An Independent Director shall:

a. have at least one (1) share of stock of the corporation or must be a member of the corporation. (Section 22 of the Revised Corporation Code of the Philippines [RCC])

b. be at least a college graduate or have been engaged or exposed to the business of the corporation for at least five (5) years; (SRC IRR Rule 38.6.1.2)

c. possess integrity/probity; (SRC IRR Rule 38.6.1.3)

d. be assiduous; (SRC IRR Rule 38.6.1.4)

e. (For government employees) have a written permission from the Head of the Department allowing him to sit as an independent director. (Office of the President Memorandum Circular No. 17 and Section 12, Rule XVIII of the Revised Civil Service Rules) N.B. This written permission is to be submitted by the company.

An ID must NOT:

a. Have been, within five (5) years prior to the election as a director –
(a) Convicted by final judgment:

   (1) Of an offense punishable by imprisonment for a period exceeding six (6) years;
   (2) For violating this Code; and
   (3) For violating Republic Act No. 8799, otherwise known as “The Securities Regulation Code”;

(b) Found administratively liable for any offense involving fraudulent acts; and

(c) Found by a foreign court or equivalent foreign regulatory authority for acts, violations or misconduct similar to those enumerated in paragraphs (a) and (b) above.

The foregoing is without prejudice to qualifications or other disqualifications, which the Commission, the primary regulatory agency, or the Philippine Competition Commission may impose in its promotion of good corporate governance or as a sanction in its administrative proceedings.(Section 26 of the RCC)

b. be a director or officer of the covered company or of its related companies or any of its substantial shareholders except when the same shall be an independent director of any of the foregoing; (SRC IRR Rule 38.2.1)

c. own more than two percent (2%) of the shares of the covered company and/or its related companies or any of its substantial shareholders; (SRC IRR Rule 38.2.2)

d. be related to any director, officer or substantial shareholder of the covered company, any of its related companies or any of its substantial shareholders. Relatives include spouse, parent, child, brother, sister and the spouse of such child, brother or sister; (SRC Rule 38.2.3)

e. be acting as a nominee or representative of any director or substantial shareholder of the covered company, and/or any of its related companies and/or any of its substantial shareholders, pursuant to a Deed of Trust or under any contract or arrangement; (SRC Rule 38.2.4)

f. be employed in any executive capacity by the covered company, any of its related companies and/or by any of its substantial shareholders within the last two (2) years; (SRC Rule 38.2.5)

g. be retained, either personally or through his firm or any similar entity, as professional adviser, by that covered company, any of its related companies and/or any of its substantial shareholders, within the last two (2) years; (SRC Rule 38.2.6)

h. be engaged within the last two (2) years and does not engage in any transaction with the covered company and/or with any of its related companies and/or with any of its substantial shareholders, whether by himself and/or with other persons and/or through a firm of which he is a partner and/or a company of which he is a director or substantial shareholder, other than transactions which are conducted at arms-length and are immaterial; (SRC Rule 38.2.7 as amended by SEC MC No. 7, Series of 2018)

i. be a regular director who resigns or whose term ends on the day of the election shall only qualify for nomination and election as an Independent Director after a two (2) year cooling off period. (SEC MC No. 9, Series of 2009)

j. be a person appointed as Chairman “Emeritus”, Ex-Officio” Director/Officers or Members of any Executive Advisory Board, or otherwise appointed in a capacity to assist the Board in the performance of its duties and responsibilities shall be subject to a one (1) year “cooling-off period” prior to his qualification as an Independent Director; (SEC MC No. 9, Series of 2009

The maximum cumulative term for IDs is nine (9) years. (Recommendation 5.3 of the CG Code for PLCs [SEC Memorandum Circular No. 19, Series of 2016] and under Recommendation 5.4 of the CG Code for PCs and RIs [SEC Memorandum Circular No. 24, Series of 2019 for PCs and RIs]).

For purposes of computing the cumulative years of service, the actual number of years in service reckoned from the date of the first election of the subject ID in 2012 shall be considered.

The CG Code for PLCs (SEC MC No. 19, Series of 2016) and CG Code for PCs and RIs (SEC MC No. 24, Series of 2019) recommend that the Board’s IDs should serve for a maximum cumulative term of nine (9) years. After which, the ID should be perpetually barred from reelection as such in the same company, but may continue to qualify for nomination and election as a non-independent director.

In the instance that a company wants to retain an ID who has served for nine years, the Board should provide meritorious justification/s and seek shareholders’ approval during the annual shareholders’ meeting.

Yes. The maximum cumulative term limit of nine (9) years for independent directors shall only apply if the subject ID intends to be re-elected as such in the same company and shall not extend to his/her election/re-election in other companies within the conglomerate.

No. SEC Memorandum Circular No. 20, Series of 2020 only applies to Exchanges and other Organized Markets.

Exchange refers to an organized marketplace or facility that brings together buyers and sellers, and executes trades of securities and/or commodities.

Organized Market refers to an over-the-counter market, alternative trading system, or otherwise recognized as such by the Commission, and governed by, among others, transparent and binding rules and market conventions on membership, trading, price transparency, trade reporting, market monitoring and orderly conduct or operation of the market which are enforceable on the members and participants.

CG-ITPs shall be accredited for a period of three (3) years from the date of the approval of its accreditation, without prejudice to the revocation of the accreditation should the CG-ITPs be found to have violated the terms of its accreditation.

After the accreditation period, the accreditation of an ITP shall expire or automatically be delisted, unless an application for its renewal is filed with the Commission not later than thirty (30) business days before its expiration.

The Integrated Annual Corporate Governance Report (I-ACGR) is a tool used to disclose publicly listed companies’ (PLC) compliance or non-compliance with the recommendations provided under the Code of Corporate Governance for PLCs. The I-ACGR harmonizes the corporate governance reportorial requirements of the SEC and the Philippine Stock Exchange (PSE).

(SEC Memorandum Circular No. 15, Series of 2017)

Yes. For incomplete disclosure(s) in the I-ACGR, there is a basic penalty of Php 25,000.00 and a continuing monthly penalty of Php 2,500.00.

For misrepresentation/misinformation on the disclosure(s) in the I-ACGR, there is a basic penalty of Php 100,000.00 and a continuing monthly penalty of Php 10,000.00.

Annual Corporate Governance Report (ACGR) is a mandated report which shall cover all relevant corporate governance information which shall cover all relevant information from January to December of the given year regardless of the registration date of public companies (PCs) and registered Issuers’ (RI) compliance or non-compliance with the recommendations provided under SEC Memorandum Circular No. 24, Series of 2019 (Code of Corporate Governance for PCs and RIs).

A sample template for the ACGR can be downloaded through this link</a<.

Only PCs and RIs are required to submit an ACGR.

SEC Memorandum Circular No. 24, Series of 2019 (Code of Corporate Governance for PCs and RIs) defines a PC and RI as follows:

A PC is a company with assets of at least Fifty Million Pesos (Php50,000,000.00) and having two hundred (200) or more shareholders holding at least one hundred (100) shares each of equity securities.

Meanwhile, an RI refers to a company that: (1) issues proprietary and/or non-proprietary shares/certificates; (2) issues equity securities to the public that are not listed in an Exchange; or (3) issues debt securities to the public that are required to be registered to the SEC, whether or not listed in an Exchange.