Supreme Court E-Library
Information At Your Fingertips

Pursuant to the provisions of Subparagraph (i), Paragraph (c), Section 7, Structural and Operational Reforms Between and Among Utilities of Rule 7, Distribution Sector, of the Implementing Rules and Regulations implementing Chapter VII, Section 57 Conversion of Electric Cooperatives of Republic Act No. 9136, otherwise known as the Electric Power Industry Reform Act of 2001, the National Electrification Administration (NEA) hereby promulgates, in accordance with its rule-making power provided under Section 5 of Presidential Decree No. 1645, the following Guidelines in the Conduct of Referendum in regard to the option given to electric cooperatives (ECs) to convert into either stock cooperative under the Cooperatives Development Act or a stock corporation under the Corporation Code.

CHAPTER I
Definition of Terms

Article 1. As used these guidelines, the following shall be construed to have the following respective meanings:

(a) "Act" - unless otherwise stated, refers to Republic Act No. 9136, otherwise known as the "Electric Power Industry Reform Act of 2001";

(b) "Bonafide Member" - refers to a person that has met all requirements set forth under the applicable EC by-laws and has been enlisted as such, with voting rights under the "one-man-one-vote" cooperative principle;

(c) "Conversion" _ refers to a change in the corporate form of the ECs, from being non-stock, non-profit, to being either stock cooperative or stock corporation as herein defined, resulting in the creation of a successor entity as such;

(d) "Cooperative Code" _ refers to Republic Act No. 6938;

(e) "Corporate Development Authority" or "CDA" _ refers to the entity created Under Republic Act No. 6939;

(f) "Corporation Code" _ refers to Batas Pambansa Bilang 68, otherwise known as "The Corporation Code of the Philippines";

(g) "District" _ refers to a town/municipality, or to a city, or to a portion thereof, or to a group of towns/municipalities contiguously located, within the coverage area of an EC, as defined in the by-laws of the EC;

(h) "District Meeting" refers to a gathering of the bonafide members of an EC from a particular district , and held within the geographical confines of such district;

(i) "Electric Cooperative" or "EC" _ refers to a Distribution Utility organized pursuant to Presidential Decree No. 269, as amended by Presidential Decree No. 1645;

(j) "General Assembly" _ refers to a gathering of all the bonafide members coming from all districts of an EC held within its coverage area, and usually conducted based on the annual schedule prescribed in the EC by-laws;

(k) "Membership Meetings" _ refer to a gathering of bonafide members of an EC, either as General Assembly, or as a District Meeting;

(l) "National Electrification Administration" or "NEA" _ refers to the government agency created under Presidential Decree No. 269, as amended, with additional mandate set forth in the Act;

(m) "Person" refers to a natural or judicial person, as the case may be;

(n) "Philippine Rural Electric Cooperatives Association, Inc." or "PHILRECA" _ refers to the National Association of EC's operating nationwide;

(o) "Referendum" - refers to an electoral process during which Bonafide Members of ECs register their respective votes on the issue of conversion through secret balloting, in designated voting centers, the conduct of which shall be under the supervision of NEA;

(p) "Secret Balloting" _ system of casting a vote by a bonafide member wherein his/her choice on the issue is registered in writing, and in private, on the prescribed ballot;

(q) "Securities and Exchange Commission" or "SEC" _ refers to the government agency created under Commonwealth Act No. 83;

(r) "Stock Cooperative" _ refers to a duly-registered association of Persons with a common bond of interest, who have voluntarily joined together to achieve a lawful common social or economic end, making equitable contributions to the capital required and accepting a fair share of the risks and benefits of the undertaking in accordance with the universally-accepted cooperative principles as defined under Article 4, Chapter I of the Republic Act No. 6938, otherwise known as the "Cooperative Code of the Philippines';

(s) "Stock Corporation" _ refers to an artificial being created by operation of law, with capital stock divided into shares, and authorized to distribute to its shareholders dividend out of its surplus profits, having the right of succession and the powers, attributes and properties expressly authorized by law or incident to its existence; and

CHAPTER II
General Provisions

Article 2. Massive Information Campaign. Prior to the conduct of a referendum, the electric cooperative Board of Directors and Management shall endeavor to undertake, in coordination with the NEA, CDA, SEC and PHILRECA, a massive information campaign, at the district level, or in each town/municipality within the EC's coverage area, in order to educate its member-consumers on the advantages and disadvantages, as well as the benefits and limitations, of conversion into either a stock cooperative or a stock corporation, vis-à-vis its present corporate form as a non-stock non-profit electric cooperative.

The information campaign shall likewise seek to inculcate into the minds of the member-consumer, the corporation and cooperative principles, and to apprise them of their rights, duties and obligations under the Corporation Code, the Cooperative Code and P.D. No. 269, as amended.

Article 3. Types of Membership Meetings. At any single time, membership meetings can take the form of a General Assembly or a District Meeting.

