The Securities and Exchange Commission (SEC) has issued a memorandum circular imposing a firm maximum cumulative nine-year term for independent directors (IDs) of publicly listed corporations, effective Feb. 1.
Under Memorandum Circular No. 7, Series of 2026, an ID is elected to a one-year term and should serve for a complete of as much as nine years in the identical company.
IDs elected before the circular’s effectivity might be subject to the identical nine-year limit, reckoned from calendar yr 2012, unless otherwise provided.
For continuous or consecutive service, the nine-year term limit will end on the date of the annual stockholders’ meeting (ASM) or on one other date approved by the SEC.
In cases of intermittent service, total tenure must still not exceed nine years, with the limit within the ninth yr ending on the ASM date.
If an ID assumes a non-independent role before reaching the nine-year limit, she or he must observe a two-year cooling-off period before being eligible for re-election as an ID.
Once the nine-year limit is reached, the director might be permanently disqualified from re-election as an independent director in the identical company but may serve in other capacities without restriction.
Under the present system, independent directors are formally re-elected at each annual stockholders’ meeting, but their cumulative service is subject to a nine-year cap, although some have been allowed to exceed this limit through exemptive relief.
The brand new circular removes this flexibility and adopts a stricter, more definitive enforcement of the term cap.
Corporations that exceed the utmost cumulative term limit for an ID may face a base penalty of P1 million per violation, plus P30,000 for every month that the director stays in office beyond the allowed term, along with other sanctions under existing laws.–Alexandria Grace C. Magno