Proclaiming Oct 20 as Special National Holiday

Policy, purpose, and guiding objectives

The transport cooperative program is directed to attain a more equitable distribution of income and wealth by increasing cooperative members’ income and purchasing power.
The program aims to upgrade the social and economic conditions of members of transport service cooperatives.
The program is geared toward maximum integration and rationalization of the public transport systems by measures that give significance to “route responsibility,” maximize utilization of available public utility vehicles under cooperatives, and eradicate destructive competition.
The program seeks to enhance revenue-generating projects/programs of transport service cooperatives.
The objectives of every transport service cooperative include increasing and establishing members’ income through continuing employment opportunities and improving commuting public transportation services.

Core definition and coverage

A transport service cooperative is a cooperative assisted in its organization and accredited by the OTC, and registered with the Cooperative Development Authority (CDA), to render public service as authorized under a franchise or Certificate of Public Convenience (CPC) and necessity duly issued by the concerned agencies.
Authorization is issued by LTFRB for land transportation, MARINA for water transportation, CAB for air transportation, and LGUs for tricycle transportation.
Membership and participation include persons such as operators, drivers, conductors/conductresses, pilots, investors, allied workers, users or commuters, who pool skill, savings, and other resources including vehicles/aircrafts/watercrafts to operate a business enterprise for efficient carriage of passengers and goods.

Cooperative powers, objectives, and functions

A transport service cooperative may exercise rights and privileges granted to persons, partnerships, and corporations under existing laws.
A transport service cooperative may establish and operate business enterprises of all kinds as its needs dictate and capabilities allow, subject to existing laws.
A transport service cooperative may own and dispose of property, enter into contracts, sue and be sued, and issue or transact negotiable instruments and other obligations connected with its business operations.
A transport service cooperative may issue bonds, debentures, contract indebtedness, and secure obligations with mortgage of deed of trust or pledge or lien on real or personal properties.
A transport service cooperative is tasked to operate transport-related goods and services for economic and efficient operations, control and direct members’ vehicle use, provide training and education, assist member-drivers acquire vehicles via financing, encourage continuing savings for capital build-up, and encourage participation in programs providing social services and benefits.

Promotion, organization, and accreditation procedures

The OTC has authority and responsibility in promotion, organization, supervision, accreditation, and development of transport service cooperatives.
The OTC promotes transport service cooperatives nationwide and coordinates with LTFRB, CDA, LGUs, and other government agencies, guided by the overall transport rationalization plan developed by the Department of Transportation and Communications (DOTC).
Operators not in cooperatives are encouraged to join existing cooperatives or organize new ones as necessary.
In Metro Manila, the promotion is geared toward operators with valid authority to operate until the moratorium on granting franchise is lifted.
Priority in organizing new transport service cooperatives is given to franchise holders.
If legalization of units is being undertaken, the OTC coordinates with LTFRB, MARINA, CAB, and LGUs to ensure priority in legalization of units to enable cooperatives to increase their authorized units, and encourages individual operators to join existing cooperatives or organize new ones where none exist.

Special organization cases and area rules

The OTC may organize transportation cooperatives exclusively for drivers in highly exceptional cases in remote and isolated barangays/areas if: (1) prospective members have already organized into an existing association with a common bond as determined by the OTC; (2) the driver-cooperative is not organized by members of an existing transport service cooperative; and (3) the proposed cooperative is fully compliant with all organizational requirements prescribed by the OTC, except the vehicle requirement.
Transport service cooperatives may be organized by individuals as beneficiaries of the cooperative’s services if: (1) there is a necessity for the transport service in the area; (2) the cooperative’s service is limited to members; and (3) the cooperative is fully compliant with other organizational requirements prescribed by the OTC.
No cooperative shall be organized along a single route unless the route is profitable enough as determined by DOTC route surveys to assure operational viability.
No two transportation cooperatives shall be organized on a particular route/line as far as practicable, and organizers of a new cooperative are encouraged to join an existing cooperative.
OTC may grant permission to organize a new cooperative on proposed routes if any of the following applies: viability for organizing another cooperative; potential service to the area; complementary operation with existing cooperatives; the existing cooperative cannot accommodate more members and units without seriously prejudicing operations; the proposed cooperative has a different route structure; or the existing cooperative does not object or endorses the new organization.
If a proposed area of operations/routes are already covered by an existing cooperative’s application, organizers are encouraged to join the existing cooperative unless those routes are not practicable due to size, viability, or geographical location, or in the opinion of the OTC, should be best operated by more than one transport cooperative.
If there is no pending expansion application, or if expansion is not feasible or practicable, OTC allows new cooperative organization without prejudice to measures that protect the existing cooperative’s interests.
Individual franchise holders intending to form a cooperative and applying the same routes as an existing cooperative are encouraged to join the existing cooperative in the area when practicable.

