SEC imposes strict 9-year limit for independent directors

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 companies, effective Feb. 1.

Under Memorandum Circular No. 7, Series of 2026, an ID is elected to a one-year term and may serve for a total of up to nine years in the same company.

IDs elected before the circular’s effectivity will be subject to the same nine-year limit, reckoned from calendar year 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 another date approved by the SEC.

In cases of intermittent service, total tenure must still not exceed nine years, with the limit in the ninth year ending on the ASM date.

If an ID assumes a non-independent role before reaching the nine-year limit, he or she 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 will be permanently disqualified from re-election as an independent director in the same company but may serve in other capacities without restriction.

Under the current 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 new circular removes this flexibility and adopts a stricter, more definitive enforcement of the term cap.

Companies that exceed the maximum cumulative term limit for an ID may face a base penalty of P1 million per violation, plus P30,000 for each month that the director remains in office beyond the allowed term, in addition to other sanctions under existing laws.–Alexandria Grace C. Magno