WHEREAS, it
is desirable that the participation of government corporations, both
collectively and individually, in the development process be clarified
and rationalized, taking into consideration inter alia the significant
primary role of private enterprise in the various economic sectors, and
therefore the importance of maintaining conditions of effective
competition; chanroblesvirtualawlibrary
WHEREAS, the Supreme Court has recently ruled that under the
Constitution, government-owned or controlled corporations include those
created by special law as well as those through the Corporation Code;chanroblesvirtualawlibrary
WHEREAS, the identification of which government entities shall be
considered as government-owned or controlled corporations should now be
undertaken on a consistent and identical basis, so that the appropriate
service-wide supervisory agencies may be so guided;chanroblesvirtualawlibrary
WHEREAS, there is need to assure the flexibility of such government
corporations consistent with the need for public accountability by
providing for differential treatment for government corporations; and
WHEREAS, it is now necessary to promulgate an integrated general
statement of national policies on government-owned or controlled
corporations for purposes of providing the necessary conceptual and
operational guidelines on the appropriate role of the government
corporate sector as a whole.
NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the Philippines,
by virtue of the powers vested in me by the Constitution, do hereby
order and decree:cralaw:red
Section 1. General Policy. — It is the policy of the
State that the corporate form of organization, utilized judiciously, is
one of the valid institutional forms through which the government may
participate in economic and social development.
It is recognized, nevertheless, that private enterprise shall play the
primary role in undertaking desirable economic activities, especially
in the production and distribution of goods and services. It is
therefore also the policy of the State to encourage the participation
of and to avoid competition with private enterprise in economic
activities. For this purpose, the areas of operation appropriate for
the government corporate form shall be defined.
Section 2. Definition. — 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;chanroblesvirtualawlibrary
Provided, that a corporation organized under the general corporation
law under private ownership at least a majority of the shares of stock
of which were conveyed to a government financial institution, whether
by a foreclosure or otherwise, or a subsidiary corporation of a
government corporation organized exclusively to own and manage, or
lease, or operate specific physical assets acquired by a government
financial institution in satisfaction of debts incurred therewith, and
which in any case by enunciated policy of the government is required to
be disposed of to private ownership within a specified period of time,
shall not be considered a government-owned or controlled corporation
before such disposition and even if the ownership or control thereof is
subsequently transferred to another government-owned or controlled
corporation;chanroblesvirtualawlibrary
Provided, further, that a corporation created by special law which is
explicitly intended under that law for ultimate transfer to private
ownership under certain specified conditions shall be considered a
government-owned or controlled corporation, until it is transferred to
private ownership; and
Provided, finally, that a corporation that is authorized to be
established by special law, but which is still required under that law
to register with the Securities and Exchange Commission in order to
acquire a juridical personality, shall not on the basis of the special
law alone be considered a government-owned or controlled corporation.
Section 3. Types of corporations. — For purposes of
this Decree, government-owned or controlled corporations, hereafter
called government corporations, may be classified as parent or
subsidiary corporations. Other corporations in which the government has
equity interest may be classified as acquired asset and affiliate
corporations. chanroblesvirtualawlibrary
(a) A parent corporation is one which is created by
special law.
(b) A subsidiary corporation is one created pursuant
to law where at least a majority of the outstanding capital stock or
outstanding voting capital stock of which is owned by parent government
corporations and/or other government-owned subsidiaries.
(c) An acquired asset corporation is one organized
under the general corporation law (1) under private ownership at least
a majority of the shares of stock of which were conveyed to a
government corporation in satisfaction of debts incurred with a
government financial institution, whether by foreclosure or otherwise,
or (2) as a subsidiary corporation of a government corporation
organized exclusively to own and manage, or lease, or operate specific
physical assets acquired by a government financial institution in
satisfaction of debts incurred therewith, and which in any case by
enunciated policy of the government is required to be disposed of to
private ownership within a specified period of time.
(d) An affiliate corporation is one where total
government ownership comprises less than the majority of its
outstanding capital stock and its outstanding voting capital stock.
