The Securities and Exchange Commission (SEC) will enforce stricter term limits for independent directors starting February 1.
Under the new rules, independent directors who have already served the maximum cumulative term of nine years will no longer be allowed to run again as independent directors in the same company. This replaces the previous policy, which allowed extensions beyond nine years if the company gave a valid reason and shareholders approved.
SEC chairman Francis E. Lim said strict term limits are needed to ensure independent directors remain objective and impartial, which is essential for good corporate governance, transparency, and accountability.
The rules apply to companies with shares listed on the Philippine Stock Exchange. The nine-year limit is counted from 2012 and includes both continuous and intermittent service. Any service period longer than six months will be counted as one full year.
Independent directors who have not yet reached the nine-year limit but served as a non-independent director or company officer in between terms must observe a two-year cooling-off period before returning as an independent director. Those who have already reached the maximum term may still serve as a non-independent director or officer without a cooling-off period.
Incumbent independent directors who have reached the maximum term by the time the rules take effect may continue serving until the 2026 annual stockholders’ meeting or another date approved by the SEC.
Companies that fail to comply will face a fine of ₱1 million per year for each independent director who exceeds the term limit, plus an additional ₱30,000 monthly penalty while the violation continues. Repeated violations may lead to the suspension or revocation of the company’s license.
