SEC Issues Memorandum Circular on Term Limits of Independent Directors

The Securities and Exchange Commission (SEC) has issued SEC Memorandum Circular No. 7, Series of 2026, which sets out comprehensive rules on the term limit of Independent Directors (IDs) of publicly-listed companies (PLCs). The issuance aims to strengthen corporate governance, reinforce director independence, and align Philippine regulations with international best practices.

Coverage

The Circular applies to companies with a class of equities listed for trading on an exchange, as defined under the Securities Regulation Code (SRC).

Term Limit of Independent Directors

Independent Directors shall be elected for a term of one (1) year and may serve a maximum cumulative term of nine (9) years in the same company. The nine-year term applies regardless of whether service is continuous or intermittent.

For purposes of computation:

• Continuous or consecutive service counts toward the nine-year limit, with the maximum term reckoned based on the date of the Annual Stockholders’ Meeting (ASM) or another ASM date approved by the SEC.

• In cases of intermittent service, cumulative tenure must not exceed nine years.

• Any fraction of a year exceeding six (6) months is considered one (1) full year.

Cooling-Off Period

If an Independent Director becomes a non-independent director or officer of the company within the nine-year term, the individual may be re-elected as an Independent Director only after a two (2)-year cooling-off period, provided that the cumulative nine-year term has not yet been exceeded.

Effects of Reaching the Maximum Term

An Independent Director who has served the maximum cumulative nine-year term is permanently barred from re-election as an Independent Director of the same company.

This prohibition does not prevent the individual from serving as a non-independent director or officer, without any cooling-off period.

Continuing Qualifications

Companies are required to ensure that their Independent Directors continuously meet all qualifications and none of the disqualifications prescribed under SRC rules and other applicable regulations.

Serving as an Independent Director of one company is not, by itself, a ground for disqualification from serving as an Independent Director of another related company.

Conflicting Regulations

In cases where other regulatory agencies impose different term limits, the shorter maximum term shall prevail.

Penalties

Covered companies that violate the maximum cumulative term limit are subject to the following penalties:

• A basic penalty of PHP 1,000,000 per Independent Director per year of violation; and

• A continuing penalty of PHP 30,000 per month for as long as the violation continues.

Repeated violations may result in the suspension or revocation of the company’s primary or secondary license, without prejudice to other sanctions under existing laws.

Exceptions

Independent Directors of government-owned or -controlled corporations (GOCCs) shall be governed by the terms and limitations provided in their respective charters.

Repealing and Separability Clauses

All SEC issuances, guidelines, or portions thereof inconsistent with this Circular are repealed or modified accordingly.If any provision is declared invalid, the remaining provisions shall continue in full force and effect.

Transitory Provision

Incumbent Independent Directors who have already reached the maximum term upon the effectivity of the Circular may continue to serve until the 2026 Annual Stockholders’ Meeting of the company or another ASM date approved by the SEC.

Effectivity

SEC Memorandum Circular No. 7, Series of 2026 shall take effect on 01 February 2026, after publication in two (2) newspapers of general and national circulation.