 212. The amount of the assessment is established for each cooperative or federation from 
reports that it must submit to the ficnd in such form and at such time as the fund may determine 
by by-laws. The fund may also specify by by-laws the terms and conditions of payment of the 
assessment. 
Art. 213. The fund may only make the investments authorized by regulation of the FSCC. The 
regulation may prescribe cases, conditions and restrictions concerning such investments, 
Art. 214. The fund may, to obtain payment in whole or in part of any sum owed to it, acquire 
the immovables securing the payment thereof. However, the fund must dispose of the 
immovables so acquired within seven years unless the FSCC grants it an extension. 


36 
C. 
BOOKS, AUDIT AND ANNUAL REPORT 
Art. 215. The fund shall keep and preserve at its principal office a register of the names and 
addresses of the members of the board of directors, and the books in which the by-laws of the 
fund and the minutes of the meetings of the board of directors and of the executive committee 
are kept. 
Art. 216. The stabilization fund shall keep its b ooks in accordance with generally accepted 
accounting principles, Furthermore, the fund shall keep a separate register and separate 
accounting for transactions. 
Art. 217. The fiscal year of the fund is the same as that of the national federation. 
Art. 218. The stabilization fund shall have its books of accounts audited each year. If the fund 
does not do so, the FSCC may appoint an auditor and fix the remuneration that the fund must 
pay to that auditor. 
The auditor has, in carrying out auditing duties, access to all the books of accounts, registers 
and other records of the fund, and every person having custody of them must facilitate the 
auditor’s examination. The auditor may also require other information from the members of 
the board of directors and the officers of the fund to carry out hisiher duties as an auditor. 
Art. 219. Theaccounts ofthe fundareclosed attheendofthe fiscal year. T heboardof 
directors shall prepare the annual report, three months from the end of its fiscal year. This 
report must set forth, in particular: 
(1) the names and addresses of the members of the board of directors; 
(2) the names of the cooperatives and federations that are members of the fund; 
(3) the balance sheet, the statement of operation, the statement of changes in financial 
position and the surplus statement; and 
(4) the report of the auditor. 
Art. 220. The balance sheet and the statement of operations must be approved by the board of 
directors, which shall designate the Chairperson to sign these financial statements in behalf of 
the Board. 
Art. 221. The stabilization fund must send a copy of the annual report to the national federation 
within three months after the end of its fiscal year. 
Art. 222. The affairs of the stabilization fund must be inspected once each year or whenever 
the FSCC considers it advisable. The inspection must be carried out by a person appointed by 
the FSCC. 
The person carrying out the inspection has access at any reasonable time to the books of 
accounts, registers, and other records of the stabilization fund, and every person having custody 
of them must facilitate their examination by the person carrying out the inspection. The person 
carrying out the inspection shall identify himself or herself and produce a certificate of capacity 
signed by the FSCC. 
D. 
PROVISIONAL ADMINISTRATION 
Art. 223. If, following an inspection made under Article 222, the FSCC is of the opinion that a 
serious fault has been committed, particularly embezzlement or breach of trust by one or more 
members of the board of directors, or that the board of directors engages in management 
practices that are not sound and prudent, the FSCC may appoint a provisional administrator to 
assume the powers of the board of directors, temporarily, for a period of seven working days. 


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The FSCC may extend this period. The powers of the board of directors are suspended when 
the provisional administrator assumes the administration of the stabilization fund. 
Art. 224. The provisional administrator must present to the FSCC, as soon as practicable, a 
detailed report of the provisional administrator’s findings, with the recommendations. If the 
report of the provisional administrator confirms the presence of fraud, embezzlement or breach 
of trust of one or more members of the Board of Directors, the FSCC shall cause the filing of 
the appropriate complaints before the proper court. 
Before initiating the complaintis, the FSCC shall give the stabilization fund an opportunity to 
be heard. 
The FSCC shall attach to the report of the provisional administrator a summary of the 
representations the stabilization fund has made to the FSCC and the FSCC’s own 
recommendations. 
Art. 225. The FSCC may also: 
(1) 
order the fund to remedy any situation referred lo in Article 293 within the time 
it determines; 
(2) 
order the provisional administrator to prolong the administration of the 
stabilization fund for a determined period, or to terminate the administration unless the 
fund fails to comply with the order referred to in paragraph 1 of this Article. 
Art. 226. The provisional administrator must inform the FSCC as soon as the provisional 
administrator ascertains that the situation referred to in Article 223 has been corrected or cannot 
be corrected. 
The provisional administrator cannot be prosecuted for acts done in good faith in the 
performance of the provisional administrator’s duties. 
Art. 227. After receiving the report provided for in Article 226, the FSCC may: 
(1) 
fund, or 
(2) 
and appoint a liquidator. 
lift the suspension of the members of the board of directors of the stabilization 
order, on the conditions it determines, the dissolution of the stabilization fund 
Art. 228. The provisional administrator must, as soon as hisker mandate has expired, make a 
complete report of the provisional administration to the FSCC. The expenses and fees of the 
provisional administration shall be charged to the stabilization fund unless the FSCC decides 
otherwise. 
Art. 229. The decision of the FSCC ordering the dissolution of the fund has the same effect as 
an order made by a judge of the Regional Trial Court. 
Art. 230. The liquidator first pays the debts of the stabilization fund and the costs of dissolving 
it, and the balance from the dissolution, if any, devolves to the national federation. 
CHAPTER XI11 
The FSCC and Government Supervision and Regulation 
THE FINANCIAL SERVICE COOPERATIVE COMMISSION 
A. 
Art. 231. Creation of the FSCC. -There is hereby created a Financial Service Cooperative 
Commission (FSCC) under the supervision of the CDA to carry out, as a collegial body, the 
provisions of this Chapter and other relevant provisions of this Act. 


