AN ACT PROVIDING FOR THE CREATION AND ORGANIZATION OF CREDIT SURETY FUND COOPERATIVES TO MANAGE AND ADMINISTER CREDIT SURETY FUNDS TO ENHANCE THE ACCESSIBILITY OF MICRO, SMALL AND MEDIUM ENTERPRISES, COOPERATIVES AND NONGOVERNMENT ORGANIZATIONS TO THE CREDIT FACILITY OF BANKS AND FOR OTHER PURPOSES

Sixteenth Congress
Third Regular Session

Begun and held in Metro Manila, on Monday, the twenty-seventh day of July, two thousand fifteen.

[ REPUBLIC ACT NO. 10744, February 26, 2016 ]

AN ACT PROVIDING FOR THE CREATION AND ORGANIZATION OF CREDIT SURETY FUND COOPERATIVES TO MANAGE AND ADMINISTER CREDIT SURETY FUNDS TO ENHANCE THE ACCESSIBILITY OF MICRO, SMALL AND MEDIUM ENTERPRISES, COOPERATIVES AND NONGOVERNMENT ORGANIZATIONS TO THE CREDIT FACILITY OF BANKS AND FOR OTHER PURPOSES

Be it enacted by the Senate and House of Representatives of the Philippines in Congress assembled:

Section 1. Title. – This Act shall be known as the “Credit Surety Fund Cooperative Act of 2015”.

Section 2. Declaration of Policy. – The State hereby recognizes the need to foster national development, promote inclusive growth, and reduce poverty by promoting the growth of micro, small and medium enterprises (MSMEs) that facilitate local job creation, production and trade in the country. Moreover, the State affirms its declared policy to foster the creation and growth of cooperatives as a practical vehicle for promoting self-reliance for the attainment of economic development and social justice. Further, it is the State’s policy to strengthen the cooperative movement in the Philippines by empowering the Cooperative Development Authority (CDA) and providing it with the necessary powers and resources to fulfill its mandate.

To attain these objectives, the State shall encourage and assist in the creation and organization of Credit Surety Fund Cooperatives (CSF Cooperatives) which shall be primarily tasked with administering their respective Credit Surety Fund (CSF). The CSF is designed to provide MSMEs, cooperatives, and nongovernment organizations (NGOs) with more inclusive access to bank credit, thereby enhancing their sustainability and growth.

Section 3. Statement of Objectives. – The purposes of this Act are as follows:

Section 4. Definition of Terms. – As used in this Act, the following terms shall mean:

Section 5. Credit Surety Fund Cooperative or CSF Cooperative. – The CSF Cooperative shall be organized as an LGU-partnered cooperative in accordance with the implementing rules and regulations to be promulgated by the CDA.

A CSF Cooperative may be established in a province or in a city.

Section 6. Articles of Cooperation. – A CSF Cooperative shall file its articles of cooperation and bylaws for registration, and any amendments of the same, with the CDA. Its articles of cooperation shall be signed by the shareholders acknowledged by them before a notary public.

The articles of cooperation shall set forth the items required by the implementing rules and regulations.

Section 7. Bylaws. – A CSF Cooperative formed and organized under this Act shall adopt bylaws not inconsistent with the provisions of this Act and its implementing rules and regulations. The bylaws shall be filed at the same time as the articles of cooperation and shall contain items required by the implementing rules and regulations.

Section 8. Registration. – A CSF Cooperative formed and organized under this Act acquires juridical personality from the moment the CDA issues a certificate of registration under its official seal. A certificate of registration issued by the CDA under its official seal shall be conclusive evidence that the CSF Cooperative is duly registered unless it is proven that the registration thereof has been cancelled.

Section 9. Tax Treatment of CSF Cooperatives. – A CSF Cooperative registered with the CDA shall enjoy the tax privileges of cooperatives under Republic Act No. 9520, otherwise known as the “Philippine Cooperative Code of 2008”: Provided, That the members of the CSF Cooperative which are not cooperatives shall be subject to regular taxes under the National Internal Revenue Code, as amended, and other tax laws.

Section 10. Board of Directors. – The members of the Board of Directors shall consist of the representatives of the member-cooperatives/NGOs, GFIs and other government agencies in accordance with the bylaws of the CSF Cooperative, Republic Act No. 9520, this Act and its implementing rules and regulations.

The LGU representative shall sit as an ex officio member without voting rights.

Section 11. Powers and Responsibilities of the Board of Directors. – The Board of Directors shall have the following powers and responsibilities:

Section 12. Authorized, Subscribed and Paid-Up Capital of CSF Cooperatives. – At least twenty-five percent (25%) of the authorized capital share as stated in the articles of cooperation must be subscribed at the time of registration, and at least twenty-five percent (25%) of the total subscription must be paid upon subscription. In no case shall the paid-up capital share be less than five thousand pesos (P5,000.00): Provided, That the required paid-up capital share for CSF Cooperatives may be increased every five (5) years, when necessary, upon determination by the CDA.

For purposes of this Act, the CSF shall not be deemed as part of the authorized capital stock.

