Proceeds from the disposition of coconut levy assets should be remitted to the Coconut Farmers and Industry Trust Fund (CFITF) forthe benefit of the coconut farmers and not to the national government, the Department of Justice rendered in an opinion released over the weekend.
In a five-page legal opinion signed for the Secretary of Justice by Undersecretary Raul Vasquez, the DOJ clarified its Opinion series 2023 issued last May 31, 2023.
This held that both the United Coconut Chemicals Inc. (Cocochem) and the Coconut Industry Investment Fund-Oil Mills Group (CIIF-OMG) are government-owned and controlled corporations (GOCCs) and thus arerequired to remit at least 50 percent of their net earnings to the national government pursuant to Republic Act 7656 or the Dividend Law.
The DOJ explained that under RA 11524, the law creating the CFITF, “all Coconut Levy Assets shall be transferred to the Trust Fund for the benefit of the coconut farmers.”
The law states that the trust fund “shall be maintained in such manner for 50 years under the Coconut Farmers and Industry Development Plan and shall be used for the benefit of the coconut farmers and the development of the coconut industry.”
“We confirm, therefore, that the dividends and/or any proceeds of the GOCCs forming part of the Coconut Levy Assets shall be transmitted to the Trust Fund in accordance with the provisions of RA 11524,” the DOJ stressed.
The DOJ issued the legal opinion upon the request of CFITF-Privatization and Corporate Affairs Group Manager Undersecretary Catherine Fong.
In her letter-request, Fong sought DOJ’s confirmation of CFITF’s position that the dividends and/or proceeds of disposition of theCoconut Levy Assets should be remitted to the trust fund, pursuant to Section 7 of RA 11524.
Fong also asked the DOJ’s confirmation of CFITF’s position that the Trust Fund Management Committee (TFMC), through the Trust Fund Manager (TFM), can withhold remittance of the dividends under the Dividend Law, as part of its disposition effort of the coco levy assets and the investment and management of the trust fund.
The CFITF pointed out that during the 13th TFMC meeting held on Oct. 6, 2023, it was disclosed that Cocochem’s valuation would be adversely affected if it remits its dividends to the national government, consequently reducing its expected selling price.
While the remitted dividends could be invested and earn additional income, Fong said the committee agreed there would be a risk of an unattractive disposition, since Cocochem would be placed in a non-viable or non-profitable state after the dividend remittance.
On this issue, the DOJ said the decision whether to withhold remittance of the dividends to improve sale of coco levy assets, which includes Cocohem and CIFF-OMG, falls within the mandate of the trust fund committee.
“The foregoing considered, we defer to the TFMC to set any investment strategy necessary and proper for coco levy assets in furtherance of the benefit that may accrue to the coconut farmers and the whole coconut industry,” the DOJ said.