When Are Corporate Directors Liable for Illegal LPG Trading Under BP 33?

The Supreme Court recently clarified the extent of criminal liability of corporate directors and officers for violations of Batas Pambansa Bilang 33 (BP 33), as amended, which penalizes illegal trading in petroleum products and underfilling of liquefied petroleum gas (LPG) cylinders. In Federated LPG Dealers Association v. Del Rosario (G.R. No. 202639, November 9, 2016), the Court ruled that mere membership in a corporation's board of directors does not make one automatically liable for the company's violations. The case also settled that illegal trading and underfilling are separate and distinct offenses under the law.

The Case: Test-Buy Operation Against an LPG Refiller

The case arose from a test-buy operation conducted by the Philippine National Police's Criminal Investigation and Detection Group against ACCS Ideal Gas Corporation (ACCS). Police operatives brought empty branded LPG cylinders—including Shellane, Petron Gasul, Totalgaz, and Superkalan Gaz—to ACCS's refilling plant in Quezon City. ACCS refilled these cylinders without authorization from the brand owners and issued receipts for the transactions. Inspection later showed the cylinders were underfilled by 0.4 kg to 1.3 kg.

A subsequent search warrant operation seized additional LPG cylinders, an electric motor, scales, and other refilling equipment. The Department of Justice (DOJ) found probable cause to charge only Antonio G. Del Rosario, ACCS's General Manager, for illegal trading. The DOJ dismissed charges against the respondents—mere members of the board of directors—and also ruled that underfilling was not a separate offense from illegal trading.

The Issue: Who Can Be Held Criminally Liable?

The central question was whether directors who were not involved in day-to-day operations could be prosecuted for the corporation's violations of BP 33. The petitioner argued that since the board of directors exercises corporate powers under the Corporation Code, directors should be considered officers charged with the management of the business affairs under Section 4 of BP 33.

The Supreme Court disagreed, citing its earlier ruling in Ty v. NBI Supervising Agent De Jemil (653 Phil. 356 [2010]).

The Ruling: Directors Are Not Automatically Liable

Section 4 of BP 33, as amended, enumerates who may be held criminally liable when a corporation violates the law: the president, general manager, managing partner, or such other officer charged with the management of the business affairs, or the employee responsible for the violation.

The Court explained that the board of directors is generally a policy-making body, not an operating body. The law's enumeration excludes mere board members. A director can only be prosecuted if he or she falls under the catch-all phrase "such other officer charged with the management of the business affairs"—a factual matter that must be alleged and proven with evidence.

In this case, the respondents were not the president, general manager, or managing partner of ACCS. The complaint merely stated they were directors based on the Articles of Incorporation. The Court found nothing in ACCS's By-Laws showing they were involved in day-to-day operations. Only Antonio, as General Manager, could be prosecuted.

Illegal Trading and Underfilling Are Separate Offenses

The Court also ruled that the DOJ erred in treating illegal trading and underfilling as a single offense.

Illegal trading (Section 2[a], in relation to Section 3, BP 33) is committed by refilling LPG cylinders without authority from the Bureau of Energy Utilization or without written authorization from the brand owner.

Underfilling (Section 2[c], in relation to Section 3, BP 33) refers to selling, transferring, delivering, or filling petroleum products in quantities below what is indicated or registered on the container, or possessing underfilled LPG cylinders for sale, distribution, or transport.

While both may involve the act of refilling, each offense requires an additional, distinct element. Illegal trading requires lack of authority; underfilling requires filling below authorized limits—or merely possessing underfilled cylinders. The Court also rejected the theory that underfilling can only be committed by duly authorized refillers. The law does not distinguish, and courts should not distinguish where the law does not.

Practical Takeaways

• Directors are not automatically liable. Mere membership in a board of directors does not make a person criminally liable for a corporation's violations of BP 33. Liability attaches only to the president, general manager, managing partner, officers charged with managing business affairs, or the responsible employee.
• Check the corporate structure. Directors who are not involved in daily operations should ensure that corporate records—Articles of Incorporation, By-Laws, and General Information Sheets—accurately reflect their roles. A director who also serves as president or holds an operating position may be exposed to liability.
• Prosecutors must allege and prove management authority. To charge a director under the catch-all provision, the complaint must specifically allege that the director was charged with managing the business affairs, supported by evidence—not just the fact of board membership.
• Illegal trading and underfilling are distinct crimes. A company may be prosecuted for both offenses even if they arise from the same refilling act, provided the elements of each are present. Underfilling may also be committed through mere possession of underfilled cylinders.
• General managers face direct exposure. Officers expressly named in Section 4 of BP 33—such as the general manager—can be prosecuted even if they claim the corporation's day-to-day operations were handled by others.

This article is general information and not legal advice. For your specific situation, consult a lawyer or ask ASG Legal AI.