The Securities and Exchange Commission has issued SEC Memorandum Circular No. 7, Series of 2026, formalizing a strict nine-year cumulative term limit for independent directors (IDs) of publicly listed companies and imposing substantial penalties for non-compliance.
Under the Circular, an independent director shall be elected for a one-year term but may serve for a maximum cumulative period of nine (9) years in the same company. The nine-year cap applies whether service is continuous or intermittent. Any fraction of a year exceeding six months is deemed one full year for purposes of computation. Service prior to the Circular’s effectivity is likewise counted, reckoned from calendar year 2012.
Once an ID reaches the nine-year maximum, he or she is perpetually barred from re-election as an independent director of the same company, although service as a non-independent director or officer remains permissible. A two-year cooling-off period is required before a former non-independent director may again serve as an independent director, provided the cumulative nine-year limit has not been exhausted.
The most striking feature of the issuance is the penalty framework. Companies that breach the maximum cumulative term limit per independent director, per year, face a basic penalty of ₱1,000,000, plus a continuing penalty of ₱30,000 per month for as long as the independent director continues to hold the seat. A third or subsequent violation may lead to suspension or revocation of the company’s secondary or primary license.
The Circular also clarifies that independent directors must continuously possess the qualifications and none of the disqualifications under applicable rules, and that in case of conflicting regulations from other agencies, the shorter maximum term shall prevail. Government-owned or controlled corporations remain governed by their respective charters.
Effective 1 February 2026, the issuance aligns Philippine corporate governance standards with international best practices by reinforcing the independence of board oversight while introducing meaningful enforcement consequences for non-compliance.
This measure, ultimately, strengthens oversight of management, enhances protection of minority shareholders, and aligns Philippine governance standards with international best practices.
This guide provides a general overview of the above transactions at the time of writing only and is not intended to be a comprehensive legal advice. This should also not be taken as an opinion on the topic. For more details and information, you may coordinate with any GVES Law Partner regarding the matter.
Atty. Khalid M. Derogongan is an Associate at GVES Law.