Role of an Independent Director in the Philippines
Section 22 of Republic Act No. 11232, otherwise known as the Revised Corporation Code, defines an independent director as follows:
An independent director is a person who, apart from shareholdings and fees received from the corporation, is independent of management and free from any business or other relationship which could, or could reasonable be received to materially interfere with the exercise of independent judgment in carrying out the responsibilities as a director.
Independent directors must be elected by the shareholders present or entitled to vote in absentia during the election of directors. Independent directors shall be subject to rules and regulations governing their qualifications, disqualifications, voting requirements, duration of term and term limit, maximum number of board membership and other requirements that the Commission will prescribe to strengthen their independence and align with international best practices.
Not all corporations are required to have independent directors. Under Section 22 of the Revised Corporation Code, only the following corporations are required to have independent directors in the Philippines:
a. Corporations covered by Section 17.2 of Republic Act No. 8799, otherwise known as "The Securities Regulation Code," namely those whose securities are registered with the Commission, corporations listed with an exchange or with assets of at least Fifty Million Pesos (50,000,000.00) and having two hundred (200) or more holders of shares, each holding at least one hundred (100) shares of a class of its equity shares;
b. Banks and quasi-banks, NSSLAs, pawnshops, corporations engaged in money service business, preneed, trust and insurance companies and other financial intermediaries; and
c. Other corporations engaged in businesses vested with public interest similar to the above, as may be determined by the Commission, after taking into account relevant factors which are germane to the objective and purpose of requiring the election of an independent director, such as the extent of minority ownership, type of financial products or securities issued or offered to investors, public interest involved in the nature of business operations, and other analogous factors.
Outside of the foregoing, electing a Philippine independent director would be a purely voluntary initiative of a regular domestic corporation. Nevertheless, having an independent director in the Philippines is a good corporate governance practice, as it promotes accountability, fresh ideas, objectivity, and generally, a check-and-balance system.
Arceo and Irasusta Law Firm is a corporate law office in Quezon City that serves Philippine and foreign corporations. Its corporate attorneys have experience as independent directors of Philippine corporations. Arceo Law also offers monthly legal retainer, corporate secretarial, and resident agent services. Should you need the help of Philippine corporate attorney, you may contact us at email@example.com to get in touch with any of our corporate lawyers.