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
herein.

Section 87. Order of Distribution. The net surplus of every cooperative shall be distributed as
follows:

(1) An amount for the reserve fund, which shall be at least ten per cent (10%) of net
surplus:
(a) The reserve fund shall be used for the stability of the cooperative and to meet net
losses in its operations. The general assembly may decrease the amount allocated to the
reserve fund when 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. 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 the dissolution of the cooperative, the reserve fund shall not be distributed
among the members. The general assembly may resolve:
(i) To establish a usufructuary trust fund for the benefit of any federation or union
to which the cooperative is affiliated; and
(ii) To donate, contribute, or otherwise dispose of the amount for the benefit of
the community where the cooperative operates. If the members cannot decide
upon the disposal of the reserve fund, the same shall go to the federation or union
to which the cooperative is affiliated.
(2) An amount for the education and training fund, which shall be not more than ten per
cent (10%) of net surplus. The by-laws may provide that certain fees or fines or a portion thereof
be credited to such fund.
(a) Half of the amounts transferred to the education and training fund annually under this
subsection maybe spent bythe cooperative for education and training and other purposes;
while the other half shall be credited to the cooperative education and training fund of the
respective apex organization of which the cooperative is a member. An apex organization
may be a federation or union.
(b) Upon the dissolution of the cooperative, the unexpended balance of the education and
training fund appertaining to the cooperative shall be credited to the cooperative
education and training fund of the above mentioned apex organization.
(3) An optional fund, a land and building, community development, and any other
necessary fund the total of which may not exceed ten per cent (10%).
(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 refunds.
The sum allocated for patronage refunds shall be made available at the same rate to all
patrons of the cooperative in proportion to their individual patronage: Provided, That:

(a) In the case of a member patron with paid-up share capital contribution, his
proportionate amount of patronage refund shall be paid to him unless he agrees to credit
the amount to his account as additional share capital contribution;
(b) In the case of a member patron with unpaid share capital contribution, his
proportionate amount of patronage refund shall be credited to his account until his share
capital contribution has been fully paid;
(c) In the case of a non-member patron, his 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 of the amount of his
patronage. The amount so allocated shall be credited to such patron toward payment of
the minimum capital contribution for membership. When a sum equal to this amount has
accumulated at any time within a period specified in the by laws, such patron shall be
deemed and become a member of the cooperative if he so agrees or requests and complies
with the provisions of the by-laws for admission to membership;
(d) If within any period of time specified in the by-laws, any subscriber who has not fully
paid his subscribed share capital or any non-member patron who has accumulated the
sum necessary for membership but who does not request nor agree to become a member
or fails to comply with the provisions of the by-laws for admission to membership, the amount so accumulated 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 and
training fund of the cooperative, at the option of the cooperative.

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