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Also, the matters contained in the following were written in accordance with the law, rules, and jurisprudence prevailing at the time of writing and posting, and do not include any future developments on the subject matter under discussion.
AT A GLANCE:
The Cooperative Development Authority (CDA) has recently issued Memorandum Circular 2024-04, establishing updated guidelines for the creation and operation of cooperative branch offices. These guidelines provide clear instructions for cooperatives aiming to expand their services by establishing branch offices, ensuring that growth remains orderly, compliant, and beneficial to cooperative members.
The Cooperative Development Authority (CDA) has recently issued Memorandum Circular 2024-04, establishing updated guidelines for the creation and operation of cooperative branch offices. These guidelines provide clear instructions for cooperatives aiming to expand their services by establishing branch offices, ensuring that growth remains orderly, compliant, and beneficial to cooperative members.
LEGAL BASES
This Memorandum Circular draws its authority from two key legislative acts:
- Article 2, Paragraph 1 of Republic Act No. 9520 which encourages the creation and growth of cooperatives to help people become self-reliant and achieve economic development and social justice.
- Republic Act No. 11364, Section 4 (d) which authorizes cooperatives to establish branches and satellite offices, allowing them to expand their services under CDA’s regulation.
PURPOSE
The circular aims to provide a structured framework for the establishment of cooperative branch offices. It ensures that any new branch adheres to proper procedures, complies with regulations, and effectively serves cooperative members.
SCOPE
All cooperatives, except credit cooperatives and cooperative banks, that wish to establish branch offices are covered by this circular. It applies to both newly established cooperatives and those with existing branches.
QUALIFICATION REQUIREMENTS
To establish a branch, a cooperative must meet the following criteria:
Location: The branch must be within the area where the cooperative operates and serves members living in that location.
Minimum Paid-up Capital: The principal office of the cooperative must meet a minimum paid-up capital, which varies depending on the classification of the cooperative:
- Primary Cooperative: Requires a minimum paid-up capital of Php 15 million.
- Secondary Cooperative: Requires a minimum paid-up capital of Php 20 million.
- Tertiary Cooperative: Requires a minimum paid-up capital of Php 25 million.
Special Type Cooperatives (those offering specific services):
- Insurance Cooperatives: Must have a paid-up capital of Php 700 million.
- Technology Service Cooperatives: Must have a paid-up capital of Php 150 million.
- Water Service Cooperatives: Must have a paid-up capital of Php 15 million.
Operating Capital Requirement for Branches: Each cooperative branch must maintain an adequate operating capital to ensure smooth operations. The required operating capital depends on the category of the cooperative or the amount specified in its business plan, whichever is higher:
- Primary Cooperative: Needs at least Php 10 million in operating capital.
- Secondary Cooperative: Needs at least Php 15 million in operating capital.
- Tertiary Cooperative: Needs at least Php 20 million in operating capital.
Special Type Cooperatives have specific operating capital requirements depending on their services:
- Insurance Cooperatives: Need an operating capital of Php 100 million.
- Technology Service Cooperatives: Need an operating capital of Php 70 million.
- Water Service Cooperatives: Need an operating capital of Php 10 million.
Financial Stability Requirement To ensure long-term viability, the cooperative must demonstrate financial stability:
- It should not have incurred a net loss for the last three consecutive years prior to the date of application.
- The cooperative’s net worth should show progressive growth during these three years, indicating sound financial management and an ability to sustain operations.
DOCUMENTARY REQUIREMENTS
When applying for a branch establishment, cooperatives must submit:
- A letter of request – The cooperative needs to submit a formal letter, signed by either the Chairperson or the General Manager. This letter must be authorized by the cooperative’s Board of Directors.
- A detailed business plan – The business plan is crucial and must include details about the proposed branch’s financial, technical, legal, and organizational aspects. It should also have financial projections for at least the first three years of operations. These projections must show that the branch will be sustainable and have enough operating capital to run smoothly during that period.
- A general assembly resolution – The cooperative’s General Assembly must pass a resolution that formally approves the establishment of the branch. This resolution should also specify the resources that will be allocated to operate the branch.
- Certification by the Chairperson/General Manager – The Chairperson or General Manager must sign a certification to confirm the following: a) Manual of Operations: The branch has its own manual detailing the policies and procedures for its operations, b) Address of the Branch: The certification must state the specific location of the new branch.
