SEC Limits Independent Director Term to Nine Years

The Securities and Exchange Commission (SEC) has issued Memorandum Circular No. 7, Series of 2026, which introduces a nine-year cumulative term limit for independent directors of publicly listed companies. The measure aims to strengthen corporate governance by preserving the independence and objectivity of directors who are expected to remain free from management influence.

Under the circular, independent directors must meet continuing qualifications, including maintaining beneficial security ownership at or below two percent (2%), attending at least 50% of board meetings unless justified by grave illness or death, and not serving as an officer or employee of the corporation. Furthermore, individuals are disqualified if they are judicially declared insolvent or have final convictions for crimes involving moral turpitude, fraud, or offenses punishable by more than six years of imprisonment.

Once the nine-year limit is reached, the individual is permanently disqualified from serving as an independent director in the same company, although appointment to a non-independent directorship remains possible. An exception is given to independent directors of government-owned-or-controlled corporations (GOCCs) whose terms shall be governed by the terms and limitations provided in their respective charters.

The circular also imposes a two-year cooling-off period for directors transitioning between independent and non-independent roles to safeguard impartial oversight. In case of conflicting regulations, the shorter maximum term shall be observed.Companies that fail to comply with these tenure limits shall incur a fineof Php 1,000,000 for every independent director who exceeds the maximum cumulative term limit in a given year and a continuing penalty of Php 30,000 every month for as long as that director remains in the position. On the third or subsequent offence, the SEC may suspend or revoke the company’s primary or secondary license. Government-owned corporations are exempt and remain governed by their respective charters.