Organizational procedures and CETOS

Organizers must form a Core Group/Organizing Committee existing only until the first meeting of the Board of Directors.
The Core Group is responsible for organizing the transport service cooperative and coordinating with the OTC on organization requirements.
The Core Group must prepare an economic survey/project feasibility study, create an ad-hoc committee for Articles of Cooperation and By-Laws, prepare documents and requirements for organization, recruit members, collect membership fees and initial paid-up capital, and assist in conducting CETOS.
The Core Group automatically dissolves after election and oath-taking of the Board Members and must turn over funds, records, and documents to the Board.
The OTC assists in determining viability and complying with registration requirements; conducts CETOS by fixing date/time/place and preparing syllabi, inviting resource speakers, and providing brochures/pamphlets; and assists in identifying viable business undertakings, preparing the cooperative feasibility study, and identifying possible financing sources.
Applications to organize/accredit must be filed with the OTC, which evaluates them within fifteen (15) days.
If applicants fully satisfy requirements, the application is presented to the OTC Board for approval; otherwise applicants are informed of deficiencies.
The application to organize must include: (1) list of prospective members indicating whether driver, driver-owner, operator, allied worker, or commuter; (2) list of units supported by authenticated copies of ORs/CRs showing motor/chassis number, owner name, and franchise number if any; and (3) clearance from LTFRB, MARINA, CAB, and LGUs that the cooperative is eligible for franchise.
CETOS is conducted by the OTC among prospective members in coordination with prospective transportation cooperatives.
CETOS generally covers: the transport cooperative program overview, definitions/rationale/objectives/functions; essential provisions of R.A. 6938/6939, franchising and traffic laws, model Articles and suggested organization structure; policies governing operations; financial/technical assistance; and CDA registration requirements.
The OTC issues certificates of attendance to participants who satisfactorily complete CETOS.

Membership rules and member rights

Membership is limited to individual and natural persons and is open to workers in the transportation industry and users of public transport services.
A minimum of fifteen (15) qualified natural persons may organize a transport service cooperative.
Prospective members must have a common bond of association, possess qualifications required by the cooperative, reside or work in the proposed area/s of operation, pledge to undertake membership responsibilities, complete CETOS, and patronize or intend to patronize the cooperative’s services as owners, users, or both.
Membership is voluntary, available without discrimination on social/political/racial/religious affiliation, and no person may be a member of more than one (1) transport service cooperative.
Membership requires favorable action by the Board of Directors on a written application in the prescribed form.
A denial by the Board may be appealed to the General Assembly, whose action is final.
Admission requirements include: eligibility under existing rules/By-Laws; completion of CETOS; majority Board approval; payment of membership fee and subscription of required shares; agreement to comply with OTC/CDA and regulatory agency rules and local police/regulatory requirements; execution of a membership agreement; and execution of a Management Agreement or Deed of Transfer.

Capitalization, vehicle minimums, and areas

Authorized capital stock must be at least: P240,000.00 for tricycle; P480,000.00 for jeepney, taxi, shuttle, motorized banca; P800,000.00 for mini-buses, buses and trucks; and P3,200,000.00 for aircraft.
At least 25% of authorized capital stock must be subscribed, and at least 25% of subscribed capital stock must be paid-up.
Paid-up capital must not be less than: P15,000.00 for tricycle; P30,000.00 for jeepney/taxi/shuttle/motorized banca; P50,000.00 for mini-bus, buses and trucks; and P200,000.00 for aircraft, or the amount necessary to assure viability as indicated in the feasibility study, whichever amount is higher.
Paid-up capital must be in cash.
Minimum vehicle units for proposed cooperatives are:
- Individual-owned: 15 jeepneys/taxis/tricycles/vans/AUVs; 10 bus and mini-bus; 5 motorized banca; 2 trucks.
- Cooperative-owned: 5 jeepneys/taxis/tricycles/vans/AUVs; 2 buses/mini-buses/motorized banca; 1 truck and aircraft.
The OTC may grant an exemption from the minimum number requirement in highly exceptional cases involving remote and isolated barangays.
Cooperative area of operations is organized from several or among combination of passenger lines converging into or passing through a common point.

