RE : San Dionisio Credit Cooperative (SDCC)

May 5, 2003 SEC OPINION NO. 18-03 Cos Farol Buenaventura & Associates Law Offices Rms. 201-202 Doa Eusebia Rodriguez Bldg., 0611 Quirino Avenue, San Dionisio, Paraaque City RE : San Dionisio Credit Cooperative (SDCC) Attention: Atty. Allan B. Cos Gentlemen : This refers to your letter dated 17 February 2003, inquiring whether your client, San Dionisio Credit Cooperative (SDCC) which is duly registered with the Cooperative Development Authority (CDA) in accordance with the Cooperative Code of the Philippines (RA 6938), still needs to register with the Securities and Exchange Commission (SEC). You pose this query because SDCC, being a multi-purpose cooperative filed an application to set up a school offering services for Preschool to Elementary level with the Department of Education (DepEd). On the other hand, it appears that the DepEd wants SDCC to register with SEC and to be informed if there is an existing school using the name "Escuela de San Dionisio" or one similar to it. You also stated that it is the position of your client that once a cooperative is registered with the CDA it does not need to register with the SEC, quoting Article 2 of RA 6938, which speaks of the autonomy or organizational integrity of cooperatives. It is your claim that SDCC, being a duly registered cooperative with the CDA in accordance with RA 6938, the institution or its school need not register with the SEC for the registration and regulations of cooperatives is vested by law upon CDA only, quoting Section 8 of Article 5 (definition of CDA), Articles 16 (Registration), 17 (Certificate of Registration) and 128 of RA 6938. For clarity, we divide the issue into two (2),to wit: 1. Whether or not a cooperative duly registered with the CDA needs to register with the SEC; and 2. Whether or not the institution or school of such CDA-registered-cooperative needs to register as a separate entity with the SEC. Relative to the first issue, Article 16 of RA 6938 provides: "ART. 16. Registration . A cooperative formed and organized under this Code acquired juridical personality from the date the Cooperative Development Authority issues a certificate of registration under its official seal. . . ." Since, a cooperative becomes a juridical person upon registration with the CDA under the aforequoted provision of law, cooperatives registered with said Authority need not register again with the SEC. ( Lopez, Vol. 1, p. 69 citing several SEC Opinions ) Relative to the second issue, the applicable law is the first paragraph of Section 25 of Batas Pambansa Blg. 232, as amended by Republic Act No. 7798, otherwise known as "The Education Act of 1982" (BP 232) ,which provides: ISCaDH "SEC. 25. Establishment of Schools . All schools shall be established in accordance with law. The establishment of new national schools and the conversion of existing schools from elementary to national secondary schools or from secondary to national secondary or tertiary schools shall be by law: Provided ,that any private school proposed to be established must incorporate as either a non-stock or a stock educational corporation in accordance with the provisions of the Corporation Code of the Philippines. This requirement may be waived in the case of family administered pre-school institutions ." (Emphasis supplied.) Corollary to the abovecited provision of law, quoted hereunder are the pertinent provisions of the Corporation Code of the Philippines : "Sec. 14. Contents of Articles of Incorporation . All corporations organized under this Code shall file with the Securities and Exchange Commission Articles of Incorporation ...." (Emphasis supplied) "Sec. 106. Incorporation . Educational corporations shall be governed by special laws and by the general provisions of this Code." "Sec. 107. Pre-requisites to incorporation . Except upon favorable recommendation of the Secretary of Education and Culture ,the Securities and Exchange Commission shall not accept or approve the Articles of Incorporation and By-laws of any educational institution." (Emphasis supplied) BP 232 requires the incorporation of any proposed private school. The Corporation Code requires registration with the SEC and favorable DepEd recommendation as a pre-requisite to incorporation. The exception to incorporation refers only to family administered pre-school institutions, of which subject-cooperative is not. In fine, the institution or school of SDCC has to be registered as a corporation with this Commission. DcICEa Very truly yours, (SGD.) VERNETTE G. UMALI-PACO General Counsel