Cooperations in the Philippines
The difference is how it is owned and operated to benefit those using its services by distributing the profits and earning evenly between members. It can be used for-profit and non-profit. All members in a cooperative, also known as ‘user owners’, must purchase shares and elect its officers and board of directors. Its main difference from a corporation is that each member only gets one vote instead of their influence being reliant on the shares they purchased.
Cooperatives are commonly established in the retail, healthcare, art, and restaurant industries. One of its main differences from other business entities is that the interests of the community balance the profits they make or the economic stability they bring.
Legal fees and capital requirements
To create a cooperative business in the Philippines, you need to accomplish several registrations and legal fees to avoid problems with the law.
The Cooperative Development Authority (CDA) will issue payment fees once you apply for business registration; once you go to the bank to pay, evidence in the form of ‘proof of payment’ must be passed either through physical or online means.
Here is a list of all the fees all companies are required to pay:
Legal and Research fee (LRF)-An additional LRF fee in an amount equivalent to one percent (1%) of the cost imposed but in no case lower than ten (10) pesos shall be collected on every fee for all applications for registration and amendment, petitions and complaints set by the Authority in the exercise and discharge of its regulatory functions.
Afterwards, you are required to register with certain government agencies to complete your capital requirements. These include the Bureau of Internal Revenue (BIR), Social Security Systems (SSS), Home Development Mutual Fund (HDMF) / Pag-IBIG Fund and even the local Barangay Office and Business Permit and Licensing Office (BPLO) relative to your corporation’s location.
You’ll also have to register with the Philippine Health Insurance Corporation (PhilHealth); they are the ones monitoring your employee’s wellbeing, and it's best to show them that you’re taking proper care of your people by paying a fixed amount for the employee’s health insurance fund.
Cooperative ownership structure
A cooperative business structure is owned and managed by an elected group of directors and officers; regular members are given the voting power to dictate the cooperative’s direction. All members could become part of the cooperative through the purchase of shares. However, unlike corporations, the amount they purchase will not increase the influence of their vote.
Essentially, a cooperative is democratically controlled by its members, who are often closely associated with the business as either producers or consumers of their product. Meaning this business can be influenced by its regular employees or even their everyday customer is, given that they have purchased shares in the business.
Types of cooperatives in the Philippines
Due to the ownership structures of cooperatives, each one tends to be largely distinct from one another. There are differences in the services provided in how the members are organised. There are six different types of cooperative enterprises you can establish in the country; their differences can give you an advantage the others do not possess. We’ve listed down these types so that you can make an informed decision on what best suits your business plans.
i. Credit cooperative
A credit cooperative in the Philippines is defined as the business that promotes and handles the savings of its members, along with the lending of services among them. It’s functioned by making a shared pool of funds to give each member financial assistance and financial services for a productive and provident purpose.
ii. Consumer cooperative
These cooperatives are among the most popular types used. They are owned and managed by the people who buy the cooperative's products and services. Its most effective way of accumulating profit is to procure products and services at their lowest cost while retaining the highest quality.
iii. Service cooperative
As its name suggests, this cooperative’s primary goal is to provide a service to each of its members. They can also assist the community on a not-for-profit basis.
iv. Producer’s cooperative
This was one of the first types of cooperatives; it was developed during the early 1880s to provide a solution for farmers’ production. The producer’s cooperative’s goal is to commercialise the input of its members by looking for the best price in the market. It will attempt to meet marketing requirements, explore, and access the market to help its product succeed.
v. Cooperative bank
Cooperative banking, also financial cooperatives, credit cooperatives, or credit unions, began their operation during the 1900s when they provided farmers with microcredits in the rural communities. Their objective is to give their members reliable financial service at the lowest cost while yielding the highest possible return. It utilises various deposit vehicles such as loans, credit, mortgages, insurance, financial planning, and more to achieve this goal.
vi. Multi-purpose cooperative
These types of cooperatives are created from the conglomeration of other cooperatives. These allow individual members to process raw commodities to benefit from market prices for their products and could profit by processing and marketing the value-added products they have incurred.
The registration process of a cooperative
To register a cooperative in the Philippines, you need to head to Cooperative Development Authority, the sole government agency that handles the registration of all types of cooperatives. To obtain a certificate of registration, the applicant must pass the following documents:
1.) Issuance of Cooperative Name Reservation Notice (CNRN)
- Submit this document to either the CDA Central Office or Regional Offices nationwide through personal, postal mail, courier, or online e-mail.
- You also need to pay to get a reservation with the proposed name of your cooperative business.
- Thirty (30) calendar days – Php 100.00
- Sixty (60) calendar days – Php 200.00
- Ninety (90) calendar days – Php 300.00
- Make sure to give your cooperative business a name in line with the prescribed guidelines.
- All reserved names shall be valid under the period specified in the Cooperative Name Reservation Notice.
2.) Issuance of Certificate of Registration (COR)
The prospective cooperative acquires its juridical personality upon issuing a Certificate of Registration.
3.) Issuance of Certificate of amendments
This is being issued in case of any amendments in the Articles of Cooperation and by laws of the Cooperative
4.) Issuance of Certificate of Authority (COA)
CDA shall issue a Certificate of Authority to cooperatives applying to establish a branch office upon compliance with the requirements. A Branch Office refers to a business office outside the principal office where cooperative activities and business operations are undertaken as per the approved cooperative development plan.
5.) Issuance of Letter of Authority (LOA)
CDA shall issue a Letter of Authority to cooperatives applying to establish a satellite office upon compliance with the requirements. Satellite Office refers to an office established by a cooperative outside of its principal/central office but within its area of operation to provide limited services to its members, but which does not maintain books of accounts as it is done only by the principal/central office.
5.) Issuance of Certificate of Recognition (COR)
This document needs to be issued for the organisation of a laboratory cooperative for minors (ages below 18 years old) by a Guardian Cooperative.
4.) Issuance of Certificate of Merger or Consolidation
This process merges two or more cooperatives into a single cooperative; this handles a case where there is a surviving cooperative and consolidates a cooperative in the case of consolidation.