Under new draft rules, the SEC will also tighten the existing 9-year cap while requiring staggered expirations to avoid boardroom disruptions.
Public comments are open until Oct. 15, 2025, with the final circular expected to take effect Jan. 1, 2026.
SEC chair Francis Ed. Lim said the move aims to “give true meaning to independent directors”.
“We are also benchmarking with other markets. Some jurisdictions provide three years’ security of tenure, others two years,” he told reporters on the sidelines of a Shareholders Association of the Philippines event on Wednesday.
Stronger safeguards for investors
“The staggered term and hard tenure limit for independent directors are major reforms that will strengthen corporate governance,” said Juan Paolo Colet, managing director at China Bank Capital.
“The nine-year maximum cumulative term is particularly important as it will prevent director entrenchment that impinges on perceived independence,” Colet told InsiderPH.
“The limit will likewise open corporate boards to new members with fresh perspectives and competencies,” he added.
SEC wants to cut back exemptions
Based on the rules, corporations would be compelled to disclose nominees nearing the cap, with those who breach the limit disqualified as independent directors though still eligible for regular seats.
Non-compliance carries heavy penalties of up to P1 million plus monthly fines if directors refuse to vacate.
“This new rule will do away with [giving] exemptive relief,” Lim said.
More reforms needed
Colet said this latest move could open the door to even bolder reforms.
“The SEC is hitting the right notes with investors and should capitalize on the momentum by taking its corporate governance reform drive further. For example, public shareholders should have a greater say in electing independent directors,” he said.
“This can be done through a requirement that an independent director must also receive a majority of the votes cast by public shareholders, or through a rule that at least one independent director should be elected solely by public shareholders,” he added.
Miguel R. Camus has been a reporter covering various domestic business topics since 2009.
