Officers and Conflict of Interest in Cooperatives

Article 42 of Republic Act No. 9520 governs officers of the cooperative and restricts certain removals and certain conflicts of interest.
The board of directors elects among themselves the chairperson and vice-chairperson.
The board of directors also elects or appoints other cooperative officers from outside of the board in accordance with the cooperative’s by-laws.
All officers serve during good behavior and shall not be removed except for cause after due hearing.
Loss of confidence is not a valid ground for removal unless evidenced by acts or omission causing loss of confidence in the honesty and integrity of the officer.
Article 42 imposes restrictions on who may be an appointive officer based on relationship up to the third civil degree and based on interests in conflict.

Article 42 prohibits any person who has relationship up to the third civil degree of consanguinity or affinity from serving as an appointive officer when two (2) or more persons with such relationship would be appointed officers in the cooperative.
Article 42 also prohibits any person engaged in a business similar to that of the cooperative from serving as an appointive officer.
Article 42 further prohibits any person who in any other manner has interests in conflict with the cooperative from serving as an appointive officer.
The circular interprets the prohibitions as applying specifically to “appointive officers” and not to certain elected positions.

Officers under Article 42 are treated by the circular through the cooperative officer categories under Article 5(11) of Republic Act No. 9520.
The circular recognizes officers as including:
- Members of the Board of Directors.
- Members of the different committee created by the general assembly.
- General Manager or the Chief Executive Officer.
- Secretary.
- Treasurer.
- Members holding other positions as may be provided for the by-laws of the cooperative.
The circular classifies officers based on who elects or appoints them:
- Officers elected by the General Assembly include members of the Board of Directors and members of the Audit and Election Committee.
- Officers appointed by the Board of Directors include Treasurer, Secretary, members of the Mediation and Conciliation Committee, members of the Ethics Committee, members of other committees unless otherwise provided in the by-laws, and members of the Board of Directors appointed by the remaining directors for vacancy other than expiration of term.
- Other board-related elected positions include members of the Board of Directors and other committee positions created by the general assembly.
The circular’s interpretation distinguishes whether the prohibition on relationship and conflict applies, depending on whether the position is appointed or elected.

Article 42 uses the third civil degree of consanguinity or affinity as the coverage limit for relationship-based conflict restrictions.
The circular provides relationship degrees covered by the prohibition:

Relationship by Consanguinity
- First Degree: Parent to Child.
- Second Degree: Grandparent to Grandchild; Brother to Sister.
- Third Degree: Uncle to Child; Aunt to Child; Great-Grandparent to Great Grandchild.
Relationship by Affinity
- First Degree: Parent-in-law to Daughter/Son-in-law.
- Second Degree: Brother-in-law to Sister-in-law.
- Third Degree: Great-Grandparent-in-law to Great Granddaughter/Great Grandson-in-law; Uncle/Aunt in-law to Niece/Nephew in-law.
The circular interprets “relationship” in a way that treats husband and wife as a one person with the same interest, and therefore applies the prohibition on appointive officers to them.

The circular interprets Article 42 as permitting officers who are elected to hold positions even if they have relationship up to the third civil degree of consanguinity or affinity within the same cooperative.
The circular identifies these permitted “elected” positions as those under its paragraph B category, covering elected officers such as:
- Members of the Board of Directors elected by the General Assembly.
- Members of the Audit and Election Committee elected by the General Assembly.
The circular interprets the prohibition on relationship as applying to appointive officers under its paragraph C category.
The circular states that there shall be no two (2) or more persons with relationship up to the third civil degree who may serve in the same cooperative in the appointed officer positions covered by Article 42.
The circular further provides a specific allowance for appointive officers: an elected officer may have one (1) appointed relative within the third civil degree of consanguinity or affinity, but there shall be no relationship up to the third civil degree among the appointed officers.

The circular provides information and guidance for the application of Article 42 of Republic Act No. 9520 to cooperative officer selection and conflict-of-interest compliance.
The circular is issued for the Board of Administrators and is formally approved under BOA Resolution No. 32-S-2011.
The chairperson of the Board of Administrators is Emmanuel M. Santiagouel, Ph. D., as shown by the signature authorizing the circular.