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The FSCC shall be composed of the Chairperson or the CDA or one of the Administrators duly 
designated by the Chairperson, who shall be the Commission Chairperson, the Secretary of 
Finance or one of the Undersecretaries duly designated by himher, who shall be the Vice 
Chairperson of the Commission, the Executive Director of the FSCC and two other members. 
The Executive Director and the two members shall be appointed by the President from the 
nominees of the cooperative sector, and, in the case of the Executive Director, of the Secretary 
of Finance. They shall have a term of six (6) years. Provided, That among those first 
appointed, the Executive Director and one member shall serve for a term of six years while the 
second member shall serve for a term of three years. If the position of Executive Director or 
Commission member becomes vacant, the President shall appoint a new Executive Director or 
member ffom the nominees of the cooperative sector and, in the case of the Executive Director, 
of the Secretary of F inance. Provided, That an Executive Drector or member so appointed 
shall serve only for the unexpired term. 
Art. 232. Qualifications and Compensation. - 
Director or FSCC member unless that person is a natural born Filipino citizen of legal age, is of 
unquestionable integrity and is widely recognized to be competent in economic and social 
disciplines and in cooperativism. Provided, That at least one of the members of the FSCC shall 
be a member of the Philippine bar. 
The salary of the Executive Director and the two members of the FSCC shall be fixed by the 
President of the Philippines. 
Art. 233. Meeting of the FSCC. - The FSCC shall meet at least once a month for the 
transaction of regular business. Special meetings may be called by the Chairperson or the 
majority of members to consider specific matters. A majority of the members shall constitute a 
quorum for all meetings of the FSCC. A majority vote by the members of the FSCC shall be 
required for a decision. 
Art. 234. The Executive Director and the Organization of the FSCC. - The Executive 
Director is the chief executive officer of the FSCC. The Executive Director shall execute and 
administer the policies, decisions, orders and resolutions approved by the FSCC and shall have 
the general executive direction and supervision of the work and operation of the FSCC and of 
its members, bodies, offices, personnel and all its administrative business. 
The FSCC may, for purposes of efficiency, delegate any of its functions to any department or 
office of the FSCC, a member of the FSCC or staff member of the FSCC except its power to 
adopt, alter and supplement any rule or regulation. The FSCC may review upon its own 
initiative or upon the petition of any interested party any action of any department or office, 
any member or staff member of the FSCC. 
The FSCC Executive Director and members shall be appointed within sixty (60) days from the 
effectivity of this Act, and the FSCC shall be organized within one hundred twenty (120) days 
from such appointment. 
No person shall be appointed Executive 
B. 
SUPERVISION 
Art. 235. The FSCC shall, at least once a year, inspect or commission the inspection of the 
internal affairs and the activities of national financial service cooperative federations. 
Art. 236. The purpose of the annual inspection is to evaluate the financial service and practices 
and the internal control systems of the national federations, to verify the accuracy of their 
financial statements and to ensure that they arc complying with this Act, the regulations, the 
by-laws, the standards and the written instructions applicable to them under this Act. 


