Who runs a cooperative: the Board and the Executive

It is COSSEC’s Informative Circular No. 2026-23, of 31 August 2026, addressed to all diverse-type cooperatives under Act No. 239-2004. It gathers and restates what that Act assigns to the Board of Directors in its Article 15.3 and to the Chief Executive in Articles 17.1 and 17.3, plus the fiduciary duties of Article 18(a) and the conflict-of-interest rules of Article 18.0.

It reaches cooperatives organised under Act 239-2004, the so-called diverse-type ones: worker, consumer, housing, user and mixed. It is useful to whoever sits on the Board or in management, and also to the member who wants to know who is responsible for what before an assembly or a complaint.

Information pending verification.

Information pending verification.

1. 1

   Step 1: The Board defines, it does not administer

   The circular starts there: Act 239-2004 recognises the Board as the governing body responsible for the cooperative’s strategic direction, general oversight and the protection of its institutional interest, within the framework of cooperative principles. Its duties, under Article 15.3, include defining and adopting institutional policies — with a fiduciary responsibility to the cooperative and the duty to act as a prudent steward in all matters relating to it — and defining the general rules and guidelines for operation and functioning, whose implementation is management’s responsibility. That last phrase is the dividing line.

2. 2

   Step 2: The Board appoints, contracts and evaluates

   The same Article 15.3 gives the Board the power to appoint and supervise the Chief Executive, who exercises the functions, duties and responsibilities the Board fixes by contract. And it requires the Board to supervise and evaluate their performance on a continuing basis, ensuring compliance with the policies, strategic plans and institutional goals adopted. It is not appoint-and-forget: the evaluation is continuous.

3. 3

   Step 3: The Board’s other duties

   Four more, from Article 15.3’s list. Adopting internal control measures, including criteria for members’ admission, permanence and withdrawal, in accordance with the Act, the regulations and the constitutive documents. Securing the protection of assets, including contracting fidelity bonds or insurance required for directors, officers, committees or employees handling the entity’s funds or property. Calling and chairing general assemblies of members or delegates, ordinary or extraordinary, in accordance with the terms, procedures and deadlines of the Act and the internal bylaws. And submitting to the assembly recommendations or proposed amendments to the internal bylaws or the articles of incorporation, where appropriate.

4. 4

   Step 4: Diligence, loyalty and care

   The circular flags it separately, citing Article 18(a): the Board’s members are further subject to the fiduciary duties of diligence, loyalty and care, always acting in the best interest of the cooperative, its members and the cooperative system. It is not only the cooperative: the Act names the members and the system too.

5. 5

   Step 5: The Chief Executive administers

   Under Article 17.1, they are the officer responsible for administration and operational execution, acting under the Board’s authority and supervision. Their general functions: keeping the Board informed of the cooperative’s operational, administrative and financial condition, for which they shall file ordinary monthly reports, plus any special reports that in their judgement or the Board’s merit submitting; formulating the draft budget and submitting it to the Board for consideration and approval before the operational year begins; implementing the institutional policies the Board adopts; and selecting, recruiting, evaluating and removing all staff in accordance with labour legislation, the cooperative’s policies and the approved budget, as well as coordinating and supervising the administrative areas and ensuring the efficiency of managerial and financial procedures.

6. 6

   Step 6: And answers personally

   This is the part to read slowly if you are in management. Article 17.3 makes the Chief Executive responsible, among other things, for: the existence, regularity and truthfulness of the books and other documents the cooperative must keep to comply with the law, except those that are the Board’s responsibility; damages caused to the cooperative itself by breach of their obligations, gross negligence, wilful misconduct or abuse of powers; the truthfulness of the information they supply to the members’ Assembly and to the Board; and the existence of the assets listed in the inventories, the concealment of irregularities observed in the cooperative’s activities, the keeping and safekeeping of funds in cash, in banks or other institutions and in accounts in the cooperative’s name, and non-compliance with the law, the internal rules and the functions set out in the contract.

7. 7

   Step 7: Conflicts of interest, for both

   The circular calls it a cross-cutting principle of cooperative governance. Both Board members and the Chief Executive are subject to Article 18.0: they must abstain from participating in decisions or actions in which there is a personal interest, direct or indirect, that may affect the objectivity of their judgement or the cooperative’s best interest, and must timely disclose any situation that may constitute a conflict under the Act and the applicable regulations.

8. 8

   Step 8: In short, and whom to ask

   The circular sums it up itself: the Board is responsible for defining the policies, rules and general guidelines on operation and functioning, and is the body with authority to appoint the Chief Executive and to supervise and evaluate their performance. The Chief Executive has the power to exercise the managerial and administrative functions, leads the team responsible for implementing the policies the Board previously adopted, coordinates and supervises the administrative areas, and exercises the additional functions and duties the Board delegates. And if there is doubt or dispute in interpreting or applying Act 239-2004, the circular says to contact COSSEC’s Legal Affairs Area at (787) 622-0957 for guidance or interpretive guides.

There is no filing to make: it is a clarification of duties COSSEC issues as the cooperative system’s regulator and supervisor. For questions of interpretation, the circular itself points to COSSEC’s Legal Affairs Area at (787) 622-0957. The office is at 400 Avenida Américo Miranda, Original COSVI Building, San Juan.

• The Board administering day-to-day: its role is to define policy and oversee, and implementation is management’s.
• The Chief Executive adopting institutional policies on their own: the Board adopts them.
• Appointing the Executive without fixing their functions, duties and responsibilities by contract.
• Ceasing to evaluate the Executive: the Act requires continuing supervision and evaluation.
• Starting the operational year without the Board having considered and approved the draft budget.
• Operating without fidelity bonds or insurance for those handling the cooperative’s funds or property.
• Taking part in a decision where there is a personal interest instead of abstaining and disclosing it.

These are the government pages this guide is based on.

• Corporación Pública para la Supervisión y Seguro de Cooperativas de Ahorro y Crédito (COSSEC)

  COSSEC

  docs.pr.gov

• COSSEC — Diverse-Type Cooperatives

  cossec

  www.cossec.pr.gov