Cooperative Code 8: Administration (Directors, Officers, Committees)

Summary

This video lecture by Attorney Javier provides an in-depth overview of the administration of cooperatives under Philippine law. It explains the roles and responsibilities of the General Assembly, Board of Directors, officers, and various committees, highlighting key rules on elections, terms, disqualifications, meetings, compensation, and bonding requirements. The lecture also addresses liability issues, conflict of interest, and safeguards against nepotism, emphasizing accountability, ethical conduct, and proper governance. Viewers gain practical insights into how cooperatives operate, how leadership functions are structured, and the legal frameworks ensuring transparency, fairness, and the protection of cooperative members' interests.

Takeaways

• 😀 A cooperative is an artificial juridical entity, separate from its members, directors, officers, and committees, and cannot perform physical acts itself.
• 😀 The General Assembly is the highest policy-making body but cannot manage daily operations due to the large number of members.
• 😀 The Board of Directors manages the cooperative's affairs, sets policies, and is composed of 5–15 members elected for a two-year term, with a holdover period until successors are qualified.
• 😀 Directors must be cooperative members with voting rights, free from conflicts of interest, and cannot hold other positions in daily operations.
• 😀 Board meetings require a quorum, majority vote for decisions, and directors cannot vote or attend by proxy.
• 😀 Officers, including the Chairperson, Vice-Chairperson, General Manager, Treasurer, and Secretary, are appointed according to bylaws, with certain disqualifications to prevent conflicts of interest and nepotism.
• 😀 Committees such as Audit, Election, Mediation & Conciliation, and Ethics are either elected by the General Assembly or appointed by the Board to manage specific cooperative functions.
• 😀 Directors, officers, and committee members are liable for willful unlawful acts, gross negligence, bad faith, or acquiring personal interests in conflict with their duties, often requiring restitution of double profits.
• 😀 Contracts involving a director, officer, or committee member are valid if fair, reasonable, properly authorized, and the involved member’s presence or vote was not necessary for approval; otherwise, contracts are avoidable but can be ratified.
• 😀 Officers and committee members must undergo CDA-accredited training programs, with certification valid for five years; failure to comply may lead to disqualification for future positions.
• 😀 The cooperative law emphasizes accountability, transparency, and ethical governance to prevent conflicts of interest, nepotism, and misuse of confidential information.

Q & A

What is the legal nature of a cooperative under Philippine law?

A cooperative is considered an artificial being or juridical entity, separate and distinct from its members, directors, and officers, and therefore cannot perform physical acts itself.

Why is the Board of Directors necessary in a cooperative?

The Board of Directors manages the day-to-day affairs of the cooperative, providing strategic planning, policy formulation, and direction-setting, because the General Assembly may be too large to meet frequently.

What is the composition and term of the Board of Directors?

The board is composed of 5 to 15 members elected by the General Assembly for a 2-year term, with directors holding office until successors are elected and qualified (holdover period).

Who is eligible to become a director and what are the disqualifications?

To be a director, one must be a member with voting rights and meet legal and bylaw qualifications. Disqualifications include engaging in a conflicting business, being a CDA officer/employee (except in CDA cooperatives), or being a public elective official (with certain exceptions).

What are the responsibilities and liabilities of a director?

Directors must act loyally in the interest of the cooperative, can be held liable for conflicts of interest or acquiring opportunities that belong to the cooperative, and must furnish a surety bond for faithful performance of duties.

What are the main officer positions in a cooperative and their duties?

Key officers include the Chairperson (sets agenda, presides over meetings, signs documents), Vice Chairperson (acts in chairperson's absence), General Manager/CEO (oversees daily operations), Treasurer (manages funds), and Secretary (maintains records, issues share certificates).

What are the rules on compensation for directors?

Directors generally receive only reasonable per diems unless otherwise approved in the bylaws or by the General Assembly. Payment may be suspended if the cooperative reports a net loss or low dividend rate, and suspended amounts cannot be reclaimed later.

What committees are mandated in a cooperative and what are their functions?

Mandated committees include Audit (monitors management and audits), Election (supervises elections and proclaims winners), Mediation and Conciliation (handles disputes), and Ethics (enforces governance and ethical standards). Other committees may be created as needed, including an Executive Committee.

Under what conditions can a director, officer, or committee member be held liable?

They are liable if they knowingly approve unlawful acts, act with gross negligence or bad faith, acquire interests in conflict with their duties, misuse confidential information, or enter into contracts adverse to the cooperative without following proper safeguards.

What are the rules regarding contracts between a cooperative and its directors or officers?

Such contracts are valid if the director's presence or vote is not necessary for quorum or approval, the contract is fair and reasonable, and prior authorization is obtained. If these conditions are not met, the contract is avoidable unless ratified by a 3/4 vote of members with full disclosure.

What training requirements exist for officers of a cooperative?

All officers must undergo CDA-accredited training programs relevant to their roles. Certificates are valid for five years, after which retraining is required. Failure to comply can disqualify officers from future election or appointment.

What measures exist to prevent nepotism in a cooperative?

No two or more appointed officers related within the third civil degree of consanguinity or affinity may serve simultaneously in appointive positions, ensuring that appointments are based on merit and preventing conflicts of interest.