SEC bans independent directorship beyond 9 years

The Securities and Exchange Commission (SEC) has imposed stricter term limits on independent directors of publicly listed companies, effectively barring those who have reached the maximum allowable tenure from being reelected in the same firm.

In a statement on Tuesday, the SEC said it had issued SEC Memorandum Circular No. 7, Series of 2026 on Jan. 26 as part of efforts to strengthen board independence and align corporate governance rules with international standards.

Under the new rules, which will take effect on Feb. 1, independent directors who have already completed the maximum cumulative term of nine years would be perpetually barred from reelection as independent directors in the same company.

This marks a shift from previous guidelines, which allowed companies to seek extensions beyond the nine-year limit, subject to shareholder approval and the presentation of a meritorious justification.

SEC chair Francis Lim said strict term limits were necessary to preserve the independence and objectivity of directors, which are essential to effective corporate governance, transparency and accountability.

“A strict term limit ensures that independent directors maintain the objectivity and impartiality required to serve the very purpose envisioned under the law,” Lim said.

The term limit applies to companies with a class of equities listed for trading on an exchange.

The nine-year cumulative period is reckoned from 2012 and covers both continuous and intermittent service. Any fractional service exceeding six months will be counted as one full year.

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Independent directors who have not yet reached the nine-year limit but previously served as a nonindependent director or officer of the same company must observe a two-year cooling-off period before being reelected as independent directors.

Those who have already completed the maximum term, however, may immediately serve as nonindependent directors or officers without a cooling-off period.

A transitory provision allows incumbent independent directors who have reached the maximum term to remain in office until the company’s 2026 annual stockholders’ meeting, or on another date approved by the SEC.