QuestionsQuestions (CIRCULAR LETTER NO. 2018-36)
At least two (2) independent directors or twenty percent (20%) of the members of the board, whichever is higher.
Any fractional result from applying the twenty percent (20%) proportion must be rounded off to the nearest whole number.
It must submit a formal written justification for non-compliance to the Insurance Commission for consideration and/or approval.
A person other than an officer/employee of the corporation, its parent/subsidiaries, or any individual with relationships that could interfere with independent judgment; independent aside from director’s fees and shareholdings.
Generally, the disqualifying relationships are evaluated over the past three (3) years counted from the date of election/appointment.
Examples: (1) Was a regular director/officer/employee of the covered entity or related companies within past 3 years; (2) Was a director/officer/employee as substantial stockholder’s related company within past 3 years; (3) Owns more than 2% of outstanding shares or is a shareholder with enough shares to elect one board seat; (4) Is a relative within the 4th degree of a director/officer/stockholder holding enough shares for one board seat; (5) Acts as nominee/representative of a director or substantial shareholder; (6) Was retained within past 3 years as professional adviser/auditor/consultant/agent/counsel; (7) Is/was a securities broker-dealer of listed companies and registered issuers; among others.
An independent director must not be the owner of more than two percent (2%) of the outstanding shares, or a stockholder with shares sufficient to elect one (1) seat—relevant because ownership can compromise independence.
The independent director must be free from any business or relationship that could materially interfere with independent judgment; transactions are only allowed if conducted at arm’s length and cannot materially interfere or influence judgment.
He must be at least a college graduate or have been exposed/engaged in the corporation’s business for at least five (5) years; and must have proven integrity, probity, and independence.
A maximum cumulative term of nine (9) years.
For insurance companies, reckoning starts from 02 January 2015.
For pre-need companies and health maintenance organizations, reckoning starts from 21 September 2016.
He is perpetually barred from re-election as an independent director in the same covered entity but may continue as a non-independent director.
Yes. The covered entity may request an exception, but it must submit a formal written justification to the Commission and must also obtain the majority of shareholders’ approval during its annual meeting.
A penalty of PhP200,000.00 per calendar year of non-compliance.
Failure to comply with the minimum number of qualified independent directors or failure to pay the penalty may be taken into account in the renewal of the Certificate of Authority.
It takes effect immediately. All issuances inconsistent with it are revoked and superseded accordingly.