August 19, 2025 | 12:00am
MANILA, Philippines — The Securities and Alternate Fee (SEC) is contemplating abolishing the “comply or clarify” framework on the cumulative time period restrict for unbiased administrators of publicly listed firms.
SEC chairperson Francis Lim stated the fee is implementing a compulsory nine-year time period cap on unbiased administrators, whereas offering them with safety of tenure on the similar time.
“Beneath our current system, it’s a comply or clarify rule. In different phrases, whereas there’s that time period restrict of 9 years, the corporate or the issuer can clarify why (it may be prolonged). For those who take a look at the info, and we now have to research extra deeply, the same old causes will not be compelling, akin to we will’t discover somebody or we’d like this man and so forth and so forth,” Lim stated.
“That’s why we’re considering of making our personal laws to prescribe issues. To any extent further, absolute 9 years. There’ll not be a have to comply or clarify. I’m certain that there are equally certified people who find themselves not simply as excessive profile as these serving as unbiased administrators,” he stated.
An organization’s unbiased director is at present allowed to serve for a most cumulative time period of 9 years, after which, the unbiased director shall be perpetually barred from re-election as such within the firm, however could proceed to qualify as a non-independent director.
Nevertheless, within the occasion that an organization needs to retain an unbiased director who has served for 9 years, the agency’s board ought to present meritorious justifications and search shareholders’ approval throughout the annual shareholders’ assembly.
“That’s one difficulty, the time period restrict. In some instances, they go to the SEC to hunt exemption from that nine-year time period restrict; that’s why you see some unbiased administrators exceeding the nine-year restrict. I need to cap it,” Lim stated.
“There’s no monopoly of expertise. There can be found abilities available in the market. And if the sitting unbiased administrators actually need to assist, they will turn out to be unbiased administrators of different firms, particularly the smaller firms that stand to profit from their knowledge and expertise,” he stated.
Lim stated that he needs the SEC to give you a brand new memorandum round purely on company governance-related issues, together with the time period of unbiased administrators and even their safety of tenure.
“Whereas we would like a cap on the time period, we additionally need to give safety of tenure to unbiased administrators. As a result of we all know that in the event you converse up, possibilities of you not being re-elected the next yr are there,” Lim stated.
“For those who’re an unbiased director and also you battle for one thing which you consider is true, however it’s not in line with what the controlling shareholders say, then you definately’re placing your tenure in danger. So it’s simply truthful to check whether or not or to not give safety of tenure to unbiased administrators,” he stated.
Lim stated the obligatory nine-year cap on unbiased administrators and offering them with safety of tenure could be studied rigorously by the SEC.
He additionally acknowledges the worth of an actual, honest-to-goodness set of unbiased administrators in firms, noting that they make plenty of distinction.