39 
Art. 237. The FSCC may-order the person in charge of audits or the person in charge of 
inspections in a national federation to conduct such examinations and investigations into the 
internal affairs and the activities of the member cooperatives and federations as the FSCC 
considers expedient and necessary. 
Art. 238. The FSCC shall, in addition, at the request of the board of directors or Audit and 
Ethics Committee of a cooperative or federation, or 250 of its members or of one-fourth of its 
members, whichever is lower, or at the request of the national federation of which it is a 
member, conduct or commission any examination and any investigation into the internal affairs 
and the activities of the cooperative or federation. 
Art. 239. For the purposes of this Act, any person conducting an inspection or examination and 
investigation under this part may: 
(1) 
inspection or examination and investigation; 
(2) 
documents relating to the activities of the legal person; and 
(3) 
enter, at any reasonable time, the establishment of any legal person under 
examine and make copies of the books, registers, accounts, records and other 
require any information or document relating to the carrying out of this Act. 
The documents, books, registers, accounts and records that the person conducting the 
inspection or examination may require must be provided to that person by the cooperative or 
federation, whatever the medium in which they are stored and whatever the means of accessing 
them. 
No person may hinder the work of any person conducting an inspection or examination and 
investigation, in particular by misleading that person. 
C. 
REGULATION 
Art. 240. 
cooperatives or federations concerning: 
(1) 
(2) 
(3) 
(4) 
investments. 
The FSCC may, after consulting the national federations, issue regulations for 
the adequacy of their capital base; 
the adequacy of their liquid assets; 
any additional information that must be stated in the annual reports; 
any other practice of sound and prudent management, in particular relating to 
Art. 241. The FSCC may, after consulting the national federations, also issue regulations for 
national federations concerning: 
(1) 
fees payable for any procedure under this Act or a regulation thereunder and for 
the examination and reproduction of documents; 
(2) 
standards, conditions and restrictions relating to the credit services of national 
federations to their members; 
(3) 
shares that may be issued and the terms, conditions and restrictions attached to 
these shares; 
(4) 
composition and adequacy of the capital base; 
(5) 
any additional information that must be stated in the auditor's report; 
(6) 
standards relating to accounting, on a combined basis; 
(7) 
standards related to the adequacy of capital stock, general reserve and liquid 
assets; 
(8) 
conditions and restrictions concerning the flow of information within a national 
federation, to and from a cooperative and legal persons belonging to the same network, 
to and from a cooperative and restricted parties, with the end in view of reducing the 
risks of conflicts of interest; 


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(9) 
standards governing arrangements between a cooperative or local federation, its 
national federation and legal persons belonging to the same network for the sale of their 
financial products, and conditions permitting such arrangements to be made; 
(10) 
standards related to the establishment and administration of the funds of a 
national federation; 
(1 1) 
standards applicable to national federations with respect to: 
(a) 
the requirements relating to the books, registers and other accounting 
records which they are required to keep; 
(b) 
, the management, preservation and destruction of documents issued or 
received by a national federation; 
(c) 
the book base system in a computerized register for the registration of 
shares issued by them; 
(d) 
the place and manner in which books, registers and other documents are 
to be preserved; and 
(e) 
the keeping of books, registers and any other document on any electronic 
information storage device capable of reproducing information in intelligible 
written form. 
Art. 242. A cooperative or federation that fails to compIy with the guidelines. issued under 
Article 241 is deemed to have failed to adhere to sound and prudent management practices. 
Art. 243. The FSCC may order a cooperative or federation to cease a course of action or to 
implement specified measures if it is of the opinion that the cooperative 'or federation is not 
adhering to sound and prudent management practices or is not complying with: 
(1) 
a provision ofthis Act; 
(2) 
a compliance program; or 
(3) 
an undertaking under this Act. 
The FSCC may make an order pursuant to this Article where, in the opinion of the FSCC, the 
conduct of a cooperative or federation is contrary to sound and prudent management practices, 
even if the cooperative or federation complies with the guidelines. 
Where, in the opinion of the FSCC, the Audit and Ethics Committee of a cooperative or local 
federation or the Ethics Committee of a national federation is not exercising its functions in 
accordance with the provisions of this Act, the FSCC may order the board to take the measures 
indicated by the FSCC to remedy the situation. 
Before taking the action set out in the first paragraph, the cooperative or the federation will be 
given the opportunity to present their position. 
The order of the FSCC must state the reasons on which the order is based. The FSCC shall send 
a copy of the order to the Audit and Ethics Committee of the cooperative or federation or, as 
the case may be, the Ethics Committee of the national federation. The order shall become 
effective on the day it is served or on any later date indicated therein. 
However, the FSCC may, without prior notice, issue a provisional order, valid for a period not 
exceeding ten (10) days, if the FSCC is of the opinion that the granting of time to the person 
concerned to present observations could be prejudicial. 
Art. 244. The FSCC may apply to a judge of the Regional Trial Court for an injunction in 
respect of any matter relating to this Act or a government regulation thereunder, 
The prescribed rules of court of the Philippines shall apply, except that the FSCC cannot be 
required to give security. 
Art. 245. The FSCC may, after obtaining the advice of the national federation of which the 
caoperative or federation is a member, suspend the powers of the board of a cooperative or 


