QuestionsQuestions (PRESIDENTIAL DECREE NO. 2029)
PD 2029 declares that the corporate form is a valid institutional way through which the government may participate in economic and social development, while recognizing that private enterprise plays the primary role and that government corporations should be encouraged to participate in appropriate areas while avoiding unnecessary competition with private enterprise.
A GOCC is a stock or non-stock corporation—performing governmental or proprietary functions—directly chartered by special law, or organized under the general corporation law and owned or controlled by government directly or indirectly through a parent/subsidiary to at least a majority of outstanding capital stock or voting capital stock, subject to the provisos on exceptions and transfer to private ownership.
Such corporation is not considered a GOCC before the disposition to private ownership, even if ownership/control later transfers to another GOCC, as long as it is under the specific policy requirement to dispose within the specified period.
Yes. PD 2029 provides that a corporation created by special law that is explicitly intended for ultimate transfer to private ownership under specified conditions remains a GOCC until it is transferred to private ownership.
It provides that such corporation shall not be considered a GOCC solely on the basis of the special law alone, because juridical personality acquisition requires SEC registration and the GOCC status depends on ownership/control criteria.
A parent corporation is one created by special law. A subsidiary corporation is one created under law where at least a majority of its outstanding capital stock or voting capital stock is owned by parent government corporations and/or other government-owned subsidiaries.
These are corporations organized under the general corporation law under private ownership where at least a majority of shares were conveyed to a government corporation in satisfaction of debts with a government financial institution (via foreclosure or otherwise), or organized as a subsidiary of a GOCC exclusively to own/manage/lease/operate specific physical assets acquired in satisfaction of such debts, and required by government policy to be disposed of to private ownership within a specified period.
An affiliate corporation is one where total government ownership comprises less than a majority of outstanding capital stock and voting capital stock. Unlike parent/subsidiary corporations, it has less than majority government equity, hence not meeting the majority control threshold used for subsidiary status.
Acquired asset corporations and affiliate corporations are excluded from the decree’s coverage, but PD 2029 clarifies that they are not automatically exempt from reportorial requirements; such reports must be coursed through the appropriate parent, and where required their financial statements must be consolidated with the parent’s financial statements and subsidiaries’ statements.
No. PD 2029 expressly states that chartered universities, colleges, and schools, as well as municipal corporations (which are nonetheless government corporations), are not covered by the Decree.
Authorization is allowed only where: (1) there is a demonstrated need for greater flexibility and the service cannot be effectively undertaken by regular line agency form; and (2) the corporation is financially viable—capable of supporting operations from internal cash generation without operating losses, and without special privilege/assistance from the national government (subject to stated exceptions).
It does not apply to corporate operations involving direct and explicit subsidy programs authorized by law where subsidies are adequately funded by external sources such as the General Fund. It also may not apply, when circumstances warrant, to civic/cultural corporations that do not pursue economic gain and do not by and large compete with the private sector.
A minister ex-officio chairman/member of a GOCC board may designate a senior official of his ministry to sit in his stead; if the minister is an ex-officio chairman, the representative must be a deputy minister. For ex-officio members of the Monetary Board, Central Bank charter rules on alternates continue to apply.
Operational flexibility is the ability of a corporation to act promptly on its own for individual transactions/matters without need for prior clearance from supervisory authorities outside the corporation, provided such actions are within its charter, explicit general policies/program/guidelines, including budgetary constraints set by external supervising authorities.
PD 2029 mandates that government corporations receive differential treatment more consistent with corporate requirements rather than regular government agencies, regarding the exercise of jurisdiction by agencies like the Civil Service Commission, Commission on Audit, and Office of Budget and Management. Comparable industry practices guide the establishment of such treatment, aiming at greater flexibility while maintaining public accountability.
Those with at least 20% of outstanding voting capital stock privately owned are, as a general rule, accorded the greatest possible flexibility in applying regulations of service-wide agencies. Employment issues are referred by the Civil Service Commission to the Department of Labor and Employment, and the personnel are not subject to the position classification/compensation rules of the Office of Budget and Management; the corporation may use private external auditors subject to COA review at its option.
The President must organize a committee (including COA, CSC, and DBM, plus ministry representation) to review and revise policies and regulations, classify government corporations per PD 2029 Section 8, and submit proposed revisions/classifications for Presidential review within two years. The status quo is maintained for two years for corporations previously deemed excluded from GOCC definition regarding COA/CSC/DBM rules (subject to presidential discretion).