Professional Documents
Culture Documents
DEPARTMENT OF FINANCE
Ito\ us lioulknaid Curia Pahl() ()camp, Si Street
M11,uuld 101)1
WHEREAS, the administrative supervision over the SEC was given to the DOF.
pursuant to Executive Order ("EC") No. 37, s.2011, primarily in view of the need to
ensure effective financial sector coordination;
WHEREAS, moved by the necessity to build a strong and stable financial system,
the National Government is interested to promote good governance in the private sector,
considering the sizeable role of the latter in the country's economic growth and
development;
Section 1. Ranking System. IC and SEC shall promulgate guidelines and shall
implement a system for ranking insurance companies and public companies,
RE: Adoption of Guidelines Prescribing the Fit and Proper Rule for
Directors of Insurance Companies and Public Companies
Page 1 of 4
respectively, in terms of company practices employed in ensuring that directors are fit
and proper to hold such position. These guidelines shall include criteria on integrity,
experience, education, training and competence, and shall be consistent with the
standards herein set forth.
The implementation of the ranking system and the standards set forth in this
Department Order shall be without prejudice to, and shall be consistent with, all
applicable laws and existing rules and regulations of the IC and the SEC.
The term "public company" shall refer to a corporation duly registered with the
SEC having the following characteristics:
RE: Adoption of Guidelines Prescribing the Fit and Proper Rule for
Directors of Insurance Companies and Public Companies
Page 2 of 4
Section 5. Ideal Qualifications of an Independent Director. An independent
director shall refer to a person who, ideally:
a. Is not more than eighty (80) years old, unless otherwise found fit to
continue serving as such by SEC or IC;
b. Is not or has not been a member of the executive committee of the board
of directors, or an officer or employee, of the covered entity, its
subsidiaries, affiliates or related companies during the three (3) years
immediately preceding the date of his election;
c. Is not a director, officer, or employee of the related companies of the
covered entity's majority shareholders;
d. Is not a "substantial shareholder", i.e., does not own/hold shares of stock
sufficient to elect one (1) seat in the board of directors of either the
covered entity, its subsidiaries, affiliates, or any related companies of its
majority corporate shareholders;
e. Is not a relative within the fourth degree of consanguinity or affinity,
legitimate or otherwise, of a director, officer, or substantial shareholder of
the covered entity or any of its related companies;
f. Is not acting as a nominee or representative of any director or substantial
shareholder of the covered entity or any of its related companies;
g. Is not retained, within the three (3) years immediately preceding the date
of his election, either in his personal capacity or through a firm, as a
professional adviser, consultant, agent or counsel of the covered entity.
any of its related companies or substantial shareholders; is otherwise
independent of management and free from any business or other
relationship within the three (3) years immediately preceding the date of
his election ; and
h. Does not engage or has not engaged, whether by himself or with other
persons or through a firm of which he is a partner, director or substantial
shareholder, in any transaction with the covered entity or any of its related
companies or substantial shareholders, other than such transactions that
are conducted at arm's length and could not materially interfere with or
influence the exercise of his judgment.
Section 7. Ideal Tenure. An independent director shall ideally serve for five (5)
consecutive years. After completion of five (5) consecutive years, the covered entity
shall ideally consider him ineligible for re-election,. which ineligibility may be lifted after
the lapse of a "cooling period" of two (2) years: Provided, that during such period, he
RE: Adoption of Guidelines Prescribing the Fit and Proper Rule for
Directors of Insurance Companies and Public Companies
Page 3 of 4
has not engaged in any activity that, under existing rules, disqualifies a person from
being elected as independent director in the same entity. The former independent
director who has undergone the aforementioned cooling period may be re-elected to
another term of five (5) years. After serving for a cumulative period of ten (10) years, an
independent director is ideally perpetually barred from being elected in the same
covered entity.
Section 10. Effectivity. This Order shall take effect immediately and all
concerned shall be guided accordingly.
CES R I IMA
Secretary
025873
RE: Adoption of Guidelines Prescribing the Fit and Proper Rule for
Directors of Insurance Companies and Public Companies
Page 4 of 4