Section 13. Establishment of a CSF. – A CSF Cooperative shall set up one CSF which shall be created to provide alternative means of collateral cover for the loans or credit accommodations obtained by qualified borrowers from lending banks. The initial contributions to the CSF shall come from participating member-cooperatives/NGOs, GFIs and other institutions/government agencies in a province and/or city.

Pursuant to the Cooperative Code of 2008 which provides that the government and all its branches, subdivisions, instrumentalities and agencies shall ensure the provision of technical guidance, financial assistance and other services to enable cooperatives to develop into viable and responsive economic enterprises, an LGU may contribute to the CSF in the form of an investment or grant, in an amount at least equal to the total contributions of the member-cooperatives/NGOs.

GFIs and other institutions/government agencies may also contribute to the CSF in the form of investment or grant which may or may not be equal to the total contributions of the member-cooperatives/NGOs.

Section 14. Composition of the CSF. –

Section 15. Usage of the Fund. – The contributions pooled from the abovementioned parties shall constitute the CSF, to be used as surety for the loans of qualified borrowers from lending banks. The CSF shall be deposited in trustee bank/s as herein defined, and shall only be invested or placed in safe and high-yielding instruments such as government securities.

Section 16. Maximum Loan Availment. – The maximum amount that may be borrowed by qualified borrowers under the program shall not exceed ten (10) times its contributions to the Fund at any given time.

Section 17. Administration of the Fund. – The CSF operation shall be administered by the CSF Cooperatives which is governed by the Board of Directors. The Board of Directors shall designate bank/s, authorized by the BSP to engage in trust and other fiduciary business under Republic Act No. 8791, otherwise known as “The General Banking Law of 2000””, to act as trustee bank/s and manage the CSF subject to additional eligibility requirements as may be provided for in the implementing rules and regulations.

Section 18. Withdrawal of Contributions. – Subject to the procedures and requirements stated in the implementing rules and regulations, a member-cooperative/NGO and other private institutions may withdraw all or part of its contributions: Provided, That it has no outstanding obligation on account of the surety agreements issued and subject to such reasonable terms and conditions such as, among others, the liquidity of the Fund. LGUs, GFIs and other government agencies may only withdraw their contribution upon dissolution of the CSF Cooperative.

Section 19. Cooperative Development Authority. – Pursuant to its constitutional mandate to promote the viability and growth of cooperatives as instruments of equity, social justice and economic development under Republic Act -No. 6939 creating the CDA, the CDA shall be the government entity in charge of registration, regulation and supervision of CSF Cooperatives. In order to implement the provisions of this Act, authority is hereby granted to the CDA to create an additional department specifically designated for CSF Cooperatives.

Section 20. Role of the Bangko Sentral. – Pursuant to its mandate to provide policy direction in the areas of money, banking and credit under Republic Act No. 7653, otherwise known as the New Central Bank Act, and to enhance credit creation in the rural areas, and achieve a more inclusive financial system, the Bangko Sentral shall have the following powers:

Section 21. Books of Accounts, Records, Reportorial Requirements and Administrative Fees. – Subject to the requirements stated in the implementing rules and regulations, the CSF Cooperative shall set and keep accurate and internal financial controls.

The reportorial requirements and administrative fees required from CSF Cooperatives, taking into consideration their unique character and purposes, shall be provided in the implementing rules and regulations.

Section 22. Implementing Rules and Regulations. – Within sixty (60) days from the effectivity of this Act, the CDA, the DOF, and the BSP shall promulgate the implementing rules and regulations for the effective implementation of this Act.

Section 23. Governing Law. – The provisions of this Act and its implementing rules and regulations shall primarily govern the organization, establishment, governance and operation of CSF Cooperatives. The provisions of the Cooperative Code of 2008 shall apply only insofar as they are not inconsistent herewith.

Section 24. Interpretation and Construction. – In case of doubt as to the meaning of any provision of this Act or the regulations issued in pursuance thereof, the same shall be liberally construed and resolved in favor of the establishment of the CSF Cooperatives.

Section 25. Transitory Provisions. – All existing CSF agreements established prior to the effectivity of this Act, pursuant to the BSP’s CSF Program are hereby deemed eligible to be registered at the CDA as CSF Cooperatives, subject to the rules of registration as provided by this Act and its implementing rules and regulations.

Section 26. Amendatory Clause. – The pertinent provisions of Republic Act No. 6938, as amended by Republic Acts Numbered 9520, 8523, 3844, 7160, as well as all other laws, presidential decrees, rules and regulations, executive orders, or parts thereof that are inconsistent with the provisions of this Act shall be deemed amended accordingly.

Section 27. Separability Clause. – Should any provision of this Act be declared unconstitutional, the other provisions not affected thereby shall continue to be in full force and effect.

Section 28. Effectivity. – This Act shall take effect fifteen (15) days after its publication in the Official Gazette or in two (2) newspapers of general circulation.

Approved,

This Act which is a consolidation of Senate Bill No. 2909 and House Bill No. 6007 was finally passed by the Senate and the House of Representatives on November 26, 2015 and December 2, 2015, respectively.

Approved:

BENIGNO S. AQUINO III
President of the Philippines

Lapsed into law on FEB 06 2016
Without the signature of the President,
In accordance with Article VI, Section
27 (1) of the Constitution.