Governance: General Assembly, Board, elections

The General Assembly consists of all members in good standing and has final authority in administration and management of cooperative affairs when duly convened and acting as a body.
The General Assembly elects and removes directors and committee members for just cause, hears and passes upon requests of the Board/general manager/committees, arbitrates disputes among board/committees/members, ratifies amendments to Articles/By-Laws, decides major financial issues (subject to legal restrictions), and exercises final authority on admission, suspension, expulsion of members and officers subject to OTC rules and existing laws.
Each member has one (1) vote regardless of shares; proxy voting is not allowed; voting agreements evading one-member one-vote are unenforceable.
The fiscal year runs from January 1 to December 31.
Regular General Assembly must be held at least once a year within sixty (60) days after year end unless CDA extends the date.
Special General Assembly may be called for urgent matters and must be called within thirty (30) days from receipt of a written request from at least thirty (30%) of total members in good standing unless CDA sets a later date.
Written notice with date/time/place/agenda must be delivered in person or mailed at least fifteen (15) days before any regular or special meeting.
Quorum for regular/special meetings is one-half plus one of members in good standing; quorum is determined based on members who have been members for at least six (6) months.
If quorum is not present, members present constituting at least thirty (30%) of members in good standing may transact business, but resolutions are not valid until subsequently approved and ratified in writing by at least two-thirds (2/3) of members in good standing within one (1) month.
Board membership is represented by drivers and operators, except where the cooperative is exclusively for drivers or individual users; drivers must represent at least 30% but not exceed 50% of total Board membership; Board consists of an odd number of not less than five (5) but not more than fifteen (15).
Directors are elected by secret ballot for a term of two (2) years and may be re-elected for not more than three (3) consecutive terms; ties for the last position are resolved in another election in the same General Assembly.
Directors must be members in good standing at least one (1) month before election and must not have any disqualification.
Directors are disqualified if: holding elective government position (except barangay council); having conflicting interest; absence from board meetings for three (3) consecutive meetings and/or total of five (5) meetings within a year without justifiable cause; removal by General Assembly; being an employee or having consanguinity/affinity within the third civil degree with the General Manager or Cashier; participating in profits of a third party doing business with the cooperative; belonging to a family group where one member is a director (family group up to third civil degree); or conviction for moral turpitude crime, or gross negligence, or administrative/civil finding involving financial/property accountability.
The Board has powers including general supervision/control of assets and management, prescribing management policies consistent with laws/By-Laws/resolutions, acting on membership applications and resignations, entering essential contracts, imposing fines/suspension/expulsion for justifiable cause subject to by-laws and appeal to General Assembly, designating depositories, causing bonding of specified officers before assuming position, determining funding needs and recommending fundraising methods, recommending major financial issues to the General Assembly, and recommending By-Laws amendments.
The Board members are solidarily liable for civil suits arising from unlawful transactions/acts/omissions, except those who protested at the time of action or did not participate.
A board member who commits an offense is penalized pursuant to Section 12, Article III and Article 124 (3) of R.A. 6938.
Board vacancies are filled within ten (10) days when the remaining board has quorum; successors serve unexpired term, but the appointed directors cannot constitute a majority. If remaining members lack quorum, the General Assembly is immediately convened within thirty (30) days to elect successors, except when vacancy occurs within three (3) months from a regular general assembly meeting, in which case election occurs at that meeting.
Directors and officers may be removed for cause after opportunity to be heard by a two-thirds (2/3) vote of members in good standing present at a special or regular meeting called for removal; officers are removed by two-thirds (2/3) vote of all board members after opportunity to be heard.
The Board receives no regular compensation but may receive per diems for actual attendance and/or allowances necessary, with total per diems/allowances limited to a percentage of monthly gross revenue as established by the General Assembly; unstandardized allowances are unauthorized.
Board meetings must be held at least once a month, with special meetings called by the Chairman (or Vice Chairman in his absence) or by a majority of the Board for urgent matters; unless dispensed, notice/agenda must be served in writing at least five (5) days before each meeting.
Board quorum is a majority of the Board; minutes and resolutions must be signed by all members in attendance, certified by the Board Secretary, numbered for reference, and furnished to OTC and every member of the Board.

