POSTED LAST 21 Mar 2016 - 09:43 am

Q: How did UCPB become a GOCC?

A:  In Philippine Coconut Producers Federation, Inc. (COCOFED), et al. v. Republic of the Philippines,[1] the Supreme Court (SC) declared that the so-called Farmers’ shares, which comprise the original 64.98% UCPB shares, and the converted 753,848,312 SMC Series 1 Preferred Shares, are conclusively owned by the Republic, and affirmed with modification its 4 September 2014 Resolution, declaring that the six Coconut Industry Investment Fund (CIIF) companies[2] are owned by the Government to be used only for the benefit of all coconut farmers and for the development of the coconut industry. In the same decision, the Court declared as well the 14 Holding Companies[3] and the converted 753,848,312 SMC Series 1 Preferred Shares to be government-owned. The formally recorded judgment or Entry of Judgment thereto was issued by the Supreme Court on 10 December 2014.

In the case of Eduardo M. Cojuangco, Jr. v. Republic of the Philippines,[4]  the Supreme Court affirmed the decision of the Sandiganbayan, nullifying the shares of stock transferred to Cojuangco and ordered the reconveyance of the 14,400 First United Bank (now UCPB) shares of stock, the additional FUB shares subscribed and paid by Philippine Coconut Authority  to Cojuangco to the Republic, and including those that were issued to the alleged fronts, nominees and dummies of Cojuangco, forming part of the 72.2% FUB/UCPB shares also paid by PCA with the use of public funds. The Entry of Judgment was issued by the Supreme Court on 1 October 2013.

Pursuant to the abovementioned Decisions, the Sandiganbayan in its Resolution dated 23 October 2015[5] ordered the PCA and Cojuangco to surrender to the Court the necessary documents to effect the transfer of the subject shares of stock in favor of the Republic and also directed UCPB to cancel the subject shares of stock and to issue the equivalent number of shares in the name of the Republic.

As held in the foregoing cases, a total of 72.2% shares of the UCPB belong to the Republic of the Philippines. As such, UCPB is a GOCC/GFI covered by R.A. No. 10149. Under Republic Act (R.A.) No. 10149, a GOCC is defined as any agency organized as a stock or non-stock corporation, vested with functions to serve the public’s needs and owned by the State either wholly or at least a majority of its outstanding capital stock.

Q: What is the role of GCG as its supervising agency?

A: The following are the roles of the Governance Commission as the supervising agency of UCPB:

1. Coordinate and monitor its operations;

2. Ensure its efficient and effective management;

3. Review and assess its functions and performance for submission to the President;

4. Recommend to the President a shortlist of suitable and qualified candidates for Appointive Directors based on the Fit and Proper Rule;

5. Recommend to the Board of Directors/Trustees of UCPB the suspension of any member of its Board for violation or non-compliance with the Ownership and Operations Manual, without prejudice to the filing of administrative and criminal charges; and

6. Recommend to the President a competitive compensation and remuneration system based on the Compensation and Position Classification System (CPCS) for GOCCs.


The turnover of UCPB to the Governance Commission does not divest the Presidential Commission on Good Government (PCGG) of its mandates under Executive Order (E.O.) No. 1 (s. 1986). PCGG retains responsibility over the following matters affecting UCPB and the CIIF Companies:

  • Prosecution and defense of all pending sequestration, including putting into effect a court decree or execution of judgment, and of related cases involving UCPB and the CIIF Companies, through the Office of the Solicitor General as PCGG’s statutory counsel;
  • Preservation of the assets of these GOCCs insofar as they are subject of pending litigation, including the determination of the necessity to file the appropriate cases to recover ill-gotten wealth and protect the interests of the Government therein; and
  • All other pending sequestration matters.


Q: What are the other legal implications now that UCPB will be supervised by GCG?

A: The legal implications of this action are the following:

1. UCPB is now covered by the Moratorium on Increases in Salaries, Allowances, Incentives and Other Benefits.              

Under R.A. No. 10149, UCPB will now be covered by the Compensation and Position Classification System developed by the Governance Commission subject to the approval of the President. Furthermore, recommendation to the President for additional incentives to be given to UCPB’s personnel shall come from GCG.

2. Appointive Directors in the UCPB Governing Board must now be qualified by the Fit and Proper Rule and has a Term of One (1) Year.

UCPB’s Governing Board will be appointed by the President based on the list of nominees submitted by GCG and the appointees shall have a term of one (1) year unless sooner removed. The number of Appointive Directors to be vetted by the Governance Commission shall only be to the extent of the government’s shareholdings in UCPB.

