Introduction to Cooperatives and Membership in the Philippines

In the Philippines, cooperatives are autonomous associations of persons united voluntarily to meet their common economic, social, and cultural needs and aspirations through a jointly owned and democratically controlled enterprise. This framework is enshrined in Republic Act No. 9520, otherwise known as the Philippine Cooperative Code of 2008, which amended the earlier Cooperative Code (Republic Act No. 6938). The Cooperative Development Authority (CDA) serves as the primary regulatory body overseeing the registration, operation, and dissolution of cooperatives.

Membership in a cooperative is open to all natural persons or juridical entities who can use the services of the cooperative and are willing to accept the responsibilities of membership. Upon joining, members are required to subscribe to a minimum share capital, which forms the financial backbone of the cooperative. Share capital represents the member's investment and entitles them to participate in the cooperative's activities, including voting rights (typically one member, one vote, regardless of shares held) and patronage refunds or interest on share capital.

However, membership is not perpetual. The Cooperative Code allows members to terminate their membership voluntarily, which often involves the withdrawal of their share capital. This process must adhere to the cooperative's bylaws, the Cooperative Code, and any relevant CDA regulations to ensure fairness and protect the cooperative's stability.

Legal Basis for Share Capital Withdrawal

The right to withdraw share capital is rooted in Article 30 of Republic Act No. 9520, which outlines the termination of membership. A member may withdraw from the cooperative for any valid reason, provided they give a written notice of at least sixty (60) days to the board of directors. The withdrawal becomes effective upon approval by the board or at the end of the notice period, whichever comes later, unless the bylaws specify otherwise.

Key provisions include:

Voluntary Withdrawal: Members can initiate withdrawal without needing to justify beyond a "valid reason," which is broadly interpreted but must not violate the cooperative's bylaws or public policy.
Involuntary Termination: While not directly related to voluntary withdrawal, it's worth noting that cooperatives can expel members for cause (e.g., non-payment of obligations, violation of bylaws), which may also trigger share capital refund processes.
Share Capital Refund: Upon termination, the member is entitled to the refund of their share capital, including any accrued interest or patronage refunds, subject to deductions for outstanding obligations. Article 31 stipulates that the refund should be at par value or book value, whichever is lower, to prevent undue financial strain on the cooperative.
CDA Guidelines: The CDA issues memoranda and circulars, such as Memorandum Circular No. 2011-05 on Cooperative Accounting, which guide the computation and timing of refunds. Refunds must not impair the cooperative's solvency, and in cases of financial distress, they may be deferred.

Additionally, the cooperative's bylaws, which must be registered with the CDA, often detail specific procedures, including the form and content of withdrawal letters, approval timelines, and any penalties for early withdrawal.

Eligibility and Conditions for Withdrawal

Not all members can withdraw share capital at any time. Eligibility depends on several factors:

Membership Duration: Some cooperatives require a minimum membership period (e.g., one year) before allowing withdrawal, as specified in the bylaws, to ensure commitment and stability.
Outstanding Obligations: Members must settle all debts, loans, or other liabilities to the cooperative. If unpaid, these can be offset against the share capital refund.
Timing Restrictions: Withdrawal may be restricted during certain periods, such as fiscal year-end audits or when the cooperative is undergoing reorganization, to avoid disrupting operations.
Impact on Cooperative: The board may deny or delay withdrawal if it would jeopardize the cooperative's financial health, per Article 31. In such cases, the member can appeal to the CDA.
Special Cases: For credit cooperatives, additional rules from the Bangko Sentral ng Pilipinas (BSP) may apply if the cooperative handles deposits. Multi-purpose cooperatives might have sector-specific conditions.

Members who are also employees or officers may face additional scrutiny to avoid conflicts of interest.

The Procedure for Share Capital Withdrawal

The withdrawal process typically follows these steps:

Preparation: Review the cooperative's bylaws and articles of cooperation for specific requirements. Gather supporting documents, such as membership certificate, proof of share contributions, and evidence of settled obligations.
Drafting the Withdrawal Letter: This is the formal initiation of the process. The letter must be addressed to the board of directors or the designated officer (e.g., the chairperson or manager).
Submission: Submit the letter in person, via registered mail, or electronically if allowed by the bylaws. Retain a copy for records.
Board Review: The board reviews the request within the 60-day notice period. They may request additional information or hold a hearing.
Approval and Refund: Upon approval, the cooperative computes the refund amount. Payment is usually made within a reasonable time, often 30-90 days, in cash, check, or transfer.
Documentation: The member receives a termination certificate or receipt, and the cooperative updates its membership registry.

If denied, the member can file a complaint with the CDA under its dispute settlement mechanisms.