Section 4. Exclusions from coverage. — The following
corporations are not covered by this Decree: (a) acquired assets
corporations and (b) affiliate corporations: Provided, that nothing in
this Section shall be construed as an automatic exemption of these
corporations from compliance with reportorial requirements, which
reports however when required shall be coursed through the appropriate
parent corporations; and Provided, further, that where so required the
financial statements of the acquired assets and appropriate affiliate
corporations shall be consolidated with the financial statements of the
parent corporation, together with its subsidies.
Chartered universities, colleges, and schools, as well as municipal
corporations, which are nonetheless government corporations, are
likewise not covered by this Decree.
Section 5. Criteria for using the corporate form. —
The use of the corporate form of enterprise shall be authorized only on
the basis of the following criteria:cralaw:red
(a) Where there exists a demonstrated need for
greater flexibility in its operations, and which by the nature of the
good or service to be provided cannot be effectively undertaken by the
regular line agency form of organization; and chanroblesvirtualawlibrary
(b) Where financial viability or the ability of the
corporation to support its operations from its own internal cash
generation without operating losses at the very least, and without any
special privileges or assistance from the national government can be
reasonably expected.
The financial viability criterion shall not apply to those corporate
operations involving direct and explicit subsidy programs as authorized
by law, and where the subsidies involved are adequately funded by
appropriate external sources such as the General Fund.
The test of financial viability shall, when circumstances warrant, not
be applicable to civic, cultural, educational, scientific, and other
similar government corporations which do not engage in activities
usually associated with economic gain, and which do not compete by and
large with the private sector.
Section 6. Ministry representation on governing
boards. — Any provision of existing law to the contrary
notwithstanding, a minister or his equivalent who is by law designated
as ex-officio chairman or member of the governing board of a government
corporation may designate a senior official of his ministry to sit in
his stead; Provided, that where a minister is ex-officio chairman, his
representative shall be a deputy minister; Provided, however, that in
the case of ex-officio members of the Monetary Board, the provisions of
the Central Bank charter on the designation of alternates shall
continue to apply.
Section 7. Provision of adequate operational
flexibility. — Government corporations shall be provided with adequate
operational flexibility in order to function properly and efficiently,
especially under conditions of market competition. Such flexibility
shall nevertheless be consistent with the requirements of public
accountability.
Operational flexibility for this purpose shall mean the ability of the
corporation to act promptly on its own on individual transactions or
matters, without need for further prior clearance from supervisory
authority external to the corporation, provided such actions are within
the purview of their respective charters, explicit general policies,
programs, and guidelines, including budgetary constraints provided by
external supervising authorities.
Section 8. Differential treatment. — To implement the
concept of greater flexibility, government corporations in general
shall be accorded differential treatment which is more consistent with
corporate organizational requirements as distinguished from regular
government agencies, with respect to the exercise by the various
service-wide agencies, such as the Civil Service Commission, the
Commission on Audit, and the Office of Budget and Management, of their
respective jurisdiction. The establishment of such differential
treatment shall be guided by comparable and appropriate industry
practices and standards.
For purposes of this provision, government corporations may in addition
be classified into functional or sectoral groupings; however, any such
functional or sectoral classification shall be agreed upon and
consistently applied by the service-wide agencies involved. Any such
classification shall consider, among others: (1) existing private
shareholdings in the government corporation, (2) any mandatory
provision in its enabling act or other applicable law for the ultimate
conversion of the specific government corporation into a private
corporation, and (3) sustained satisfactory financial and economic
performance indicative of continuing financial viability. Such agreed
classifications may be used as a basis for further differentials in
treatment among the different categories of government corporations.
The Commission on Audit shall observe the applicable industry standards
in the promulgation of appropriate accounting and auditing regulations,
and towards this end shall ensure that government corporations
establish and adopt accounting and auditing systems and standards which
are consistent with the appropriate and applicable guidelines of the
Commission on Audit, and which in any case shall be as uniform as
possible and shall conform with law and with generally accepted
accounting principles and sound auditing practices. The policy of the
withdrawal of resident auditors shall be fully implemented; Provided,
that adequate funding support shall be provided the Commission on Audit
for the exercises of its audit function over government corporations,
which support shall come from reasonable audit services charges levied
by it on the individual government corporations, and supplemented as
necessary from budgetary appropriations.
