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11 PNCC v. PABION

The Philippine National Construction Corporation (PNCC) claimed it was exempt from holding stockholder meetings to elect directors because it was a government-owned and controlled corporation (GOCC) governed by an administrative order. However, the Supreme Court ruled that the Securities and Exchange Commission (SEC) has jurisdiction to determine if PNCC is properly classified as a GOCC. The SEC, and other authorities, can rule on PNCC's status based on the law. As a corporation established under the Corporation Code, the SEC can exercise jurisdiction over PNCC and compel it to hold stockholder meetings to elect board members as required by law.

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690 views1 page

11 PNCC v. PABION

The Philippine National Construction Corporation (PNCC) claimed it was exempt from holding stockholder meetings to elect directors because it was a government-owned and controlled corporation (GOCC) governed by an administrative order. However, the Supreme Court ruled that the Securities and Exchange Commission (SEC) has jurisdiction to determine if PNCC is properly classified as a GOCC. The SEC, and other authorities, can rule on PNCC's status based on the law. As a corporation established under the Corporation Code, the SEC can exercise jurisdiction over PNCC and compel it to hold stockholder meetings to elect board members as required by law.

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Tricia
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#11 Philippine National Construction Corporation v.

Pabion
G.R. No. 131715,
December 8, 1999

FACTS: Ernesto Pabion and Louella Ramiro, claiming to be stockholders of the PNCC, filed with the SEC a verified
petition, therein alleging that for a period of twelve years, there has been no stockholders' meeting of the PNCC
to elect the corporation’s board of directors, thus enabling the incumbent directors to hold on to their position beyond
their 1-year term, in violation of PNCC’s By-Laws and the Corporation Code. Pabion and Ramiro, therefore, prayed
the SEC to issue an order to call and hold a meeting of the stockholders for the purpose of electing new directors.

PNCC filed its answer claiming that it is a GOCC whose `organizational and functional management, administration,
and supervision are governed by Administrative Order (AO) No. 59, issued by then President Corazon Aquino. PNCC
asserts that its board of directors does not hold office by virtue of a stockholder’s election but by appointment of the
President of the Philippines, relying on Article IV, Section 16 of AO No. 59. PNCC added that a GOCC is not
required to hold a general meeting of stockholders but, instead, the general manager thereof is merely required to
submit an annual report to the President of the Philippines.

ISSUE: Whether SEC may order PNCC to hold a stockholders meeting for the conduct of an election for the members
of the board?

HELD: Yes. It is certainly absurd to say that SEC is without jurisdiction to determine if PNCC is a GOCC simply
because the latter claims to be one. The President does not determine whether a corporation is a GOCC or not. It is the
law that does. PNCC’s status as a GOCC can be ruled upon by SEC, as well as by other competent authorities for that
matter based on law, specifically the Revised Administrative Code of 1987.

SEC have jurisdiction over GOCCs. GOCCs may either be (1) with original charter or created by special law; or (2)
incorporated under general law, via either the Old Corporation Code or the New Corporation Code. SEC has no
jurisdiction over corporations of the first type primarily because they are governed by their charters. But even this is
not absolute, since the corporation Code may apply suppletorily, either by operation of law or through express
provision in the charter.

On the other hand, over GOCCs established or organized under Corporation Code, the SEC can exercise jurisdiction.
These GOCCs are regarded as private corporations despite common misconception. That the government may own the
controlling shares in the corporation does not diminish the fact that the latter owes its existence to the Corporation
Code. Prescinding from such premises, it necessarily follows that SEC can compel PNCC to hold a stockholders’
meeting for the purpose of electing members of the latter’s BOD as clearly provided for by Section 50 of the
Corporation Code.

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