How to Write a Share Capital Withdrawal Letter

The withdrawal letter serves as the official notice and must be clear, concise, and professional to avoid delays or rejections. It should comply with the cooperative's bylaws and the Cooperative Code. Below is a comprehensive guide to drafting it.

Essential Elements of the Letter

Heading and Date: Include the member's full name, address, contact details, and membership number at the top. Date the letter.
Addressee: Address it to the "Board of Directors" or the specific person/office as per bylaws, including the cooperative's full name and address.
Subject Line: Use a clear subject, e.g., "Notice of Withdrawal of Membership and Request for Share Capital Refund."
Salutation: Formal, e.g., "Dear Members of the Board."
Body:
- Introduction: State the purpose clearly, e.g., "I am writing to formally notify the Board of my intention to withdraw my membership from [Cooperative Name] effective [date, at least 60 days from submission]."
- Reason (Optional): While not mandatory, providing a brief, valid reason (e.g., relocation, change in needs) can facilitate approval.
- Details of Shares: Specify the number of shares, total contribution amount, and any accrued benefits.
- Settlement of Obligations: Affirm that all dues and loans are paid or request an offset if applicable. Attach proof if necessary.
- Request for Refund: Explicitly request the refund of share capital at par or book value, plus any interest or refunds due.
- Contact Information: Provide details for follow-up.
Closing: End politely, e.g., "Thank you for your attention to this matter." Sign with full name and signature.
Attachments: List any enclosed documents, such as ID copies, passbook, or receipts.

Common Pitfalls to Avoid

Vague Language: Be specific about dates and amounts to prevent misinterpretation.
Short Notice: Ensure the effective date complies with the 60-day rule.
Incomplete Information: Omitting membership details can lead to delays.
Emotional Tone: Maintain neutrality; avoid accusations or demands that could antagonize the board.
Non-Compliance: If the bylaws require notarization or witnesses, include them.

Sample Share Capital Withdrawal Letter

[Your Full Name]
[Your Address]
[City, Province, ZIP Code]
[Email Address]
[Contact Number]
[Membership Number]
[Date]

Board of Directors
[Cooperative Name]
[Cooperative Address]
[City, Province, ZIP Code]

Subject: Notice of Withdrawal of Membership and Request for Refund of Share Capital

Dear Members of the Board,

I, [Your Full Name], a regular member of [Cooperative Name] with Membership Number [Number], hereby give formal notice of my intention to withdraw my membership from the cooperative, effective [Effective Date, at least 60 days from today].

My decision is based on [brief reason, e.g., personal relocation to another province]. I have subscribed to [number] shares with a total contribution of PHP [amount], as evidenced by my membership certificate and contribution records.

I confirm that all my obligations to the cooperative, including any outstanding loans or dues, have been fully settled [or: please offset any remaining balance from my share capital]. Attached are copies of relevant documents for your reference.

Pursuant to Article 30 of Republic Act No. 9520, I kindly request the refund of my share capital at par value or book value, whichever is applicable, along with any accrued interest on share capital and patronage refunds due to me. Please process this request and inform me of the computed amount and payment schedule.

I can be reached at [contact details] for any further information or clarification needed.

Thank you for your prompt attention to this matter and for the opportunities provided during my membership.

Sincerely,

[Your Full Name]
[Signature]

Attachments:

Copy of Membership Certificate
Proof of Share Contributions
Settlement Receipts (if applicable)

Rights and Obligations Upon Withdrawal

Member's Rights: Entitlement to a fair refund, access to records for verification, and appeal rights to the CDA if aggrieved.
Obligations: Continue fulfilling duties until withdrawal is effective; non-disclosure of confidential information post-withdrawal.
Cooperative's Duties: Timely processing, transparent computation, and non-discrimination.
Tax Implications: Refunds may be subject to withholding taxes under the Tax Code, especially if considered income.
Effects on Benefits: Withdrawn members lose voting rights, access to services, and future patronage but retain claims on prior entitlements.

Special Considerations in Different Types of Cooperatives

Credit Cooperatives: Regulated by both CDA and BSP; withdrawals may require liquidity checks.
Agricultural Cooperatives: May tie withdrawals to crop cycles or harvest seasons.
Housing Cooperatives: Share withdrawal often linked to property transfer.
Workers' Cooperatives: Employee-members may need to coordinate with labor laws.

Dispute Resolution and Legal Recourse

If disputes arise (e.g., delayed refunds), members can seek mediation through the cooperative's internal mechanisms, then escalate to the CDA's Adjudication and Conciliation Unit. Judicial recourse is available in regular courts for enforcement, but cooperatives encourage amicable settlements per Article 137 of the Code.

Conclusion

Withdrawing share capital from a Philippine cooperative is a structured process designed to balance individual rights with collective stability. By adhering to the legal framework and crafting a well-drafted letter, members can ensure a smooth transition. Proper documentation and understanding of bylaws are key to avoiding complications.