The Fit & Proper

Rule as Applied to
the Business Sector
and GOCCs: A
Comprehensive
Assessment

Nicole Patricia P. Torres

March 13, 2018
“Good governance extends to corporate governance. We
want our insurance companies and public companies to
reflect the highest standards of integrity and excellence .
For company directors

to be fit & proper is a given; it

merely enforces good practice.”

- Finance Secretary Cesar V. Purisima

(Press Briefing, 2014)
 What is the Fit & Proper Rule?

–  It lays down the minimum and ideal qualifications of directors

to ensure that they possess the necessary qualifications and
competence needed for their positions.
–  It is made to ensure that covered entities have directors that
are “fit & proper” to hold their positions.
 Fit & Proper Rule as Applied in the Business
Sector and GOCCs
DOF CIRCULAR DO 054-2015 GCG MC No. 2012-05

COVERAGE
-Insurance Companies -Appointive Directors and CEOs of GOCCs /
-Public Companies Subsidiaries / Affiliates
OBJECTIVES
To build a strong and stable financial system To ensure that the governing boards of
by ensuring that directors are fit & proper every GOCC and its subsidiaries are
to hold their positions competent to carry out its functions, fully
accountable to the State as its fiduciary, and
acts in the best interest of the State.

 Ideal Minimum Qualifications /
Term
–  SIMILARITIES:
–  Good moral character, integrity, competence, skills and
training
–  Special Seminar of corporate / public governance
–  DIFFERENCES
–  Nationality, age, educational attainment

 Independent Directors under D.O.
054-2015 sand SEC MC No. 19, s. 2016

– Qualifications
– Disqualifications
 Independent Directors under D.O.
054-2015 and SEC MC No. 19-2016
D.O. 054-2015 SEC M.C. 19-2016

TERM 5 consecutive years Maximum cumulative term of 9

2 year cooling period years
Re-elected for another 5 years

MINIMUM At least 20% but not less than two (2) At least 3 or 1/3 of the Board,
NUMBER OF members of the board of directors whichever is higher
DIRECTORS
Corporate Governance Training:
SEC MC No. 20, Series of 2013
–  Mandates all key officers and members of the board of
publicly-listed companies to attend, at least once a year,
a program on corporate governance conducted by
training providers that are duly accredited by the
Commission.
–  The participants should also submit a CERTIFICATE OF
ATTENDANCE within 10 days from completion.
 Corporate Governance Training:
SEC MC No. 13, Series of 2014
BASIC COURSE
–  Framework for financial Statement Reporting
–  Principal Financial Statements and their uses
–  What Decision-Makers Need To Know About the Financial Statements
–  Income Statement, Balance Sheet, Statement of Cash Flows
–  Financial Statement Analysis
–  Issue Spotting

ADVANCE COURSE
–  Provisions of Philippine Financial Reporting Standard Provisions that are
relevant to the company’s specific industry
Corporate Governance Training:
SEC MC No. 2, Series of 2015
–  ADDITIONAL GUIDELINES ON CORPORATE GOVERNANCE
TRAINING PROGRAMS AND LECTURES
1.  RESOURCE PERSONS
2.  TRAINING PROVIDERS
3.  IN-HOUSE TRAINING
–  DURATION
–  4 hours of training every year

 3 Key messages

–  1. THE BOARD PLAYS AN IMPORTANT ROLE IN THE MANAGEMENT OF

THE BUSINESS. THUS, IT IS IMPORTANT TO APPOINT DIRECTORS WHO
ARE COMPETENT, CAPABLE, AND WHO POSSESS GOOD MORAL
CHARACTER.

–  2. IN CHOOSING DIRECTORS WHO ARE FIT & PROPER FOR THEIR

POSITIONS, A COMPANY / ENTITY MUST ALSO INVEST IN THE
QUALIFICATIONS OF A DIRECTOR, NOT JUST THE DISQUALIFICATIONS.

–  3. TRAINING ENSURES THAT DIRECTORS ARE CONTINUOUSLY LEARNING

AND IMPROVING
Sources

–  Department of Finance D.O. No. 054-2014

–  GCG Memorandum Circular 2012-05
–  GCG Memorandum Circular 2012 - 07
–  SEC Memorandum Circular No. 20 Series of 2013
–  SEC Memorandum Circular No. 13 Series of 2014
–  SEC Memorandum Circular No. 02 Series of 2015
–  SEC Memorandum Circular No. 19 Series of 2016