SEC tightens rules on board independence

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, in a bid to strengthen board independence.

In an interview with reporters on Wednesday, SEC Chairperson Francis Lim said independent directors must act solely in the interest of companies and shareholders.

The regulator has also released for public comment a draft circular on the duration of term and term limits of independent directors.

“The Commission hereby requests comments, and/or inputs on the attached draft Memorandum Circular on the Duration of Term and Term Limit of Independent Directors,” the SEC said in a 30 September notice.

Stakeholders have until 15 October to submit feedback.

Capped at nine years

Under the proposal, independent directors will serve fixed three-year terms with staggered expirations, and their cumulative service will be capped at nine years.

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

The new rules, meant to align with international best practices under the Revised Corporation Code, will take effect on January 1, 2026, after publication in two national newspapers.

Marcoleta’s wife

The move comes as questions mounted over Senator Rodante Marcoleta’s wife serving as an independent director in Stronghold Insurance, Inc.

“Independent directors protect the investing public. Once you are a director of a company, you are supposed to be independent… Duty of loyalty and obedience is to the company not the persons who voted you,” Lim said, emphasizing their role in safeguarding minority investors and ensuring corporate accountability.