The list of nominees from GCG will be qualified by the Fit and Proper Rule which is defined as the standards for determining whether a member of the Board of Directors/Trustees or CEO is fit and proper to hold a position in a GOCC which shall include, but not be limited to, standards of integrity, experience, education, training and competence.

 3. Appointive Directors are Public Officers.

As presidential appointees, the Appointive Directors are now covered by the laws on public officers such as the “Code of Conduct and Ethical Standards for Public Officials and Employees” and “Anti-Graft and Corrupt Practices Act”, and as public officers, they are required to submit their annual Statements of Assets, Liabilities and Networth (SALNs) pursuant to Article XI, Section 17 of the 1987 Constitution and Section 8 of R.A. No. 6713.

 4. Compensation of Appointive Directors shall be based on E.O. No. 24, series of 2011.             

The compensation, per diems, allowances and incentives of the members of the Board of Directors/Trustees of GOCCs shall be determined by GCG using as reference E.O. No. 24, series of 2011. The said E.O. provides that the compensation of the members of the Board shall be in the form of per diems and performance-based incentives (PBIs).

5. UCPB must now adopt a Corporate Code of Governance for GOCCs and a No Gift Policy.

In accordance with GCG Memorandum Circular No. 2012-07 or the “Code of Corporate Governance for GOCCs,” UCPB is enjoined to adopt a Manual of Corporate Governance, to be submitted to GCG for evaluation. The Code of Corporate Governance embodies and operationalizes the philosophies and best practices in public corporate governance enshrined in R.A. No. 10149. It aims to instill within the GOCC Boards and Management the principles of responsibility, transparency and accountability as public servants.

In addition, UCPB is enjoined to comply with Section 29 of GCG Memorandum Circular No. 2012-07 and adopt its own No Gift Policy, to instill the practice of unbiased professionalism in the performance of responsibilities. UCPB must submit its No Gift Policy to GCG for evaluation, and ensure its full advertisement to the community and its strict implementation inside UCPB.

Furthermore, they shall regularly submit mandatory reports to GCG including their Performance Scorecards, financial reports, implementation of the audit recommendations of COA, and compliance with commitments on servicing loans to and borrowings guaranteed by the National Government.

6. Reorganization or Streamlining of UCPB requires GCG Approval, while its Merger, Abolition, or Privatization requires GCG Recommendation and Approval by the President.

Under Section 5(a), R.A. No. 10149, the Governance Commission is given the power to determine if it is to the best interest of the State that a GOCC should be reorganized, merged, streamlined, abolished or privatized, after which, it shall:

  1. Implement the reorganization, merger, or streamlining of the GOCC, unless otherwise, directed by the President; or
  2. Recommend to the President the abolition or privatization of the GOCC.

Any measure, including a Capital Call on all stockholders to infuse additional capital, which may potentially result in the dilution of the Government’s stake in the bank, is tantamount to a privatization of the bank, the determination of the necessity and propriety of which falls within the powers of the Governance Commission as described above.

Having previously obtained approval by the President, and guided by the provisions of Executive Orders Nos. 179 and 180 on the inventory, privatization, reconveyance and utilization of the coco levy assets, the Governance Commission commenced the recapitalization through privatization of UCPB. The Supreme Court, however, issued a Temporary Restraining Order (TRO) in Confederation of Coconut Farmers Organizations of the Philippines, Inc. (CCFOP) v. Aquino[6] against the privatization efforts of the Governance Commission. The case is still pending and the TRO remains in effect.



Bea Nadine V. Barte

(02) 328 – 2030 to 34

[email protected]



[1] G.R. Nos. 177857-177858 and G.R. No. 178193, 24 January 2012.

[2] Legaspi Oil Co., Inc.; Granexport Manufacturing Corp.; Iligan Coconut Industries, Inc.; San Pablo Manufacturing Corp.; Cagayan de Oro Oil Mills, Inc.; andSouthern Luzon Coconut Oil Mills, Inc.

[3] AP Holdings, Inc.; ARC Investors, Inc.; ASC Investors, Inc.; Anglo Ventures, Corp.; Fernandez Holdings, Inc.; First Meridian Development, Inc.; Randy Allied Ventures, Inc.; Rock Steel Resources, Inc.; Roxas Shares, Inc.; San Miguel Officers Corp. Inc.; Soriano Shares, Inc.; Te Deum Resources, Inc.; Toda Holdings, Inc.; and Valhalla Properties, Inc.

[4] G.R. No. 180705, 27 November 2012.

[5] Civil Case No. 0033-A entitled Republic of the Philippines v. Eduardo M. Cojuangco, Jr., et al.

[6] G.R. No. 217965.