SEC wants to tighten rules on board independence
Securities and Exchange Commission Chairperson Francis Lim speaks to reporters on Wednesday, underscoring the role of independent directors in protecting minority shareholders and strengthening board accountability.
Photograph by Maria Romero for DAILY TRIBUNE
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 their 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.
“Independent directors protect the investing public. Once you are a director of a company, you are supposed to be independent.
Your 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.
On Wednesday, the SEC 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 notice dated 30 September.
Stakeholders have until 15 October to submit feedback.
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 1 January 2026, after publication in two national newspapers.
To recall, questions mounted over Senator Rodante Marcoleta’s wife serving as an independent director in Stronghold Insurance, Inc.
Marcoleta earlier denied conflict of interest allegations, saying his wife Edna serves only as an independent director at Stronghold, which has been linked to Alpha & Omega Contractor, a firm owned by the Discaya couple.
The contractor reportedly transacted with Stronghold for a bond obligation.