Tax Notes: New term limit of independent directors

PREVIOUSLY, the Securities and Exchange Commission (SEC) issued Memorandum Circular No. 9-2011, prescribing a 10-year limit on independent directors in listed, public and mutual fund companies.

The rule provides that an independent director can have an initial term limit of five years and can be reelected for another five years only after a cooling off period of two years.

In the pursuit of promoting and reinforcing the independence of the board of directors, the SEC recently issued Memorandum Circular No. 4-2017, amending the term limit of the independent directors to a maximum of nine years. After the nine-year term, the independent director will be permanently barred from reelection as such in the same company but may continue to qualify as a non-independent director.

In case a company wants to retain an independent director who has served for nine years, the board of directors should provide meritorious justifications/s and seek the approval of shareholders during the annual shareholders’ meeting.

This takes effect immediately. Source: P& A Grant Thornton