Sources of Funds of a

Cooperative

1. Share Capital
• The member contributes in form
of shares with a par value of an
amount stated in the by-laws
• The member shall subscribe for
a minimum number of shares in
a accordance with the by-laws
Sources of Funds of a
Cooperative

1. Share Capital
• Subscriptions may be paid in cash
or installment basis depending upon
the agreement
• No member of a cooperative other
than a cooperative shall own or hold
more than 20% of the subscribed
share capital of the cooperative
Sources of Funds of a
Cooperative

2. Revolving Capital
• Defer payment of interest in
share capital & patronage refund
• The Board shall issue a revolving
capital certificate with serial
number, name, amount & rate of
interest to be paid at the time of
retirement
Sources of Funds of a
Cooperative

3. Deposits of Members
• The cooperative may receive
two kinds of deposits:
a) Savings
b) Time deposit
Sources of Funds of a
Cooperative

4. Borrowings
• The cooperative may borrow from
members at terms comparable or
less onerous from loans outside of
membership or external sources
• It must not compromise the
cooperative’s autonomy and
independence
Sources of Funds of a
Cooperative

5. Fees
• Membership and transfer fees,
and others
6. Subsidies, Grants, Donations
• The cooperative may accept
subsidies, grants and donations
from members, foreign and
domestic sources.
How is the net surplus of a cooperative
allocated & distributed? (RA 6938)

ARTICLE 86. NET SURPLUS

• The net surplus of a cooperative
shall be determined in accordance
with its by-laws.
• Net surplus shall be determined at
the close of every fiscal year and
at such other time as may be
prescribed by the by-laws.
How is the net surplus of a cooperative
allocated & distributed? (RA 6938)

ARTICLE 86. NET SURPLUS (cont.)

• The net surplus shall not be construed
as profit but as excess of payments
made by the members for the loans
borrowed, or the goods and services
bought by them from the cooperative
and which shall be deemed to have
been returned to them if the same is
distributed as prescribed therein.
How is the net surplus of a cooperative
allocated & distributed? (RA 6938)

ARTICLE 87. ORDER OF DISTRIBUTION

– The net surplus of every cooperative
shall be distributed as:
1. An amount for the reserve fund
which shall be at least 10% of the
net surplus:
a. The reserve fund shall be used for
the stability of the cooperative and
to meet net losses in its operations.
How is the net surplus of a cooperative
allocated & distributed? (RA 6938)

a. (cont.) The general assembly may

decrease the amount allocated to the
reserve fund when the reserve fund
already exceeds the share capital. Any
sum recovered on items previously
charged to the reserve fund shall be
credited to such fund
b. The reserve fund shall not be utilized
for investment other than those allowed
in this Code.
How is the net surplus of a cooperative
allocated & distributed? (RA 6938)

b. (cont.) Such sum of the reserve fund

in excess of the share capital may
be used at anytime for any project
that would expand the operations of
the cooperative upon the resolution
of the general assembly
c. Upon dissolution of the cooperative,
the reserve fund shall not be
distributed among the members.
How is the net surplus of a cooperative
allocated & distributed? (RA 6938)

c. (cont.) The general assembly may resolve:

i. To establish usufructuary trust fund for the
benefit of any federation or union to which
the cooperative is affiliated.
ii. To donate, contribute, or otherwise dispose of
the amount for the benefit of the community
where the cooperative operates. If the
members can not decide upon the disposal of
the reserve fund, the same shall go to the
federation or union to which the cooperative
is affiliated.
How is the net surplus of a cooperative
allocated & distributed? (RA 6938)

2. An amount for the education & training

fund, shall not be more than 10% of
net surplus. The by-laws may provide
that certain fees or a portion thereof be
credited to such fund.
3. An optional fund, a land and building
fund, community development fund,
and other necessary fund, the total of
which should not exceed 10% of net
surplus.
How is the net surplus of a cooperative
allocated & distributed? (RA 6938)

4. The remaining net surplus shall be

made available to the members in the
form of interest not to exceed the
normal rate of return on investments
and patronage refund.
The sum allocated for patronage
refund shall be made available at the
same rate to all patrons of the
cooperative in proportion to their
individual patronage, provided that:
How is the net surplus of a cooperative
allocated & distributed? (RA 6938)

a. In the case of a member patron

with paid up share capital
contributions, his/her
proportionate amount of
patronage refund shall be paid to
him/her unless s/he agrees to
credit the amount to his/her
account as additional share
capital contribution.
How is the net surplus of a cooperative
allocated & distributed? (RA 6938)

b. In the case of a member patron

with unpaid share capital
contribution, his/her
proportionate amount of
patronage refund shall be
credited to his/her account until
his/her share capital contribution
has been fully paid up.
How is the net surplus of a cooperative
allocated & distributed? (RA 6938)

c. In case of non-member patron, his/her

proportionate amount of patronage refund
shall be set aside in a general fund for
such patrons and shall be allocated to
individual non-member patrons only upon
request and presentation of evidence that
the amount is his/her patronage.
The amount so allocated shall be credited
to such patron toward payment of the
minimum capital contribution for
membership.
How is the net surplus of a cooperative
allocated & distributed? (RA 6938)

c. (cont.) When a sum equal to this

amount has accumulated at
anytime within a period specified
in the by-laws, such patron shall be
deemed and become a member of
the cooperative if he/she so agrees
or requests and complies with the
provisions of the by-laws for
admission of membership.
How is the net surplus of a cooperative
allocated & distributed? (RA 6938)

d. If within any time period

prescribed the by-laws,
subscribers with not fully paid
subscribed share capital & non-
member patrons who has qualified
for membership but does not
request or agree to become a
member or fails to comply with the
membership,
How is the net surplus of a cooperative
allocated & distributed? (RA 6938)

d. (cont.) the amount so

accumulated or credited to their
account together with any part of
the general fund for non-member
patrons shall be credited to the
reserve fund or to the education &
training fund of the cooperative,
at the option of the cooperative.
CDA Memorandum Circular No.
2000-08 Dated 26 Sept. 2000

Consistent with the accounting principles

of conservatism and the going concern, all
losses incurred by the cooperative in its
business operations shall be charged
against the Reserve Fund. In the event that
the Reserve Fund reflects a debit balance,
the allocation & distribution of net surplus of
the succeeding fiscal years are modified in
consonance with CDA Memorandum Circular
No. 2000-08 Dated 26 Sept. 2000, viz:
CDA Memorandum Circular No.
2000-08 Dated 26 Sept. 2000

a. Reserve Fund – not more than 65% of

the net surplus
b. Cooperative Education & Training Fund
– not more than 5% of the net surplus
c. Optional Fund – not more than 5% of
the net surplus
d. Interest on Capital & Patronage Refund
– the remaining net surplus but not less
than 25%
CDA Memorandum Circular No.
2000-08 Dated 26 Sept. 2000

The mentioned modified

distribution & allocation of net
surplus shall be enforced and
implemented until such time
that the debit balance of the
Reserve Fund account shall
have been fully offseted.