The Securities and Exchange Commission (SEC) has drawn a firm line in the sand: independent directorship in publicly listed companies is no longer indefinite. Under SEC Memorandum Circular No. 7, Series of 2026, the Commission formally imposes a strict nine-year cumulative term limit for independent directors (IDs).
The message is unmistakable. Independence must remain real — not ceremonial. And tenure, however distinguished, cannot quietly erode objectivity.
The Legal Basis: Reinforcing Independence Under the RCCP
The Circular finds its footing in Sections 22 and 179 of the Revised Corporation Code (RCCP), which authorize the SEC to regulate the qualifications, disqualifications, and term limits of independent directors.
The policy rationale is aligned with international best practices: long tenure may compromise independence in fact or, at the very least, independence in perception. Even without formal ties to management, extended service can create familiarity that weakens oversight.
In short, independence is not a lifetime title.
The Nine-Year Rule: How It Works
An independent director is elected annually. However, total service in the same company — whether continuous or intermittent — may not exceed nine cumulative years.
Key Mechanics of the Rule:
- Continuous Service: The maximum term expires on the date of the Annual Stockholders’ Meeting (ASM) in the ninth year.
- Intermittent Service: The cumulative total cannot exceed nine years, regardless of breaks in service.
- Fractional Years: Any period exceeding six months counts as one full year.
- Reckoning Period: The computation dates back to calendar year 2012.
This approach prevents technical workarounds through partial appointments or intermittent resignations.
What Happens After Nine Years?
Once an independent director reaches the nine-year cap:
- He or she is permanently barred from re-election as an independent director in the same company.
- However, the individual may still serve as a non-independent director or officer, without any cooling-off period.
If an ID shifts to a non-independent role before completing nine years, re-election as an independent director is possible — but only after a two-year cooling-off period, and only if the nine-year maximum has not yet been reached.
Importantly, the restriction is company-specific. A person disqualified as an independent director in one company may still serve as an independent director in another.
Compliance Is Not Optional: Penalties and Consequences
The SEC did not leave enforcement ambiguous.
Companies that allow an independent director to exceed the nine-year cap face:
- ₱100,000 basic penalty per ID per year of violation
- ₱30,000 monthly continuing penalty
- For third or subsequent violations: possible suspension or revocation of the company’s license
These sanctions elevate the rule from governance guidance to regulatory mandate.
Transitional Window
Incumbent independent directors who have already reached the maximum term upon effectivity may continue serving only until the company’s 2026 ASM (or another ASM date previously approved by the SEC).
The Circular takes effect on 1 February 2026, after publication.
The clock is already ticking.
Practical Implications for Publicly Listed Companies
For publicly listed companies, this reform demands immediate action:
- Conduct a tenure audit of all independent directors.
- Review service records dating back to 2012.
- Begin succession planning well before the ninth year.
- Align nomination committee processes with the new term limits.
- Reassess board composition strategies balancing institutional memory and fresh oversight.
Boards that rely heavily on long-serving independent directors must now recalibrate governance structures proactively.
Why This Matters
Corporate governance rests on trust. Independent directors serve as the safeguard for minority shareholders and the investing public. But independence is not simply a matter of designation; it is a matter of distance.
Over time, even the most principled directors may lose the detachment necessary for rigorous oversight. The SEC’s reform recognizes this institutional reality.
By mandating turnover, the Commission injects fresh perspective into boardrooms and reinforces accountability.
Independence, after all, has a shelf life.
And the SEC has now defined it.