The Securities and Exchange Commission (SEC) has issued draft rules to strictly enforce a nine-year term limit and fixed three-year tenure for independent directors of publicly listed companies, public companies and registered issuers.
It issued Memorandum Circular No. 3, Series of 2025 to strengthen board independence and align Philippine corporate governance practices with international standards under the Revised Corporation Code of the Philippines.
The rules, which will be open for comments from affected sectors, will take effect on Jan. 1, 2026.
Under the draft circular, independent directors should be elected to a fixed three-year term and may serve a maximum cumulative term of nine years. Any fraction of a year served is counted as one full year, regardless of the reason for resignation or removal.
Once a director reaches the nine-year limit, they must vacate the position immediately and may no longer be re-elected as an independent director in the same company, according to the draft rules.
To ensure board continuity, companies are required to stagger the initial terms of their independent directors. For example, a company with five independent directors may assign two to three-year terms, two to two-year terms, and one to a one-year term during the first cycle. All subsequent appointments will follow the three-year fixed term.
SEC chairman Francisco Lim said the commission would be very strict with the implementation of the nine-year limit and will no longer accept applications for exemptions.
“At the same time, to make the independent directors truly independent, we’re giving them a three-year security tenure,” Lim said.
The SEC said it would impose a P1 million fine for companies with an independent director exceeding the nine-year term limit and a P100,000 fine for failure to vacate the position after disqualification.
As part of the transition period, the SEC said independent directors who have already served nine years as of the circular’s effectivity may continue to serve only until their company’s 2028 annual stockholders meeting.
The move, the SEC said, is part of its continuing efforts to promote transparency, accountability and strong corporate governance in the capital markets.
