Roles and Duties of Singapore Company Directors

Roles and Duties of Singapore Company Directors

A company cannot operate on its own. It requires officers and directors to control and manage its activities. In Singapore, the government mandates every company to appoint at least one director. In this article, we have outlined what it means to be a director of a Singapore company – who is eligible, what their responsibilities and duties are, and how they are appointed and can leave the company.

 

Who can be a Singapore company director?

To become a director in Singapore, one must:

  • Be over 18 years old;
  • Be s natural person (i.e., a business entity or business cannot be a director);
  • Have a healthy mind;
  • Be an ordinarily resident in Singapore — ideally a Singaporean citizen, but can be a Singapore Permanent Resident or a person with an Employment Pass/Dependent Pass.

A person cannot be a director if they are:

  • An unfit director from another company;
  • An undischarged bankrupt;
  • A person who has been disqualified by an order made by the court;
  • A person involved in offenses such as dishonesty or fraud that is punishable with imprisonment of three months or more either in Singapore or elsewhere;
  • A director of a company that was wound up due to interest or national security;
  • A person who has been convicted of three or more filing-related offenses under the Companies Act within five years; 
  • A person who has three or more High Court Orders made against them compelling compliance with the relevant requirements of the Act within five years.

Note:

Once disqualified, the person will not be allowed to become a director or manage a local or foreign company unless they request permission from the High Court. In addition, if directors have gone bankrupt, they must seek approval from the court officer presiding over the bankruptcy, also known as the Official Assignee.

 

Can a foreigner be a company director?

As long as you have at least one local resident director, you can have foreigners/non-locals as other company directors. However, if you are on a Dependent Pass, you may require approval from the Ministry of Manpower (MOM) to become a company director in Singapore. 

 

How many company directors do I need?

While the minimum number of directors required for Singapore company registration is one, the maximum number will usually be stated in the company constitution.

It is important to note that if a company has only one director, that sole director can also be its sole shareholder. Also, note that the same person cannot serve as a company secretary. Thus, even a company with one director will still have at least two company officers – a director and a company secretary.

 

Read a related article:

How to Appoint a Nominee Director in Singapore

 

Statutory duties of a Company Director

Company directors must fulfill their obligations under the law as regulated in the Company Law. Also, they need to understand the procedural aspects of their compliance to ensure that no violations occur. The tasks are described below.

 

Maintaining accounting records

Under section 199 of the Companies Act, directors must ensure that accounting records are kept that demonstrate the company’s financial health. Records should be kept in a location where other company directors can easily access and check them.

Directors who fail to keep accounting records can face a fine of up to S$2,000 and/or imprisonment of up to three months.

 

Managing annual accounts

According to section 116 of the Companies Act 2014, the board of directors must submit the company’s financial statements at an Annual General Meeting (AGM) every calendar year. Directors must submit their first financial reports within 18 months of company incorporation at the AGM, and no more than 15 months must pass between the two meetings. Financial statements must be made up to the date:

  • No later than four months before the meeting date for a public company.
  • Not later than six months before the meeting date in the case of other companies.

Under Section 201 of the Companies Act, any director who knowingly fails to maintain the company’s annual books faces a fine of up to S$10,000 or a prison term of up to two years.

 

Holding meetings

Directors are required to hold the following meetings, which may vary based on the company’s size and the company’s business structure.

  • Annual General Meeting (AGM): All companies are obliged to hold an AGM at least once a year.
  • Statutory Meeting: Directors of a  public company have to hold a statutory meeting within the first three months after starting the business
  • Extraordinary Meeting: At the request of members who own at least ten percent of the total paid-up shares and have voting rights in the general meeting, directors should hold an extraordinary meeting no later than two months from the date of the request.

Under section 174 of the Companies Act, directors of a public company who fail to meet must face a fine of up to S$1,000 and a default penalty. Similarly, under section 175, any director who fails to hold an annual general meeting faces a fine of up to S$5,000 and a default penalty.

 

Appointing a company secretary

It is the duty of the board of directors to appoint a company secretary within six months of starting the business. Directors must ensure that the chosen secretary has the requisite experience, qualifications, and industry membership before being appointed. For additional information about the appointment of a company secretary in Singapore, please refer to:

The Essential Guide for Choosing a Company Secretary in Singapore

 

Appointing an auditor

Company directors must appoint an auditor or audit committee within the first three months after establishment. Based on section 205 of the Companies Act, a director who fails to appoint an auditor faces a fine of up to S$5,000.