Article 4. Methods of Conduct of a Series of Membership Meetings  and Referendum. For purposes of consulting the member-consumers on the conversion issue, the series of district meetings may be undertaken:

4.1 Simultaneously _ wherein meetings are held on the same day at various venues (barangay's); or

4.2 Sequentially _ wherein meetings are held one after the other in different venues (barangay's).

Article 5. Notice of Membership Meetings. Aside from print and broadcast media available within the coop coverage area, written notices with the complete information for the meeting shall be mailed or delivered to the address of the member-consumers in addition to those that shall be posted in strategic areas of the district, not later than ten (10) days before the scheduled meeting.

Article 6. Masterlist of Voters. A sanitized masterlist of bonafide members entitled to vote in each district shall be prepared by the electric cooperative officials and employees concerned and shall be the basis for determining the attendance or turn-out of voters in each meeting held, whether simultaneous or sequential.

Article 7. Required Number of Votes for Conversion. The approval of at least a simple majority, or fifty percentum (50%) plus one of the required number of turn-out of voters or quorum in a referendum conducted for such purpose (AS PROVIDED IN RULE 7, SECTION 7, [c] [i] OF IRR R.A. 9136), shall be considered a valid decision for conversion. The required quorum to conduct a valid referendum shall be at least a majority of all bonafide members of the electric cooperative.

Article 8. Voting System

8.1 Each bonafide member shall be entitled to only one (1) vote.

8.2 Voting shall be done through "secret balloting"

8.3 No proxy voting shall be allowed.

Article 9. Over-all Decision. The final decision as to whether or not the coop will convert shall be based on the majority decision as culled from the result of the general assembly, or the cumulative results of the district assembly meetings, as the case may be.

CHAPTER III
Procedure/Mechanics

Article 10. In-House Activities

10.1 Board Resolution scheduling the district(s) date(s), venue(s) and time of the assembly must be passed by the Board of Directors;

10.2 Board Resolution appropriating the corresponding budget for the Activities is imperative;

10.3 The concerned departments of the coop shall prepare and execute the requirements set under the said Board Resolutions;

10.4 The Institutional Services Department shall prepare in not less than twenty-five (25) days before the General Assembly or District Meetings the sanitized masterlist of voters in alphabetical order and classified according to districts, municipalities and barangays to facilitate registration and voting; and

10.5 The Board Member of the concerned district shall be responsible in ensuring the success of the assembly/referendum/assembly in that district; and shall likewise preside in the district assembly meeting/s.

Article 11. Major Activities in the Program

11.1 Determination of attendance from the registration of voters.

Only bonafide members shall be allowed to register in the masterlist prepared by the electric cooperative.

(a) Where meetings are held simultaneously (meetings held on the same day at various venues/barangays), the total number of votes shall be determined on a cumulative basis;

(b) Where meetings are held sequentially (meetings held one after the other in different days in different venues/barangays), the same procedure in (a.1) shall be followed.

11.2 Introduction by the Presiding officer

11.3 Presentation of the issues related to conversion

(a) Presentation of the historical profile of the cooperative

(b) Presentation for the positive side/advantages

(c) Presentation for the negative side/disadvantages

(d) Open Forum

11.4 Process of voting (casting of votes through secret balloting and the subsequent canvassing of the ballots)

11.5 Declaration of the results by the Presiding Officer

11.6 Adjournment

Article 12. Documentation

12.1 Preparation of the minutes of meeting indicating the highlights, particularly the over-all decision of the bonafide members (whether to convert or not to convert).

12.2 If the vote is for conversion.

(a) Certificate of Election to Convert. A Certificate of Election to Convert shall be executed and acknowledged on behalf of the EC by its board president or vice-president under its seal, attested by its secretary, stating: (1) the name of the cooperative; (2) the address of its principal office; and (3) that the members of the cooperative have duly voted that the cooperative converted into a stock corporation or a stock cooperative;

(b) The board president or vice-president who executed the said Certificate shall execute an Affidavit which shall state that the statements in the certificate are true;

CHAPTER IV
Registration Requirements

Article 13. WITHIN 180 DAYS FROM THE DATE OF APPROVAL OF THE CONVERSION TO STOCK CORPORATION WITH SEC OR TO A STOCK COOPERATIVE WITH CDA, THE ELECTRIC COOPERATIVE SHALL FILE WITH THE SEC OR CDA AS THE CASE MAY BE, THE FOLLOWING:

13.1 ARTICLES OF CONVERSION;
13.2 AMENDED BY-LAWS; AND
13.3 TREASURER'S AFFIDAVIT ON THE PAYMENT OF SUBSCRIPTIONS OF THE MEMBERS OR SHAREHOLDERS.

Article 14. THE ARTICLES OF CONVERSION SHALL CONTAIN, AMONG OTHERS, THE AUTHORIZED CAPITAL STOCK, SUBSCRIBED CAPITAL STOCK AND PAID UP CAPITAL OF THE EC AND THE RESPECTIVE SUBSCRIPTIONS AND PAYMENTS FOR SUBSCRIPTIONS OF THE MEMBERS OR SHAREHOLDERS LISTED IN ALPHABETICAL ORDER.

