SECTION 16: The congress shall not, except by general law, provide for the formation, organization, or

regulation of private corporations. Government-owned or controlled corporations may be created or

established by special charters in the interest of the common and subject to the test of economic
viability.

Interpretation: Congress is prohibited from passing a special law or charter for the formation,
organization, or regulation of specific private corporations. These matters are to be provided for by
general law that is a law equally applicable to all private corporations. The purpose then is to prevent
discriminatory practices wherein special privileges are granted to a few without giving others the right
to obtain those privileges or the same conditions. The exception relates to private corporations that are
owned or controlled by the government.

Creation of government-owned or controlled corporations. These corporations may be created or

established by a special charter or law but only “in the interests of the common good and subject to the
test of economic viability”. “Economic viability” means that the government corporation will have the
capability to make profits and will not have to depend on budgetary appropriations or special assistance
from the government. The limitation that the creation must be in the interest of the common good is
recognition that the private sector should be the ”engine” of national economic progress while the
government should engage in business only when it is absolutely necessary.

Example Case where this section was used:

G.R. No. 175352

DANTE V. LIBAN, REYNALDO M. BERNARDO, and SALVADOR M. VIARI, Petitioners,

vs.

RICHARD J. GORDON, Respondent.

Petitioners Dante V. Liban, Reynaldo M. Bernardo, and Salvador M. Viari (petitioners) filed with this
Court a Petition to Declare Richard J. Gordon as Having Forfeited His Seat in the Senate. Petitioners are
officers of the Board of Directors of the Quezon City Red Cross Chapter while respondent is Chairman of
the Philippine National Red Cross (PNRC) Board of Governors.

According to Sec 13: SEC. 13. No Senator or Member of the House of Representatives may hold any
other office or employment in the Government, or any subdivision, agency, or instrumentality thereof,
including government-owned or controlled corporations or their subsidiaries, during his term without
forfeiting his seat. Neither shall he be appointed to any office which may have been created or the
emoluments thereof increased during the term for which he was elected.
The Issues

Petitioners raise the following issues:

1. Whether the Philippine National Red Cross (PNRC) is a government- owned or controlled corporation;
2. Whether Section 13, Article VI of the Philippine Constitution applies to the case of respondent who is
Chairman of the PNRC and at the same time a Member of the Senate;
3. Whether respondent should be automatically removed as a Senator pursuant to Section 13, Article VI
of the Philippine Constitution; and
4. Whether petitioners may legally institute this petition against respondent.

But we will focus on number 1 only.

PNRC is a Private Organization Performing Public Functions
 Geneva Conventions, established the PNRC as a voluntary organization for the purpose
contemplated in the Geneva Convention of 27 July 1929
 To ensure and maintain its autonomy, neutrality, and independence, the PNRC cannot be owned
or controlled by the government. Indeed, the Philippine government does not own the PNRC.
The PNRC does not have government assets and does not receive any appropriation from the
Philippine Congress.13 The PNRC is financed primarily by contributions from private individuals
and private entities obtained through solicitation campaigns organized