Corporate donations

Are corporations, both domestic and foreign, allowed to give donations to political parties,   candidates  or for the purpose of any partisan political activity?

In 2015, this question was asked of the Securities and Exchange Commission (SEC) in view of Section 36 Paragraph 9 of Batas Pambansa 68 of the Corporation Code of the Philippines, which provides that “no corporation, domestic or foreign, shall give donations in aid of any political party or candidate or for purposes of partisan political activity.”

Section 36 provides for an enumeration of the so-called express general powers of corporations incorporated under BP 68, which is the general law under which private corporations are created.

The request for an advisory opinion then was brought about by the seeming conflict with Section 95 of BP 881 or the Omnibus Election Code, which enumerates the juridical entities that are prohibited from making political contributions.

The said provision of the Election Code absolutely prohibits foreigners and foreign corporations from contributing for purposes of partisan political activity whether directly or indirectly, but gives an enumeration of domestic corporations, which are covered by the said ban. Among these domestic corporations are public or private financial institutions, juridical persons operating a public utility or in possession of or exploiting any natural resources, juridical persons holding contracts or sub-contracts to supply the government with goods or services, or to perform construction or other works, those granted franchises or other privileges or concessions by the government, and educational institutions which have receives grants of public funds of no less than P100,000.

While the Corporation Code provides for an absolute prohibition for corporations, both foreign and domestic, from giving donations for political purposes, the Election Code provides an enumeration, which would seem to imply that those that are not included in the list are allowed.

But according to the SEC, there is no conflict. It noted that while “at first glance, the enumeration in Sec. 95 of the Election Code gives the impression that the prohibition applies only to the entities listed, and conversely, all others not specifically included are permitted, if we are to harmonize and give effect to both laws, it is prudent to uphold the absolute prohibition on donations to any candidate or political party or for purposes of partisan political activity by any and all corporations.”

The commission explained that Sec. 95 of the Election Code is just an amplification of the absolute prohibition contained in the Corporation Code and is actually illustrative of some specific circumstance of the evil sought to be avoided in both laws. While the Corporation Code is a blanket prohibition, the Election Code is industry and activity specific.

We now have Republic Act 11232 or the Revised Corporation Code, which took effect on Feb. 23, 2019.

Section 35, which enumerates the general powers of corporations in particular paragraph (i) now provides that every corporation incorporated under the Code has the power and capacity “to make reasonable donations… provided that no foreign corporation shall give donations in aid of any political party or candidate or for purposes of partisan political activity.”

While the old Corporation Code absolutely prohibited domestic and foreign corporations from making such donation for political purposes, the new Code now limits the prohibition to foreign corporations.

In the book “The Revised Corporation Code of the Philippines,” authored by former SEC chairman Teresita Herbosa, who initiated proposed amendments to the Code, and Eric Recalde, it was explained that “domestic corporations may now make campaign or political contributions, subject to compliance with the reportorial requirements under existing election rules and provided they do not fall among those absolutely prohibited to donate for political purposes.”

It was further pointed out that “foreign corporations remain prohibited from making political donations” while “the removal of the ban against domestic corporations is offset by the inclusion of special offenses, such as acting as intermediaries, engaging intermediaries for, or tolerating graft and corrupt practices.”

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