Government-owned or controlled corporations (GOCC)

According to the cases decided by the Supreme Court Government- owned or controlled
corporations are created by special charters1 and not under the Corporation Code of the
Philippines.2 A government- owned or controlled corporation must be owned by the government,
and in the case of a stock corporation, at least a majority of its capital stock must be owned by
the government.3 The mere fact that the Government happens to be a majority stockholder does
not make it a public corporation. 4 Therefore, it can sue and be sued in the same manner as any
other private corporations, and in this sense it is an entity different from our government. 5
GOCC are created to promote certain aspects of the economic life of our people. 6 It was
given a corporate power separate and distinct from our government, for it was made subject to
the provisions of our Corporation Law in so far as its corporate existence and the powers that it
may exercise are concerned (sections 2 and 4, Commonwealth Act No. 518) and it may take on
the form of a private enterprise or one organized with powers and formal characteristics of a
private corporations under the Corporation Law.7
The Administrative Code of 1987 defines GOCC as follows: (Republic of the Philippines
v City of Paranaque, G.R. No. 191109, July 18, 2012)
SEC. 2. General Terms Defined. x x x x
(13) Government-owned or controlled corporation refers to any agency organized as a
stock or non-stock corporation, vested with functions relating to public needs whether
governmental or proprietary in nature, and owned by the Government directly or through
its instrumentalities either wholly, or, where applicable as in the case of stock
corporations, to the extent of at least fifty-one (51) percent of its capital stock: x x x.

1 Engr. Feliciano v COA, G.R. No. 147402, January 14, 2004

2 Davao City Water District v CSC G.R. No. 95237-38 September 13, 1991
3 People v Morales, G.R. No. 166355, May 30, 2011; Liban v Gordon, G.R. No. 175352, January 18, 2011
4 National Coal Co. vs. Collector of Internal Revenue, 46 Phil., 586-587
5 Ibid.
6 Bacani v National Coconut Corporation, 100 Phil 468
7 Ibid.

According to the 1987 Constitution the Congress shall not, except by general law,
provide for the formation, organization, or regulation of private corporations. Governmentowned 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.8
The two conditions in creating a GOCC are 1) the GOCC must be established for the
common good; and 2) the GOCC must meet the test of economic viability.9
GOCC with special charters, organized essentially for economic or commercial
objectives, must meet the test of economic viability because they compete in the market place.
They derive their income to meet operating expenses solely from commercial transactions in
competition with the private sector.10

8 Section 16, Art 12, 1987 Constitution

9 Republic of the Philippines v City of Paranaque, G.R. No. 191109, July 18, 2012
10 Manila International Airport Authority v CA, G.R. No. 155650 July 20, 2006