Law Summary
Objectives of Transport Service Cooperatives
- Equitable distribution of income by increasing members' income and purchasing power.
- Improve social and economic conditions of members.
- Integrate and rationalize public transport systems.
- Promote route responsibility and efficient utilization of public utility vehicles.
- Enhance revenue generating projects and programs.
Promotion Policies
- OTC encourages formation and growth of transport cooperatives nationwide in coordination with LTFRB, CDA, LGUs, and DOTC.
- Operators not in cooperatives encouraged to organize or join existing cooperatives.
- Priority to franchise holders and legalization of units given to cooperatives.
- Exceptional cases allow driver-only cooperatives under strict conditions.
- Cooperatives may be formed by beneficiaries subject to necessity and compliance.
Definition of Transport Service Cooperative
- A registered cooperative with OTC accreditation providing public transport services under valid franchise or certificate of public convenience.
- Composed of operators, drivers, conductors, investors, allied workers, and users pooling resources.
Powers of Transport Service Cooperatives
- Exercise rights similar to persons or corporations.
- Engage in business enterprises, own property, enter contracts.
- Issue negotiable instruments, bonds, incur indebtedness.
- Undertake powers necessary to fulfill objectives.
Objectives and Functions of Cooperatives
- Increase members’ income and employment.
- Provide social benefits (Medicare, SSS, retirement, insurance).
- Promote discipline, efficiency, and better transport services.
- Rationalize traffic rules and improve safety.
- Operate business enterprises, control vehicle use, provide training, assist members to acquire vehicles, encourage savings and social programs.
Membership
- Minimum 15 natural persons with a common bond.
- Must meet qualifications (residence/work in operation area, education on cooperative matters).
- Voluntary membership without discrimination.
- Limited to one cooperative membership per person.
Capitalization and Vehicle Requirements
- Minimum authorized capital varies by vehicle type (e.g., P240,000 for tricycle, P3.2 million for aircraft).
- At least 25% subscribed and 25% of subscription paid-up.
- Minimum vehicle units vary for individual or cooperative-owned units.
- Exceptions permitted for remote areas.
Areas of Operation
- Organized among passenger lines converging at common points.
- Generally, one cooperative per route unless viability and complementary conditions exist.
- Cooperation encouraged over competition.
Organizational Procedures
- Organizers form a Core Group to handle surveys, documents, recruitment, capital collection, and seminar coordination.
- OTC assists in viability assessment, seminar conduction (CETOS), and preparation of feasibility studies.
- Applications evaluated within 15 days followed by OTC Board approval.
Cooperative Education and Transport Operations Seminar (CETOS)
- Mandatory for prospective members.
- Covers cooperative programs, legal frameworks, operational policies, and registration requirements.
- Certificate of attendance issued upon completion.
Membership Admission and Termination
- Written application, board approval, seminar completion, payment of fees, and agreements required.
- Obligations include participation, compliance with rules, patronage, and financial contributions.
- Termination for resignation, death, disability, insanity, insolvency, or board order.
- Suspension or expulsion after due notice for violations or harmful acts.
Administration and Governance
- General Assembly is the supreme authority composed of members in good standing.
- Board of Directors elected by the membership; odd number between 5 to 15.
- One member one vote principle; proxies prohibited.
- Board exercises supervision, policy-making, contract approval, fines, membership actions.
- Directors liable for violations; removal possible by two-thirds vote.
- Officers include chairman, vice-chairman, secretary, treasurer, and management staff with stated duties and qualifications.
- Board meetings at least monthly; special meetings possible with proper notice.
- Election Committee supervises elections, qualifications, and results.
Vehicle Operation
- Members must transfer or assign management of units to cooperative while retaining beneficial ownership.
- Cooperative may own and register vehicles.
- Franchises issued exclusively to cooperatives with member usage rights determined by membership status.
- Policies for dropping and substituting member units in franchise.
- Income and expenses tied to member-owners.
- Franchise application and endorsement procedures put in place.
Financial Operations
- Capital contributions primarily from members through shares; common and preferred stocks regulated.
- Minimum shares and payments set by membership category and vehicle type.
- Shareholder ownership limited to 20% to prevent domination.
- Cooperative first option on share transfers.
- External financing allowed with Board authorization.
- Fees and dues established to support operations; proper receipts and accountability required.
- Funds segregated into capital, savings, and other funds for designated uses.
- Net savings allocation includes reserve fund (≥10%), education/training fund (≤10%), optional funds, and patronage refunds.
- Annual financial reporting, auditing, budgeting, and bonding of accountable officers mandated.
Development Programs
- OTC to strengthen existing cooperatives through membership growth, restructuring, technical assistance.
- Integration through establishment of federations at provincial, regional, and national levels.
- Continuous training and education programs conducted.
Monitoring and Supervision
- Annual reports filed with CDA within 60 days after fiscal year, mandatory for good standing.
- OTC oversees general assembly meetings and may designate observers.
- Financial and operational audits conducted by OTC to ensure compliance and recommend improvements.
- Audit reports provided to cooperatives with follow-up on recommendations.
- Regular coordination with government agencies for uniform policy application.
- Certificates of Good Standing issued to compliant cooperatives, necessary for assistance eligibility.
Federation of Transport Service Cooperatives
- Federations composed of multiple cooperatives for business and non-business functions.
- Powers include representation, planning, coordination, education, credit services, and conflict resolution.
- Federations organized at provincial, city, sectoral, regional, and national levels.
- Membership open only to registered cooperatives; initial formation requires meet membership thresholds.
Administrative Sanctions
- Non-compliance with reporting and audit leads to non-issuance or withdrawal of Certificates of Good Standing or Accreditation.
- Failure to comply with audit recommendations may trigger registration cancellation procedures.
General and Final Provisions
- Rules apply to all registered and accredited transport service cooperatives and federations.
- OTC Chairman may issue supplementary regulations subject to DOTC approval.
- Repealing clause nullifies inconsistent past rules.
- Separability clause protects unaffected provisions if parts declared invalid.
- Effectivity set at 15 days after certification with UP Law Center as per Administrative Code of 1987.
This comprehensive framework ensures structured promotion, organization, supervision, and development of transport service cooperatives in the Philippines with clear governance, financial controls, vehicle operation, member rights and obligations, and regulatory compliance, supported by the Office of Transportation Cooperatives and related government agencies.