The SEC issued Memorandum Circular No. 7, Series of 2026 on Jan. 26, with the rule taking effect Feb. 1 for companies listed on an exchange.
What the regulator says
“The essence of having independent directors is that their ability to exercise independent judgement over a company’s affairs, making them an effective tool for promoting good corporate governance, transparency, and accountability,” SEC chairperson Francis Ed. Lim said.
“A strict term limit ensures that independent directors maintain the objectivity and impartiality required to serve the very purpose envisioned under the law,” he added.
Impact on companies
The nine-year cap is counted from 2012 and covers both continuous and intermittent service, with stints longer than six months counted as a full year.
Companies that keep independent directors beyond the limit face a P1 million annual penalty per director plus P30,000 in monthly fines, with repeat violations risking license suspension or revocation.
Incumbent directors who have reached the cap may stay only until the 2026 annual stockholders’ meeting, pushing firms to refresh boards or absorb compliance costs.
—Edited by Miguel R. Camus
