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 SRC Rule 38 and the Code of Corporate Governance, 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 took effect on 1 February 2026. For incumbent independent directors, the nine-year term is reckoned from 2012, and service of more than six (6) months is counted as a full year. Incumbent independent directors who have reached the nine-year limit may continue to serve until the 2026 annual stockholders’ meeting.
An ID who serves as a non-independent director or officer within the nine-year period may be re-elected as an ID only after a two-year cooling-off period, and only if the cumulative nine-year limit has not been reached. An individual who has completed the nine-year term may continue as a non-independent director or officer without a cooling-off period. 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.