SEC proposes 9-year cap on independent director service

The Securities and Exchange Commission (SEC) is proposing stricter rules on the tenure and qualifications of independent directors, including a fixed three-year term and a nine-year cumulative service cap, to strengthen board independence.

Independent directors will serve fixed three-year terms with staggered expirations, and their cumulative service will be capped at nine years, a move intended to align with international best practices under the Revised Corporation Code of the Philippines.

Currently, an independent director can serve a maximum of nine cumulative years, after which they are barred from re-election as an independent director in the same company but can still be a non-independent director.

Companies that fail to comply with the new rules face fines of up to P1 million, with additional penalties for breaching term limits and for failure to vacate disqualified positions.

The SEC has released a draft circular on the duration of term and term limits of independent directors for public comment, with stakeholders having until October 15 to submit feedback.

The new rules are set to take effect on January 1, 2026, after publication in two national newspapers.