 

Paying dividends

Section 403 of the Companies Act states that dividends can only be paid out of profits generated by the company. Company directors are entrusted with the responsibility to ensure that this happens.

As stated in section 403 of the Companies Act, any director who issues dividends using sources other than profits can face a fine of up to S$5,000 and imprisonment of up to 12 months. In addition, the director will also be responsible for repaying each creditor for any debt used to pay dividends.

 

Issuing shares

A director must ensure that company shares can be issued only after the shareholders’ approval. Any shares issued without shareholder approval are considered void.

As mentioned in section 161 of the Companies Act, directors who issue shares without shareholder approval may be responsible for compensating the company and the shareholders to whom the shares were issued.

 

Disclosing conflicts of interest

As part of the director’s statutory duties, they are required to avoid conflicts of interest. However, if a dispute arises, a director must disclose it to the company. This disclosure is made to the company to assess the director’s potential conflict of interest in any transactions that may arise with other companies, firms, or limited liability partnerships in the future.

The Singapore Institute of Directors (SID), through its Statement of Good Practice 5, categorizes the following as situations in which a conflict of interest may arise:

  • Where the directors have a material interest in the company’s transactions,
  • Where the directors own property and hold positions in the company that gives rise to conflicting duties, and
  • Where directors receive information because of their role and benefit from them.

Section 156 of the Companies Act states that a director who fails to disclose their interest in a company transaction or ownership of office property faces a fine of up to S$5,000.

 

Fiduciary duties of a Company Director

Fiduciary duties of a company director stem from the principle that they must be loyal to their company, act in their best interest, and not have a conflict of loyalty. To fulfill fiduciary duties, a director must always act in good faith to benefit the company members and act in the best interests of the company.

The Accounting and Corporate Regulatory Authority of Singapore (ACRA) has outlined the fiduciary obligations that a company’s director must fulfill. Every director must satisfy the following fiduciary duties:

  • Act honestly and in good faith while keeping the company’s interests in mind.
  • Avoid any conflicts of interest.
  • Be diligent and conduct their duties very carefully.
  • Not take advantage of the power given to them or the information they know.

 

For breach of any of the four fiduciary obligations, a company can do any of the following in civil court:

  • Demand that the director pay for any losses incurred by the company;
  • Request the director to return the profits earned while in breach;
  • Declare any action or decision made by the director as invalid.

Similarly, a director who violates their fiduciary duties may face the following criminal liability:

  • Fines up to S$5,000; or
  • Maximum 1-year imprisonment.

 

Appointing a Company Director

In general, directors are appointed through an ordinary resolution issued at a general meeting. Still, the specific method of appointment is determined by the company’s memorandum and articles of association.

Ordinary resolutions are decisions that the company’s shareholders vote on. Before an ordinary resolution can be passed, it must receive at least 50% of the votes cast in the general meeting. A company can issue an ordinary resolution through a physical meeting or writing.

In most cases, before the board of directors passes an ordinary resolution, they can appoint alternate directors who hold office until the next general meeting, where the shareholders may re-elect them.

Before a director can be officially chosen, a company must first complete the following documents and file a notice of director appointment with ACRA:

  • A declaration of consent to act as a director using form 45;
  • Director’s disclosure of all directorships or other shareholdings; and
  • A board resolution was signed approving the appointment.

A person considered a regular resident of Singapore, an existing director, or a company secretary can apply for a director notice appointment with ACRA online using BizFile. However, if the director is a foreign citizen, the company must apply for the selection of the director through a registered company service provider.

 

Can a director resign?

To resign as a director, you must first ensure that there is another local director to fulfill your obligations under the Companies Act. After that, your next step is to notify your company secretary, who will prepare your letter of resignation and a resolution for all other directors to sign and file changes with ACRA. Once the change is submitted, your company secretary will update all necessary registers.

 

Can a director be removed?

According to the Companies Act, a company director can be dismissed by an ordinary shareholders’ ordinary resolution before their term in office gets expired. Note that the removal process must be performed following the company’s memorandum and articles of association.

Once a director is dismissed, the company must file the removal of the director’s notice with ACRA within 14 days. As with the appointment or resignation of directors, companies can apply for the removal of director notices through BizFile.

 

Conclusion

Singapore company directors have so many responsibilities and must comply with all statutory requirements outlined by law. Violation of duties can result in penalties and, in serious cases, criminal prosecution and civil action against directors. To ensure proper compliance with these obligations, your company should engage the services of a reputable corporate service provider that can guide and assist your directors in carrying out their responsibilities under regulations.

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