The audit of government corporations by the Commission on Audit shall
not preclude government corporations from engaging the services of
private auditing firms; Provided, however, that even if the services of
the latter are availed of, the audit report of the Commission on Audit
shall serve as the report for purposes of compliance with audit
requirements as required of government corporations under applicable
law.
The Civil Service Commission shall be guided by comparable industry
practices and shall develop appropriate standards in its personnel
policies pertaining to selection, movement, training, discipline and
related matters.
The Office of Budget and Management through the Office of Compensation
and Position Classification shall formulate compensation and position
classification policies which shall endeavor to make the government
corporate salary scales competitive with those for similarly situated
industry personnel.
Nothing in this Section and in Section 9 hereinbelow shall be construed
as in any way diminishing or limiting the responsibilities and
accountabilities of government corporations and their corporate
officials.
Section 9. Government corporations with significant
minority private equity. — Government corporations at least twenty
percent of the outstanding voting capital stock of which is privately
owned shall, as a general rule, be accorded the greatest possible
flexibility in the application of the regulations of the various
service-wide agencies.
Issues concerning terms and conditions of employment for such
corporations shall be referred by the Civil Service Commission to the
Ministry of Labor and Employment, which shall act upon such matters in
accordance with applicable law.
Such corporations may engage the services of private external auditors,
and the Commission on Audit may, at its option and with respect to its
financial audit function, review the private external audit.
The personnel of such corporations shall not be subject to the position
classification and compensation rules and regulations of the Office of
Budget and Management. chanroblesvirtualawlibrary
Section 10. Transitory Provisions. — The President
shall organize an appropriate Committee, the composition of which shall
include the Commission on Audit, the Civil Service Commission, and the
Office of Budget and Management, as well as adequate representation of
the Ministries; and which Committee shall, in consultation with the
government corporate sector, immediately take steps to review and
revise their policies and regulations in accordance with the standard
of differential treatment provided herein, including the preparation of
draft amendatory legislation as may be necessary, as well as to
classify government corporations as provided in Section 8 of this
Decree. The proposed revisions and classifications shall be submitted
for Presidential review not later than two years after the issuance of
this Decree.
The revised policies and regulations shall provide for a reasonable
period of time for their effectivity; Provided, however, that the
status quo shall be maintained for a period of two years with respect
to government corporations existing at the time of the issuance of this
Decree which had been previously deemed excluded from the definition of
a government-owned or controlled corporation insofar as the application
of existing policies and regulations of the Commission on Audit, the
Civil Service Commission, and/or the Office of Compensation and
Position Classification of the Office of Budget and Management are
concerned; Provided, however, that any provision of existing law to the
contrary notwithstanding, all chartered government corporations shall
be immediately subject to the audit jurisdiction of the Commission on
Audit. The President may, at his discretion, institute such changes or
otherwise modify the conditions of the status quo.
Collective bargaining agreements existing at the time of the issuance
of this Decree in those corporations previously deemed excluded from
the coverage of the definition of government corporations, including
renewals made during the status quo, shall continue to be in full force
and effect until their expiration.
Section 11. Separability Clause. — The provisions of
this Decree are declared to be separable and if any provision of the
application thereof is held invalid or unconstitutional, the validity
of other provisions shall not be affected.
Section 12. Repealing Clause. — All laws, decrees,
orders, proclamations, rules, regulations or parts thereof which are
inconsistent with any of the provisions of this Decree are hereby
repealed or modified accordingly. chanroblesvirtualawlibrary
Section 13. Effectivity Clause. — This Decree shall
take effect immediately.
DONE in the City of Manila,
this 4th day of February, in the year of Our Lord, nineteen hundred and
eighty-six.
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