Question & AnswerQ&A (GCG MEMORANDUM CIRCULAR NO. 2012-10 [1])
The State recognizes GOCCs as significant tools for economic development and mandates active exercise of ownership rights to ensure operations are consistent with national development policies.
Members of the Boards of Directors/Trustees and Officers of GOCCs are designated as fiduciaries of the State, legally obligated to act in the best interest of the GOCC with utmost good faith.
They must act with utmost loyalty (Duty of Loyalty), due care and extraordinary diligence (Duty of Diligence), avoid conflicts of interest, declare interests (Duty of Loyalty and Transparency), apply sound business principles (Duty of Competence), and employ only fit and proper officers.
DOLI is indemnity coverage for GOCCs and their Directors/Trustees and Officers against claims and liabilities arising from actions within their official functions, allowing protection against litigation costs and liabilities when acting in good faith.
Yes, under R.A. No. 10149 and GCG Memorandum Circular No. 2012-07, GOCCs have the authority and obligation to provide DOLI coverage for the Governing Board and Officers consistent with state policy.
Both ex officio and appointive Directors/Trustees, including alternates of ex officio members, and Officers including Board Officers (Chairman, Vice-Chairman, Corporate Secretary) and Executive Officers (CEO, senior officers) are eligible for DOLI coverage.
DOLI coverage may be procured with the GOCC as the beneficiary or with the Directors/Trustees and Officers as the beneficiaries, or a combination of both.
No, premium payments that cover indemnity for costs and liabilities arising from breach of fiduciary duties or fraud by Directors/Trustees and Officers are not valid expenses of the GOCC.
Proper coverage includes lawsuits related to disciplinary actions against employees, unwarranted complaints to the Ombudsman, and litigations by disgruntled clients against Government Financial Institutions (GFIs).
When premium costs for DOLI are prohibitive or when deductible claims leave substantial costs to the GOCC, or when insurance reimbursement is inefficient, GOCCs may establish a DOLF funded through their budget, held in trust with a government financial institution, governed by formal guidelines approved by the GCG.