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federation and appoint a provisional administrator to exercise the powers of the cooperative or 
federation for such period as the FSCC may determine, if the FSCC has grounds to believe: 
(1) 
protection of the depositors, creditors and members; 
(2) 
the requirement of this Act or the standards of its national federation; 
(3) 
that the assets of the cooperative or federation are inadequate to ensure effective 
that the cooperative or federation has failed to maintain a capital base meeting 
that the cooperative or federation does not adhere to sound and prudent 
management practices; 
(4) 
that the cooperative or federation has failed to comply with the FSCC’s written 
instructions concerning a compliance program; 
(5) 
that there has been misappropriation of property; 
(6) 
that a serious fault has been committed, in particular, embezzlement or breach 
of trust by members of the board of the cooperative or federation, or that such members 
have been seriously remiss in the performance of the obligations imposed on them by 
this Act or a government regulation thereunder. 
Before exercising the powers under this Article, the FSCC shall give the members of the board 
of a cooperative or federation whose powers are suspended an opportunity to present their 
position. 
However, if warranted by the urgency of the situation, the FSCC may order the suspension, for 
a period not exceeding 15 days, without giving the members referred to in the first paragraph or 
the cooperative or federation or the national federation of which the cooperative or federation 1s 
a member an opportunity to present their positions. 
Art. 246. Where the powers of the board of directors are suspended, the provisional 
administrator shall exercise, in addition to the powers of the board of directors, those of the 
general assembly. 
The provisional administrator shall remain in office until the expiry of hidher appointment, 
unless the FSCC prolongs or terminates the administrator’s appointment. 
The provisional administrator cannot be prosecuted by reason of any act done in good faith in 
the performance of the provisional administrator’s duties. 
Art. 247. The provisional administrator shall submit to the FSCC, as soon as practicable, a 
detailed report of his or her findings, together with recommendations. The provisional 
administrator shall also, at the FSCC’s request, submit any additional report. 
The provisional administrator shall, at the end of his or her appointment, make a complete 
report of the provisional administration to the FSCC. 
Art. 248. The FSCC, after considering the report of the provisional administrator and on the 
recommendation of the national federation, may: 
(1) 
lift the suspension of the powers of the board of the cooperative or federation, 
or prolong such suspension; 
(2) 
remove from office the members of the board of the cooperative or federation 
and order the provisional administrator to call a special meeting to elect new members 
of the board; 
(3) 
order the winding-up of the cooperative or federation and appoint a liquidator. 
Art. 249. The decision of the FSCC ordering the winding-up of a cooperatlve has the same 
effect as an order made by a judge of the Regional Trial Court. In the case of such a winding- 
up, the order is final. However, the FSCC may terminate the winding-up where the interest of 
the members justifies it. 