Election committee and election offences

An Election Committee is composed of an odd number of at least three (3) members elected during the last regular General Assembly preceding the Board election; it serves for a term of two (2) years until successors are elected and qualified.
The Election Committee supervises all elections, determines members in good standing and qualified members at least thirty (30) days prior to the next regular General Assembly, prepares notices or posts lists of voters and candidates qualified to be voted upon at least thirty (30) days prior to the General Assembly meeting, proclaims elected directors, and certifies quorum, election results, and resolution of any protest.
Election protests are governed by rules including service of notice by summon/notice at the candidate’s postal address; the protestee must answer within ten (10) days from receipt or from appearance if no summons; the Election Committee decides based on merits if no answer is filed; and the authenticated and verified voters list is conclusive on who had the right to vote.
Election offences include: coercion of members/subordinates to influence voting; threats/intimidation/terrorism and use of fraudulent devices or coercion causing violence or disadvantage to qualified voters; coercion of Election Committee officials/members; undue influence through promises or offers of expenditures from cooperative funds to induce votes; unlawful electioneering via solicitation/propaganda within the polling place and during the 15 days prior to election and on election day; use of cooperative funds or money deposited with a financing institution for election campaign; and carrying deadly weapons in the polling place and within a radius of 100 meters on election day.

Member status, rights, liabilities, termination

A member in good standing must: have paid required membership fee and minimum required share value as stated in the By-Laws; not be delinquent in subscription/payment obligations within the period specified in written notice/demand; have attended required seminars/training; have complied with member duties; and have not violated laws, rules/circulars/memoranda issued by OTC, cooperative By-Laws, membership agreement, or other required instruments.
Members in good standing have rights including participation and voting in assemblies, subject to a membership duration requirement: a member with at least six (6) months in the cooperative and in good standing for at least one (1) month before the General Assembly may vote.
Members in good standing may be elected as directors/officers/committee members subject to director/officer qualifications/disqualifications, examine cooperative records during designated hours, and avail benefits/incentives under laws and OTC policies.
Member benefits include reasonable-price access to cooperative business goods and services; allocation and use of permits/CPC, with member-owners/operators in good standing receiving priority; member-driver priority to drive units owned by the member-operator and the cooperative; social service program benefits such as SSS and Medicare, housing, retirement/pension, and insurance coverage; and assistance and opportunities for member-drivers to acquire vehicles through financing.
Members are entitled to income allocation for interest based on capital contribution or patronage refund proportional to cooperative patronage, and assistance in dealings with regulators for vehicle registration/renewal, franchise applications/petitions, and traffic violations.
Members must patronize the cooperative’s business.
A member is liable for cooperative indebtedness only to the extent of paid-up capital and unpaid subscription, unless by the member’s own acts or omissions the member has bound himself to criminal and/or civil liability.
Membership terminates upon resignation (with Board approval and written application setting terms), termination by Board order when the member leaves the area of operations or suffers total permanent disability that prevents performance, automatic termination on death, and termination on insanity and insolvency.
Suspension/expulsion may be imposed after due notice and hearing by the Board for: failure to comply with member duties/obligations and membership agreement terms for three (3) months without valid cause; acts violating cooperative by-laws/rules/decisions; acts injurious or prejudicial to cooperative interest and welfare; and violation of existing laws/rules/circulars/directives/orders/memoranda by OTC and other regulatory agencies.
Upon termination, the Board determines book value of member shares (not exceeding par value), member financial/property accountability, and other necessary matters; it pays the determined amount in money, but payment in cash is withheld if it impairs liquidity or diminishes reserves required under existing laws; and capital contribution payment must not be later than sixty (60) days.

Administration, officers, audit, and vehicle operations

The cooperative is administered through General Assembly and Board mechanisms described above.
The Chairman presides over General Assembly and Board meetings, reports operations to General Assembly and CDA/OTC and regulators, represents the cooperative in dealings with CDA/OTC, LTO/LTFRB, DOTC, and other agencies/banks/private institutions, signs stock certificates and required instruments unless authorized by Board, executes applicable laws/rules/By-Laws/decisions, and performs other duties assigned by law or General Assembly.
The Vice-Chairman assumes Chairman duties in absence or inability and is ipso facto Chairman of the Education and Training Committee.
The Secretary keeps custody of the cooperative seal and valuable non-accounting records and documents, issues notices of meetings, prepares minutes and submits copies to Education and Training Committee and CDA/OTC, maintains the registry book of member names and information, and assists election forms preparation in coordination with the Election Committee.
The Treasurer (from among members in good standing) has custody of books of accounts and other financial records, collects contributions/payments and issues receipts and deposits funds until a collector-cashier is appointed, monitors financial transactions, posts a bond for faithful performance, co-signs financial transactions/accounts with the bank, turns over all cooperative money/papers/documents/property upon successor election, and performs other Board-directed duties; the Treasurer is not related within the third civil degree of consanguinity/affinity to any director.
The Internal Audit Unit is created, composed of a Chairman and two (2) members appointed by the Board from among members in good standing qualified for internal audit, serving for two (2) years or until terminated for cause; it must provide monthly internal audit service, submit monthly audited financial reports to the Board and General Assembly during regular meetings, and maintain complete examination/inventory/working papers records. If auditing expertise is lacking, the Board may employ certified public accountants under its control and supervision.
The Education and Training Committee is composed of at least three (3) members appointed by the Board for two (2) years, with the Vice-Chairman ipso facto as Chairman; its duty is to educate members and prospective applicants on cooperative principles/methods and help acquire understanding of cooperative movement aims/purposes/philosophy.
The Board creates other committees as required.

