The Securities and Exchange Commission (“SEC”) has issued SEC MC No. 4, Series of 2017 to provide the guidelines for the term limit of independent directors. The term limit of independent directors of registered issuers, public and mutual fund companies shall be as follows:
A company’s independent directors shall serve for a maximum cumulative term of nine (9) years;
After which, the independent director shall be perpetually barred from re-election as such in the same company, but may continue to qualify as a non-independent director;
In the instance that a company wants to retain an independent director who has served for nine (9) years, the Board should provide meritorious justification/s and seek shareholders’ approval during the annual shareholders’ meeting; and
Reckoning of cumulative nine-year term is from 2012.
The said circular has changed the old rule under SEC MC No. 9, Series of 2011 which is also known as the “5-2-5” where an independent director can serve for five (5) consecutive years. After completion of the five-year period, the independent director shall be ineligible for election unless the independent director has undergone a “cooling off” period of two (2) years. Under the old rule, the independent director may thereafter be re-elected for another five (5) consecutive years.