Article 15. THE ELECTRIC COOPERATIVE SHALL FURNISH THE NEA CERTIFIED TRUE COPIES OF THE DOCUMENTS MENTIONED IN ARTICLE 13 HEREOF.

CHAPTER V
Other Provisions

Article 16. Governing Law. Upon conversion of an EC into stock cooperative, it shall be registered with the Cooperative Development Authority and operate with the purview of the Cooperative Code. If the decision is to convert into stock corporation, it shall be registered with Securities and Exchange Commission and shall be governed by the provisions of the Corporation Code.

Article 17. EFFECTS OF CONVERSION.

17.1 ECS CONVERTED INTO STOCK CORPORATIONS SHALL BE REGISTERED WITH THE SEC IN ACCORDANCE WITH THE CORPORATION CODE, WHILE THOSE CONVERTED INTO STOCK COOPERATIVES, SHALL BE REGISTERED WITH THE CDA: PROVIDED, HOWEVER, THAT THE ECS WHICH OPT TO REMAIN AS NON-STOCK COOPERATIVES SHALL CONTINUE TO BE REGISTERED WITH THE NEA AND SHALL BE GOVERNED BY THE PROVISIONS OF PRESIDENTIAL DECREE NO. 269, AS AMENDED; (RULE 7, SECTION 7 [c] [ii], OF THE IMPLEMENTING RULES AND REGULATIONS OF REPUBLIC ACT NO. 9136).

17.2 AN EC HERETOFORE CONVERTED, REGARDLESS OF THE CORPORATE FORM OR ITS SUCCESSOR ENTITY, SHALL RETAIN ITS FRANCHISE RIGHTS: PROVIDED, FURTHER, THAT ITS OPERATIONS SHALL BE REGULATED BY THE ERC AND OTHER GOVERNMENT INSTRUMENTALITIES INSOFAR AS PRACTICABLE AND CONSISTENT WITH THE ACT; (RULE 7, SECTION 7 [c] [iii], OF THE IMPLEMENTING RULES AND REGULATIONS OF REPUBLIC ACT NO. 9136).

17.3 WITHIN FIVE (5) YEARS FROM THE COMPLETED CONDONATION OF DEBT, ANY ELECTRIC COOPERATIVE WHICH SHALL TRANSFER OWNERSHIP OR CONTROL OF ITS ASSETS, FRANCHISE OR OPERATIONS SHALL REPAY THE PUBLIC SECTOR ASSETS AND LIABILITIES MANAGEMENT, CORP. (PSALM) THE TOTAL DEBTS INCLUDING ACCRUED INTERESTS THEREON; (RULE 31, SECTION 5 OF THE IMPLEMENTING RULES AND REGULATIONS OF REPUBLIC ACT NO. 9136 AND SECTION 8 OF EXECUTIVE ORDER NO. 119 DATED AUGUST 28, 2002).

17.4 THE ASSUMPTION BY PSALM OF THE RURAL ELECTRIFICATION LOANS OF AN EC SHALL BE REVOKED FOR FAILURE TO COMPLY WITH SECTION 5 OF SAID E.O 119 AND UPON SUCH REVOCATION THE CONVERTED EC SHALL REPAY PSALM THE TOTAL RURAL ELECTRIFICATION LOAN/S, INCLUDING INTEREST THEREON ASSUMED BY PSALM; (SECTION 8 OF E.O. 119 DATED AUGUST 28, 2002).

17.5 MEMORANDUM OF AGREEMENT WITH PSALM DATED OCTOBER 3, 2003 WITH RESPECT TO THE ASSUMPTION OF EC'S OUTSTANDING LOANS AND ITS REVOCATION FOR FAILURE TO COMPLY WITH THE CONDITIONS SET FORTH THEREIN SHALL REMAIN IN EFFECT, NOTWITHSTANDING THE CONVERSION OF AN EC TO STOCK CORPORATION OR STOCK COOPERATIVE.

Article 18. Amendments. The NEA reserves the right to issue supplementary and/or amendatory provisions as it sees fit, consistent with its objectives safeguarding government investments in, and protecting the interest of the member-consumers of the electric cooperative.

Article 19. Separability Clause. If, for any reason, any section subsection, sentence, clause or term of these Guidelines is held to be illegal, invalid or unconstitutional, such parts not affected by such declaration shall remain in full force and effect.

Article 20. Repealing Clause. All other issuances, rules and regulations or parts thereof, which are inconsistent with the provisions of this Guidelines are hereby repealed, amended or modified accordingly.

Article 21. Effectivity. These Guidelines shall take effect fifteen (15) days from the date of its publication in the Official Gazette or a newspaper of general circulation.

Adopted: 05 Oct. 2005