DOJ Opinion No. 132, s. 1983

DOJ OPINION NO. 132 , s. 1983 August 25, 1983 The Chairman Presidential Commission on Reorganization 2934 Magsaysay Boulevard Metro Manila 2606 Sir : This refers to the request of Lt. Gen. Fidel V. Ramos, former President of the PEFTOK Investment and Development Corporation (PIDC), for recognition/certification by the Presidential Commission on Reorganization (PCR) that the PIDC is now a private corporation, which request you have referred to us "for appropriate action". It appears that a request of the same tenor was first addressed by Lt. Gen. Ramos to the PCR on December 16, 1981 to "ease the apprehensions" of its stockholders spawned allegedly by news reports on the plan of the President to revamp all government-owned or controlled corporations, including the PIDC. In its letter dated January 7, 1982, the PCR informed General Ramos that its could not provide the certification requested because the PIDC was still considered as a government controlled corporation for purposes of its study of corporate entities of the government in view of the fact that "the majority of the bonafide PEFTOK veterans who had been issued their corresponding shares of stock have not yet exercised their right to vote and elected the members of the Board of Directors". However, it advised that "[A]s soon as the majority of the bonafide PEFTOK veterans are able to vote their stocks and elect the six (6) members of the Board of Directors, the PIDC shall taken be considered as a purely private corporation". This condition having been allegedly fulfilled upon the election on September 19, 1982 of a new set of Board of Directions by the majority of the PIDC stockholders (the Filipino veterans of the Korean War), Gen. Ramos requested the PCR a new that "this fact be recognized/certified by the Presidential Reorganization Commission". You have in turn referred the matter to us "for appropriate action" stating that while the Special Presidential Reorganization Committee (SPRC) has favorably considered the fact that the PIDC may no longer be considered a government corporation for purpose of the reorganization work, nonetheless you feel that this Ministry "would be the proper government agency to issue the appropriate legal ruling or certification to the effect that the PIDC is now a private corporation". LexLib It is noted that the instant request of Gen. Ramos was precipitated by the press releases concerning the intended revamp of all government corporations. It would appear therefore that the thrust of the request is to remove the PIDC from the scope of the nomenclature "government-owned or controlled corporations" for purpose of the reorganization work presently being undertaken by the PCR. Since, as you state, the PCR has already favorably considered the position that the PIDC "may no longer be considered as a government-owned or controlled corporation" "for purposes of the coverage of the reorganization work" it is believed that the request of the PIDC has been technically satisfied and there would be no further legal necessity for a ruling of this Ministry on the matter. Nonetheless, we are giving hereunder some pertinent observations for whatever purpose they may serve: The PIDC was created by a special law (P.D. No. 257 which took effect on July 31, 1973) with a capital stock of four million pesos (P4,000,000.00), fifty-one percent (51%) of which shall be fully subscribed by the government for and in behalf of the PEFTOK veterans. Said Decree provides that within three (3) years from the date of promulgation thereof, all shares of capital stock subscribed and held by the government for and in behalf of the PEFTOK veterans who shall transferred to the PEFTOK veterans who shall thereafter vote said common shares (Sec. 3). It also provides that the governing board shall be composed of the Secretary of National Defense, the Chief of Staff of the Armed Forces of the Philippines, and the President of the PEFTOK Veterans Association, Inc. and six (6) other persons to be designated by the President from a list of qualified PEFTOK veterans. (Sec. 2) It appears that as of 1977, only 50% of the certificates of the corporation have been issued to PEFTOK veterans a large number of whom have not been accounted for as of said period. (See Op., Sec. of Justice, No. 153, s. 1977) Thus, it was necessary for the President to issue in 1976 P.D. No. 959 to authorize for the President to continue designating the six other members of the Board of Directors and the continuance in office of the three ex-officio members of the said Board "[U]ntil such time that the majority of all the bonafide PEFTOK veterans shall have been accounted for, issued their corresponding shares of stock, are able to vote said stocks and elect the members of the Board of Directors". (Sec. 3-A, P.D. No. 257, as inserted by P.D. No. 959) It is stated that on September 19, 1982, the majority of the PIDC stockholders (the Filipino veterans of the Korean War) elected a new Board of Directors to hold office for a period of one (1) year or up to such time as a new Board shall have been elected. On September 27, 1982, the three ex-officio members of the Board, namely, Minister Enrile, General Ver and Lt. Gen. Ramos tendered their resignations to the President effective as of said date, which were accepted/approved by the President on October 1, 1982. In the letter dated October 1, 1982 of the President, addressed to the Minister of National Defense, a copy of which is among the enclosures in your basic letter, approving the resignations of Defense Minister Juan Ponce Enrile, General Fabian C. Ver, and Lt. Gen. Fidel V. Ramos, as Chairman/Director, Vice-Chairman/Director, and President/Director, respectively, of the PIDC effective as of September 27, 1982, the President declared that the said "Corporation can now be turned over to its newly elected Board of Officers and converted into a private corporation as contemplated within the law ". LexLib It appears further that in its letter dated August 26, 1982, the Securities and Exchange Commission, through Chairman Manuel G. Abello, ruled as follows: "In as much as the PEFTOK Investment & Development Corporation was not created for political purpose with political powers to be exercised for purpose connected with the public good in the administration may well be classified as private. Subject corporation meets the requirements of a private corporation, having been formed for some private purpose, benefit, aim or end. It was organized wholly for the profit and advantage of the PEFTOK veterans; their widows and legitimate children. The fact that some or all of the stock in the corporation is held by the government does not even make it a public corporation. (1 Fletcher, Cyc. of Corps, Sec. 58, p. 293) In view thereof, there exists no need for any proposed conversion, as PEFTOK Investment & Development Corporation already falls within the classification of a private corporation". It is believed that the election of a new Board of Directors by a majority of the PIDC stockholders completed the transition of the PIDC to a purely private corporation. No less than the President confirmed this status in his letter dated October 1, 1982, above-cited. And the SEC Chairman, in his letter of August 26, 1982, also cited above, ruled that no further step need be taken to convert the PIDC into a private corporation. In this connection, the observation in Opinion No. 153, s. 1977 of then Secretary of Justice Vicente Abad Santos is relevant, and we quote: "The peculiar provisions of the PIDC charter noted above indicate that the said corporation, while initially funded with capital appropriated from government funds, was not intended to remain a government-owned or a government-controlled corporation, but rather a corporation eventually to be owned and managed by PEFTOK veterans . While the transfer of the shares of stock to the veterans was not completed within the three-year timetable fixed in P.D. No. 257, the legislative intent is manifest to divest the government of ownership and control as soon as all the PEFTOK veterans are determined and accounted for. . . ." (Emphasis supplied.) LexLib Please be guided accordingly. Very truly yours, (SGD.) RICARDO C. PUNO Minister of Justice