HOW MUCH IS THE PROCESSING FEE?
The processing fees for establishing a cooperative branch range from Php 1,000 to Php 5,000, depending on the category, with Primary cooperatives paying Php 1,000, Secondary Php 3,000, and Tertiary, Insurance, Technology Service, and Water Service cooperatives paying Php 5,000 each.
CONTINUING QUALIFICATIONS FOR A BRANCH OPERATION
Every cooperative that has established a branch must maintain certain standards to continue operating. These include providing:
- Office space and business signage indicating the branch’s cooperative status.
- A Manual of Operations.
- A complete management staff.
- A budget and operational plan.
- Proper bookkeeping and maintaining all required financial forms and reports.
- Displaying the following important documents:
- Certificate of Registration
- Certificate of Authority
- Business permit
- Certificate of tax exemption
- Operational structure
- Procedural flow of business transactions
- Necessary logistics, such as office furniture, cash registers, and safes.
Additionally, the cooperative must ensure that it complies with any other conditions set by the CDA.
CONDUCT OF VALIDATION — HOW THE BRANCH IS CHECKED.
When a cooperative applies to open a branch, the branch must go through a validation process to ensure everything is in order. If the cooperative cannot be inspected on-site (in person), the validation can be done offsite (remotely), but the cooperative must be informed in advance.
- The validator (the person checking) may ask for more documents during the validation process if needed.
- The validator will complete the validation within two (2) days from the time they are assigned to make sure they can gather all the information and prepare a complete report with recommendations.
JURISDICTION — WHO ISSUES THE CERTIFICATE?
The Certificate of Authority for a cooperative branch is given by the Extension Office (EO) of the Cooperative Development Authority (CDA). This office is where the cooperative’s main office is located. They check that the cooperative meets all the requirements before allowing it to open a branch.
If the branch is outside the area of the original EO or the Head Office (HO), the application must still go through them. They will check if the branch meets all the rules and regulations. If everything is in order and the new branch won’t affect other cooperatives nearby, the EO will approve the branch and issue the Certificate of Authority.
INFORMATION INCLUDED IN THE CERTIFICATE OF AUTHORITY
When the CDA approves a cooperative branch, they issue a Certificate of Authority, which contains the following information:
- A control number (like an ID number for the certificate).
- The name of the cooperative (it should be the same as the name of the main office).
- The addresses of the main office and the new branch.
- The date and place when and where the certificate was issued.
- The signature of the authorized CDA official.
This certificate officially allows the cooperative branch to operate legally.
INSPECTION OF BRANCH OFFICES
The Extension Office (EO) that oversees the area where the branch is located will conduct regular inspections of the branch. After the inspection, the EO will send the report to the EO responsible for the cooperative’s main office, which will review the findings and take the necessary actions.
ADMINISTRATIVE REGULATIONS (RULES FOR RUNNING THE BRANCH)
- The branch must have a separate book of accounts.
- There should be at least three staff members at the branch: a manager, bookkeeper, and cashier.
- The branch must follow its Manual of Operations.
- The branch should issue official receipts for every financial transaction.
- The branch must have a proper system in place for handling cash at all times.
- The branch must secure a barangay permit and a mayor’s permit to operate legally.
- The branch must submit operational reports (financial statements, cash flow, etc.) to the main office.
- The same operational reports should be sent to the CDA Extension Office.
- The branch must comply with all regulations set by the CDA and other government agencies.
TRANSFER AND CLOSURE OF A COOPERATIVE BRANCH
If a cooperative decides to transfer or close a branch, it must follow the rules outlined in MC 2020-17 and any amendments.
CHANGE OF NAME AND/OR ADDRESS OF THE COOPERATIVE
If the cooperative changes its name or address, it must apply for a new Certificate of Authority within fifteen (15) working days upon receipt of the Certificate of Registration of Amendment.
SANCTIONS
Any violations of these rules can lead to the cancellation of the branch’s Certificate of Authority, following due process.
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Alburo Alburo and Associates Law Offices specializes in business law and labor law consulting. For inquiries regarding legal services, you may reach us at info@alburolaw.com, or dial us at (02)7745-4391/ 0917-5772207/ 09778050020.
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