LEGAL NOTE 0019: WHAT IS A GOVERNMENT OWNED AND CONTROLLED CORPORATION?

SOURCE: ANTONIO M. CARANDANG VS. HONORABLE ANIANO A. DESIERTO, OFFICE OF THE OMBUDSMAN (G.R. NO. 148076); ANTONIO M. CARANDANG VS. SANDIGANBAYAN (FIFTH DIVISION) (G.R. NO. 153161) (12 JANUARY 2011, BERSAMIN, J.)

X ————————————————————————————————- X

 

WHAT ARE GOVERNMENT-OWNED AND CONTROLLED CORPORATION?

 Similarly, the law defines what are government-owned or -controlled corporations. For one, Section 2 of Presidential Decree No. 2029 (Defining Government Owned or Controlled Corporations and Identifying Their Role in National Development) states:  

Section 2. A government-owned or controlled corporation is a stock or a non-stock corporation, whether performing governmental or proprietary functions, which is directly chartered by a special law or if organized under the general corporation law is owned or controlled by the government directly, or indirectly through a parent corporation or subsidiary corporation, to the extent of at least a majority of its outstanding capital stock or of its outstanding voting capital stock.

Section 2 (13) of Executive Order No. 292 (Administrative Code of 1987)[1][26] renders a similar definition of government-owned or -controlled corporations:

Section 2. General Terms Defined. – Unless the specific words of the text or the context as a whole or a particular statute, shall require a different meaning:

x x x

(13) government-owned or controlled corporations refer to any agency organized as a stock or non-stock corporation vested with functions relating to public needs whether governmental or proprietary in nature, and owned by the government directly or indirectly through its instrumentalities either wholly, or where applicable as in the case of stock corporations to the extent of at least 51% of its capital stock.

It is clear, therefore, that a corporation is considered a government-owned or -controlled corporation only when the Government directly or indirectly owns or controls at least a majority or 51% share of the capital stock. Applying this statutory criterion, the Court ruled in Leyson, Jr. v. Office of the Ombudsman:[2][27]

But these jurisprudential rules invoked by petitioner in support of his claim that the CIIF companies are government owned and/or controlled corporations are incomplete without resorting to the definition of “government owned or controlled corporation” contained in par. (13), Sec.2, Introductory Provisions of the Administrative Code of 1987, i.e., any agency organized as a stock or non-stock corporation vested with functions relating to public needs whether governmental or proprietary in nature, and owned by the government directly or indirectly through its instrumentalities either wholly, or where applicable as in the case of stock corporations to the extent of at least fifty-one (51) percent of its capital stock. The definition mentions three (3) requisites, namely, first, any agency organized as a stock or non-stock corporation; second, vested with functions relating to public needs whether governmental or proprietary in nature; and, third, owned by the Government directly or through its instrumentalities either wholly, or, where applicable as in the case of stock corporations, to the extent of at least fifty-one (51) of its capital stock.

In the present case, all three (3) corporations comprising the CIIF companies were organized as stock corporations. The UCPB-CIIF owns 44.10% of the shares of LEGASPI OIL, xxx. Obviously, the below 51% shares of stock in LEGASPI OIL removes this firm from the definition of a government owned or controlled corporation. x x x The Court thus concludes that the CIIF are, as found by public respondent, private corporations not within the scope of its jurisdiction.[3][28]

 

APPLIED TO RADIO PHILIPPINE NETWORK,  IS THE LATTER A GOVERNMENT-OWNED OR CONTROLLED CORP?

NO BECAUSE SHARE OF GOVERNMENT IN RPB IS ONLY 32.4%.

Consequently, RPN was neither a government-owned nor a controlled corporation because of the Government’s total share in RPN’s capital stock being only 32.4%.

 

SANDIGANBAYAN ORDERED BENEDICTO TO TRANSFER HIS 72.4%  IN RPN TO RPN. DOES THIS MAKE RPN NOW A GOVERNMENT-OWNED AND CONTROLLED CORP?

NO. BECAUSE BENEDICTO FILED A MOTION FOR RECONSIDERATION WHERE HE CLARIFIED THAT THE SHARES CEDED TO RPN WAS ONLY 32.4%. SUCH MOTION IS NOT YET RESOLVED WITH FINALITY.

Parenthetically, although it is true that the Sandiganbayan (Second Division) ordered the transfer to the PCGG of Benedicto’s shares that represented 72.4% of the total issued and outstanding capital stock of RPN, such quantification of Benedicto’s shareholding cannot be controlling in view of Benedicto’s timely filing of a motion for reconsideration whereby he  clarified and insisted that the shares ceded to the PCGG had accounted for only 32.4%, not 72.4%, of RPN’s outstanding capital stock. With the extent of Benedicto’s holdings in RPN remaining unresolved with finality, concluding that the Government held the majority of RPN’s capital stock as to make RPN a government-owned or -controlled corporation would be bereft of any factual and legal basis.  

[1][26] Enacted on July 25, 1987.

[2][27] G.R. No. 134990, April 27, 2000, 331 SCRA 227, 235-236.

[3][28] Bold underscoring supplied for emphasis.