THE Department of Justice (DOJ) has issued a legal opinion declaring both the United Coconut Chemicals Inc. (Cocochem) and the Coconut Industry Investment Fund-Oil Mills Group (CIIF-OMG) as government-owned and controlled corporations (GOCCs) that are required to remit at least 50 percent of their net earnings to the national government.
Justice Secretary Jesus Crispin Remulla issued the opinion upon the request of the Bureau of Treasury (BTr), which believes that Cocochem and CIIF-OMG are both GOCCs, required by Republic Act No 7656 to remit at least 50 percent of their earnings to the national treasury.
In her letter-request to the DOJ, National Treasurer Rosalia de Leon said it was discovered during the 11th Trust Fund Management Committee (TFMC) meeting of March 13, 2023, that the two companies do not remit their dividends to the national government.
Cocochem argued at the meeting that it is not a GOCC, since it is not vested with functions relating to public needs, as ruled by the Supreme Court in Leyson vs. Ombudsman case.
The company also cited the DOJ legal opinion of 2016 which cited the same SC ruling in holding that it is not a GOCC.
While CIFF-OMG did not contest that it is a GOCC, it insisted that it was covered by the exemption provided in Section 4 of the Dividends Law.
However, the DOJ explained that in Leyson vs. Ombudsman, the SC ruled that the CIFF companies named in the case are not GOCCs because it was not proven that they are vested with functions relating to public needs.
The DOJ also noted that the SC cited three important attributes to consider an entity a GOCC: any agency organized as a stock or non-stock corporation; vested with functions relating to public needs whether government 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 51 percent of its capital stock.
In the case of Cocochem, the DOJ said it is a stock corporation organized under the Corporation Code and it is owned by the government to the extent of at least 51-percent capital stock.
Likewise, the DOJ said Cocochem is vested with functions relating to public needs, noting that it is considered as the country’s leading manufacturer of oleochemicals.
“Cocochem uses local coconut oil as its only feedstock. With the production of local coconut oil, Cocochem helps the Philippine coconut industry thrive and the coconut farmers sustain their livelihood. This is in itself upholding public interest for the benefit of the coconut farmers and their community,” the DOJ said.
Furthermore, DOJ noted that Cocochem aims to lead the national effort in increasing the downstream utilization of coconut oil and contribute to the worldwide efforts to increase the use of natural oils in the production of higher value-added products.
“Hence, Cocochem performs governmental roles in the interest of health, safety and for the advancement of public good and welfare, affecting the public in general,” the legal opinion stated.
In the case of CIFF-OMG, the DOJ noted that Section 4 of the Dividends Law lists some of the GOCCs which are exempt from the coverage of the law on the ground that they were created to administer real or personal properties or funds held in trust for the use and the benefit of its members.
Among those covered by the exemptions are the Government Service Insurance System (GSIS), the Home Development Mutual Fund, the Employees Compensation Commission (ECC), the Overseas Workers Welfare Administration (OWWA) and the Philippine Medical Care Commission (PMCC).
However, the DOJ said coco levy funds are not the same as the funds being held in trust by the said agencies.
“The coco levy funds are in the nature of taxes and can only be used for public purposes. Consequently, they cannot be used to purchase shares of stocks to be given for free to private individuals,” the DOJ said.
“Clearly, to hold therefore, even by law, that the revenues received from the imposition of the coconut levies be used purely for private purposes to be owned by private individuals in their private capacity and for their benefit, would contravene the rationale behind the imposition of taxes or levies,” it added.
