GOCC, govt instrumentality explained - sc.judiciary.gov.ph/jurisprudence/2012/july2012/191109.pdf

sc.judiciary.gov.ph/jurisprudence/2012/july2012/191109.pdf

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When the law vests in a government instrumentality corporate powers, the instrumentality does not necessarily become a corporation. Unless the government instrumentality is organized as a stock or non-stock corporation, it remains a government instrumentality exercising not only governmental
but also corporate powers.

Many government instrumentalities are vested with corporate powers but they do not become stock or non-stock corporations, which is a necessary condition before an agency or instrumentality is deemed a GOCC. Examples are the Mactan International Airport Authority, the Philippine Ports Authority, the University of  the Philippines, and Bangko Sentral ng Pilipinas. All these government instrumentalities exercise corporate powers but they are not organized as stock or non-stock corporations as required by
Section 2(13) of the Introductory Provisions of the Administrative Code.

These government instrumentalities are sometimes loosely called government corporate entities. They are not, however, GOCCs in the strict sense as understood under the Administrative Code, which is the governing law defining the legal relationship and status of government entities.

 Correlatively, Section 3 of the  Corporation Code  defines a stock corporation as one whose "capital stock is divided into shares and x x x authorized to distribute to the holders of such shares dividends x x x."

Section 87 thereof defines a non-stock corporation as "one where no part of its income is distributable as dividends to its members, trustees or officers."

Further, Section 88 provides that non-stock corporations are "organized for charitable, religious, educational, professional, cultural, recreational, fraternal, literary, scientific, social, civil service, or similar purposes, like trade, industry, agriculture and like chambers."

Two requisites must concur before  one may be classified as a stock corporation, namely: (1) that it has capital stock divided into shares; and (2) that it is authorized to distribute dividends and allotments of surplus and profits to its stockholders. If only one requisite is present, it cannot be properly classified as a stock corporation. As for non-stock corporations, they must have members and must not distribute any part of their income to said members.

 
In the case at bench, PRA is not a GOCC because it is neither a stock nor a non-stock corporation. It cannot be considered as a stock corporation because although it has a capital stock divided into no par value shares as provided in Section 7 of P.D. No. 1084, it is not authorized to distribute
dividends, surplus allotments or  profits to stockholders. There is no provision whatsoever in P.D. No. 1084 or in any of the subsequent executive order that authorizes PRA to distribute dividends, surplus allotments or profits to its stockholders.

PRA cannot be considered a non-stock corporation either because it does not have members. A non-stock  corporation must have members.

Moreover, it was not organized for any of the purposes mentioned in Section 88 of the Corporation Code.  Specifically, it was created to manage all government reclamation projects.

Furthermore, there is another reason why the PRA cannot be classified as a GOCC. Section 16, Article XII of the 1987 Constitution provides as follows:

Section 16. The Congress shall not, except by general law, provide for the formation, organization, or regulation of private corporations. Government-owned or controlled corporations may be created or established by special charters in the interest of the common good and subject to the test of economic viability.

The fundamental provision above authorizes Congress to create GOCCs through special charters on two conditions: 1) the GOCC must be established for the common good; and 2) the GOCC must meet the test of economic viability.  In this case, PRA may have passed the first condition of common good but failed the second one - economic viability. Undoubtedly, the purpose behind the creation of PRA was not for economic or commercial activities. Neither was it created to compete in the market place considering that there were no other competing reclamation companies being operated by the private sector. As mentioned earlier, PRA was created essentially to perform a public service considering that it was primarily responsible for a coordinated, economical and efficient reclamation, administration and operation of lands belonging to the government with the object of maximizing their utilization and hastening their development consistent with the public interest. Sections 2 and 4 of P.D. No. 1084 reads, as follows:

Section 2. Declaration of policy. It is the declared policy of the State to provide for a coordinated, economical and efficient reclamation of lands, and the administration and operation of lands belonging to, managed and/or operated by the government, with the object of maximizing their utilization and hastening their development consistent with the public interest.

Section 4. Purposes. The Authority is hereby created for the following purposes:
(a) To reclaim land, including foreshore and submerged areas, by dredging, filling or other means, or to acquire reclaimed land;
(b) To develop, improve, acquire, administer, deal in, subdivide, dispose, lease and sell any and all kinds of lands, buildings, estates and other forms of real property, owned, managed, controlled and/or operated by the government.
(c) To provide for, operate or administer such services as may be necessary for the efficient, economical and beneficial utilization of the above properties.

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