General Manager, management staffing, and removal

The Board appoints the General Manager; the General Manager appoints other management staff subject to Board approval.
A director appointed as General Manager automatically ceases to be a Board member effective on appointment date.
The General Manager manages day-to-day affairs, supervises personnel, directs use of funds and properties according to General Assembly policies and under Board supervision to attain objectives.
The General Manager supervises members’ compliance with LTO/LTFRB/traffic bureau local police and other regulatory rules, appoints/employs/supervises/dismisses employees or management staff subject to Board policies, approves disbursements/purchases/issuance of materials and supplies, submits regular reports to the Board, and prepares operating budget while keeping within budget.
A person is disqualified from management positions if related to a director within the third civil degree of consanguinity or affinity; management staff members must not be related to each other within the third civil degree of consanguinity or affinity.
The Accountant/Bookkeeper appointment requires stated qualifications: commerce graduate major in accounting; at least two (2) years experience in cooperative/related business; honest and responsible; not engaged in business similar to the cooperative’s; not convicted of moral turpitude crimes or found guilty of gross negligence/grave misconduct in administrative proceedings or civil suit involving financial/property accountability; not addicted to gambling and without immoral or vicious habits; and willing to undergo pre-service and/or in-service training.
Management staff duties and responsibilities of the Accountant/Bookkeeper include maintaining cooperative books of accounts and updating them, preparing journal vouchers and reviewing/approving disbursement vouchers and related documents, preparing/reviewing reports and schedules required by management and government agencies, assisting the General Manager in annual budget preparation, and performing other duties assigned by the General Manager.
The Board fixes compensation and tenure of management staff.
The General Manager and management staff may be removed for just cause by majority vote of all Board members after the person is given an opportunity to be heard; the General Manager may recommend dismissal/removal of employees.

Vehicle operation and franchise allocation

Members must transfer the “management” of their units to the cooperative or assign units to the cooperative in consideration of shares corresponding to the value of units.
“Management” covers day-to-day activities by cooperative officers for efficient transport service, including designation of routes, scheduling trips, registration of vehicles, and overall supervision of units.
Members who transfer management remain beneficial owners and remain liable owners; vehicles assigned to the cooperative make the cooperative the beneficial owner; vehicle certificates of registration are issued by the LTO to the vehicle owner.
The cooperative may procure vehicles it owns and operates, register vehicles in the cooperative’s name, and is responsible for operational expenses (maintenance, registration, fuel, driver salaries) and civil liabilities in case of accidents, while all income accrues to the cooperative.
The issuance of CPC or franchise/authority in favor of a transportation cooperative must be endorsed and recommended by the OTC after the cooperative is organized according to EO 898 and R.A. 6938, accredited by OTC, and after members transfer management/assign units to the cooperative.
The cooperative is the exclusive owner of the franchise/authority secured from LTFRB, MARINA, CAB, and LGUs, and the franchise must indicate the cooperative’s name.
The cooperative allocates portions of franchise/authority only to members in good standing in this order: driver-owner, then small operators; preferred shareholders who are operators with more than five (5) units receive any remaining portion of the franchise/authority.
Units may be dropped from the cooperative’s franchise/authority for cause subject to cooperative by-laws and LTFRB and other franchising agencies’ rules; dropped units may be substituted by petition to the proper franchising agency.
Member-owners are entitled to income derived from operations of their units, while all expenses for safe, adequate, and efficient operation are the responsibility of member-owners.
Franchise applications are governed such that only applications for new franchise are preprocessed and endorsed by OTC, and OTC and franchising agencies may execute MOAs authorizing OTC to preprocess new franchise applications of transport service cooperatives and their members before action by franchising agencies; franchising agencies provide OTC copies of relevant documents and circulars to ensure preprocessing consistency with franchising policies.
Franchise applications refer to requests for authority to operate a public utility business in the Philippines and result in either a Provisional Authority (PA) or a Certificate of Public Convenience (CPC).