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Art. 250. The expenses, fees and outlays entailed by the provisional administration shall be 
charged to the cooperative or federation concerned, unless the FSCC orders otherwise. 
D. 
MISCELLANEOUS PROVISIONS AND REPORTS 
Art. 251. The FSCC will request the CDA correct an incomplete certificate or a certificate 
containing an error. The completed or corrected certificate is deemed to have been issued on 
the date shown on the certificate that it replaces or on the date that should have been shown on 
it, where such is the case. The CDA shall deposit the completed or corrected certificate in the 
register. 
Art. 252. It shall not be necessary in any proceedings to produce the original of any book, 
document, order or register in the possession of the FSCC; a copy or extract certified by the 
FSCC shall be sufficient proof ofthe original. 
Art. 253. The FSCC may, on its own motion and without notice, intervene in any civil action 
concerning a provision of this Act or a government regulation thereunder to take part in the 
proof and hearing as if the FSCC were a party. 
Art. 254. The FSCC shall submit a report to the CDA Board of Administrators yearly on the 
financial position ofthe savings and credit cooperative, financial service cooperatives and local 
and national financial service cooperative federations. The report shall include any other 
information considered appropriate by the FSCC or required by the CDA Board. 
The CDA shall submit a copy of the report of the FSCC to the Office of the President of the 
Philippines within 30 days after receiving it. 
CHAPTER XIV 
Deposit Insurance 
Art. 255. In order to provide protection to the members, all financial service cooperatives shall 
be required to have deposit insurance for their member-depositors within three (3) years from 
the approval of this Act. 
Art. 256. The Philippine Deposit Insurance Corporation (PDIC), the FSCC, the CDA and 
other government agencies, government owned or controlled corporations and government 
financial institutions shall provide technical assistance to national financial service cooperative 
federations in order for these federations to establish and/or strengthen their own Cooperative 
Deposit Insurance System. 
CHAPTER XV 
Final Provisions 
Art, 257. Information Campaign. - The CDA, in partnership with the Department of Finance 
and the national financial service cooperative federations, is mandated to conduct an intensive 
and comprehensive information campaign on the provisions of this Act beginning three months 
from the effectivity oi" this Act. 
Art. 258. Amendments of By-Laws of Cooperatives and Federations - All savings and 
credit cooperatives, financial service cooperatives, financial service cooperative federations and 
other cooperatives covered by this Act shall, within three (3) years from its effectivity, amend 
their Articles of Cooperation and By-Laws lo conform to this Act and shall submit such 
amendments to the CDA and FSCC, and, in the case of savings and credit cooperatives and 
financial service cooperatives, to the national federation of which they are a member. 


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Art, 259. Penal Provisions. 
Sec. 1. 
The following are considered offenses punishable by the penalty of 
imprisonment for one (year) or a fine of not more than fifty thousand pesos (P50,OOO.OO) or 
both at the discretion of the court: 
a) The use of the name “savings and credit cooperative” or “credit cooperative” unless 
duly registered under this Act, the use of the name “financial service cooperative” 
unless duly registered and qualified under this Act, and the use of any name or 
designation to falsely represent an institution as being governed by this Act; 
b) Omission o r  refusal to furnish any information, report o r  other document that i s 
required to be furnished under this Act; 
c) Providing to the CDA or FSCC or any other person information, reports or other 
documents that are required under this Act, which the person knows to be false or 
misleading; 
d) Omission or refusal to keep a book or register required under this Act or to make a 
required entry therein; 
e) Making an entry required under this Act in a b ook o r r egister, which t be p erson 
lcnows to be false or misleading; 
fl Hindering a person who, as part of the person’s duties, is making an inspection, an 
audit, an examination or an investigation under this Act; 
g) Failure to comply with an order or written instructions issued or given by the FSCC 
or CDA, 
h) Violation of Articles 92, 94 and 96 regarding transactions with a restricted party; 
and 
i) 
. Abetting, counseling, allowing, authorizing or commanding another person to 
commit an offence punishable by this Act. 
Provided that in case the violator is a cooperative or another juridical person, the penalty shall 
be imposed on its directors and officers. 
Sec. 2. Any violation of any provision of this Act for which no penalty is imposed shall be 
punished by imprisonment of not less than six (6) months nor more than one (1) year and a fine 
not exceeding thirty thousand pesos (P30,000.00) or both at the discretion ofthe court. 
Art. 260. Appropriations. - The amount of One Hundred Million Pesos (PlO0,000,000.00) is 
hereby appropriated for the initial year of operation of the FSCC and the implementation of this 
Act. This fund may be drawn from the Contingent Fund of the President. Thereafter, such 
sums as may be necessary for the implementation of this Act shall be included in the annual 
General Appropriations Act. 
Art. 261. Cooperatives covered by this Act as defined under Article 2 hereof are not covered 
by Republic Act No. 8791 (The General Banking Law of 2000) and are not under the 
regulation and supervision of the Bangko Sentral ng Pilipinas. 
Art. 262. Repeals and Amendments. - The provisions of the Cooperative Code of the 
Philippines (RA 6938), Republic Act No. 6939 and all other laws or parts thereof which are 
inconsistent with any provision of this Act shall be deemed repealed or modified accordingly. 
Provided that Articles 8, 9, 12, 13, 28, 30, 49, 50, 61, 62, 63, 74, 124 - sec. 2 and 3, 126 and 
other articles of RA 6938 which are not inconsistent with this Act shall still apply to 
cooperatives registered and covered by this Act. Sections 33 and 79 of Republic Act No. 8791 
are hereby amended. 
Art. 263. Separability. - Should any part of this Act be declared unconstitutional, the rest of 
the provisions shall not be affected thereby. 


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Art. 264. Effectivity. - 
a newspaper of general circulation. 
This Act shall take effect fifteen (15) days fkom its publication in 
Approved,