By: Christianne Grace F. Salonga
The Securities and Exchange Commission (“SEC”) has issued SEC Memorandum Circular No. 7, Series of 2026, which prescribes a uniform term limit framework for Independent Directors of publicly-listed companies. The Circular was issued pursuant to the SEC’s rule-making powers under the Revised Corporation Code and is intended to strengthen board independence and align Philippine corporate governance practices with international standards.
Under the Circular, an Independent Director shall be elected for a term of one (1) year, subject to a maximum cumulative term of nine (9) years in the same company. The nine-year cap applies regardless of whether service is continuous or intermittent, and is reckoned from calendar year 2012 for incumbents. Any fraction of a year exceeding six (6) months is counted as one full year of service.
Once an Independent Director has completed the maximum cumulative nine-year term, he or she is permanently barred from re-election as an Independent Director of the same company. However, the individual may continue to serve the company in a non-independent capacity, subject to compliance with other applicable laws and regulations.
The Circular also clarifies scenarios involving changes in role. Where an individual previously served as a non-independent director or officer, re-election as an Independent Director of the same company is allowed only after a two-year cooling-off period, provided the cumulative nine-year limit has not yet been reached.
The rules apply to all publicly-listed companies, as defined under the Securities Regulation Code. Non-compliance exposes covered companies to administrative penalties, including a basic fine of P100,000.00, a continuing penalty of P30,000.00 per month of violation, and, for repeated offenses, possible suspension or revocation of the company’s license.
A transitory provision allows incumbent Independent Directors who have already reached the maximum term to continue serving until the company’s 2026 Annual Stockholders’ Meeting (“ASM”), or such other ASM date as may be approved by the SEC. The Circular takes effect on 01 February 2026, following publication.
In light of this Circular, Boards and corporate secretaries of listed companies should review the tenure history of their Independent Directors, assess compliance with the cumulative term limit, and start succession planning where necessary. Companies should also update their governance policies and nomination processes to ensure continued compliance with the Circular.
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