DOJ Opinion No. 041, s. 1996

DOJ OPINION NO. 041 , s. 1996 April 23, 1996 Hon. Teodorico P. Sanchez Administrator National Electrification Administration 1050 CDCF Building, Quezon Avenue Quezon City Sir : This has reference to your request for opinion regarding the status of registration of electric cooperatives (ECs) which will fail to qualify, or opt not to apply, for permanent registration with the Cooperative Development Authority (CDA) pursuant to the provisions of R.A. No. 6938, otherwise known as the "Cooperative Code of the Philippines". You state that under Article 128 of R.A. No. 6938. ECs created and registered with the National Electrification Administration (NEA) under P.D. No. 269, as amended by P.D. No. 1645, are given three (3) years within which to permanently register with the CDA which, under Section 9 of R.A. No. 6939 is the sole government body authorized to register cooperatives; that under the Omnibus Rules and Regulations (ORR) on the Registration of Electric Cooperatives under R.A. No. 6038, approved by President Fidel V. Ramos on February 10, 1994, these ECs are given up to May 4, 1997 within which to permanently register with the CDA; that as a requirement for permanent registration with the CDA, paragraphs (f) and (g), Rule III, and Rule VII of the ORR require ECs to obtain the favorable indorsement of the NEA provided such ECs are current in their NEA amortization payments; that a few ECs, especially those which are inherently non-viable, e.g. some island cooperatives, are unable to update their NEA amortizations, for which reason, not all the 119 ECs nationwide can gain the prerequisite NEA indorsement for registration with the CDA. Hence, your query as to the status of such ECs which fail to qualify for registration with the CDA or choose not to register under the new Cooperative Code. It is your view that ECs which will fail to qualify for permanent registration with the CDA, and/or ECs which will simply opt not to be permanently registered with the CDA shall: (1) continue to be registered with and regulated by the NEA pursuant to P.D. No. 269, as amended; (2) continue to enjoy the tax exemptions granted under P.D. No. 269, as amended; and (3) "continue in their corporate existence" under and by virtue of P.D. No. 269, as amended, and "remain under the supervisory and regulatory ambit of NEA" but "may drop the word 'cooperative' in their corporate names because the same is prohibited under Art. 124 (1) of R.A. No. 6938". The pertinent provisions of R.A. No. 6938 provide as follows: "Art. 127. Repeals . Except as expressly provided by this Code, Presidential Decree No. 175 and all other laws, or parts thereof, inconsistent with any provision of this Code shall be deemed repealed: Provided, however, That nothing in this Code shall be interpreted to mean the amendment or repeal of any provision of Presidential Decree No. 269: Provided, further , That the electric cooperatives which qualify as such under this Code shall fall under the coverage thereof." (Emphasis supplied.) "Art. 128. Transitory Provisions . All cooperatives registered under Presidential Decree Nos. 175 and 775 and Executive Order No. 898, and all other laws shall be deemed registered with the Cooperative Development Authority: Provided, however, That they shall submit to the nearest Cooperative Development Authority office their certificate of registration, copies of the articles of cooperation and by laws and their latest duly audited financial statements within one (1) year from effectivity of this Act, otherwise their registration shall be canceled : Provided, further, That cooperatives created under Presidential Decree No . 269, as amended by Presidential Decree No . 1645, shall be given three (3) years within which to qualify and register with the Authority : Provided, finally, That after these cooperatives shall have qualified and registered, the provisions of Sections 3 and 5 of Presidential Decree No. 1645 shall no longer be applicable to said cooperatives." (Emphasis supplied.) It is clear from the repealing clause (Sec. 127 supra ) of R.A. No. 6938 that P.D. No. 269 which originally governed the organization and registration of electric cooperatives is not amended or repealed by R.A. No. 6938 (please see underscored portion). However, electric cooperatives which will qualify for registration as such under R.A. No. 6938 shall be covered by said R.A. No. 6938 (please see last Proviso). Relatedly, the transitory provisions of Section 128, also supra, provides that ECs created under P.D. No. 269 as amended shall be given three (3) years within which to qualify and register with the CDA. If such ECs do not qualify for registration or opt not to register with the CDA within the said the three-year period, they do not lose their status as NEA registered electric cooperatives but remain as such, and subject still to all the provisions of P.D. No. 269, as amended. Unlike other existing cooperatives which "shall be deemed registered" with the CDA but whose "registration shall be canceled" if they fail to submit their certificate of registration, copies of articles of cooperation and by laws and their latest duly audited financial statements within one year from the effectivity of the Act, ECs are not considered registered outright but must apply and qualify for permanent registration with the CDA within the given three-year period. However, failure of such ECs to apply and/or qualify for permanent registration with the CDA will not mean cancellation or forfeiture of their registration with the NEA. They shall remain as NEA registered ECs entitled to all the benefits and incentives granted under P.D. No. 269, as amended, but of course not to the benefits and incentives granted under R.A. No. 6938. Moreover, if such ECs should decide to register under R.A. No. 6938 after the lapse of the prescribed three years, such ECs "shall undergo the required procedures for registration of new cooperatives, including the submission of an economic survey", (See Sec. 1, Rule VIII, ORR). Based on these premises, it is believed that registration with the CDA under R.A. No. 6938 is optional insofar as ECs are concerned. Hence, some ECs may opt not to register with the CDA, or if they do choose to register with the CDA, may fail to qualify registration under R.A. No. 6938. In either case, the ECs shall not lose their status as registered ECs under P.D. No. 269, as amended, and shall continue to be governed by said P.D. No. 269. However, they shall not be entitled to the other privileges granted to CDA registered electric cooperatives under R.A. No. 6938. As to whether ECs which opt not to register, or fail to qualify for permanent registration with the CDA, should drop the word "cooperative" in their corporate names, it is believed that such ECs may, and in fact, should continue employing the word "cooperative" in their corporate name in view of the mandatory provision of Section 17 of P.D. No. 269, as amended, which provides: "Sec. 17. Name . The same of a cooperative shall include the words 'Electric' and 'Cooperative', and the abbreviation 'Inc.' The name of a cooperative organized under this Decree shall be distinct from the name of any other cooperative already organized or converted under this Decree. The foregoing requirement shall not apply to any cooperative which becomes subject to this Decree by complying with the provisions of Section 31." This is true notwithstanding the provision of Section 124 (1) of R.A. No. 6938 which penalizes the use of the word "cooperative" in the firm name of a business unless it is duly registered as a cooperative under R.A. No. 6938. Section 17 of P.D. No. 269, as amended, which is not repealed by R.A. No. 6938, shall continue to apply to those ECs which do not opt, and/or are not qualified, to register under R.A. No. 6938. Being a special provision, Section 17 shall be deemed an exception to, or qualification of, the general provision of Section, 124(1) of R.A. No. 6938. Moreover, since Section 124(1) is a penal provisions, it should be restrictively construed to exclude those cases which are not clearly within its coverage. LLpr Please be guided accordingly. Very truly yours, (SGD.) TEOFISTO T. GUINGONA, JR. Secretary