Directors’ Duties in Singapore
Contrary to popular belief, the management of a company is not entirely vested in the Chief Executive Officer. Under section 157A of the Companies Act (CA), the management of a company is vested in the board of directors (which the CEO is usually part of).
Although day-to-day management may be delegated to executives, there are still business decisions that directors have to make in accordance with their duties under the law. Otherwise, they may face civil liability in a lawsuit, criminal penalties and/or be subject to removal from the company.
These consist of duties found in the legislation, such as the Companies Act.
Duty to disclose interests in transactions
Under section 156 of the CA, a director is generally required to make a disclosure at a directors’ meeting if he is interested in a transaction or proposed transaction with the company. This disclosure is not required where “the interest of the director consists only of being a member or creditor of a corporation which is interested in a transaction” and “if the interest of the director may properly be regarded as not being a material interest.”
There are also exceptions as to when a director will be found to be interested. These can be found under section 156(3) of the CA.
Besides disclosing the nature and extent of his interest in an entity that is transacting with the company, the director must also disclose the nature, character and extent of any conflicts with his directors’ duties that may arise due to his holding any office or possessing any property.
Failure to disclose can lead to a fine not exceeding $5000 or to imprisonment of a term not exceeding 12 months.
Duty to act honestly and use reasonable diligence
Under section 157 of the CA, directors have the “duty to act honestly and use reasonable diligence in the discharge of the duties of his office”.
Specifically, a director “shall not make improper use of any information acquired by virtue of his position as officer or agent of the company to gain…an advantage for himself or for any other person or to cause detriment to the company”.
If found guilty of breaching the provisions, a director is liable to the company for any profits made by him and any damages suffered by the company. There is also a possibility of criminal sanctions.
Common Law Duties
Common law duties consist of duties that have been recognised in past cases. Inevitably, the common law duties will overlap with the statutory duties as the statutes are a form of codification of the common law duties. This codification does not exclude the common law duties.
Duty to exercise power in good faith for the company’s interests
Directors owe a fiduciary duty towards the company, and so they must act in the interests of the company.
Duty to avoid conflicts of interest
For example, a director cannot hijack a business opportunity that he comes across through his role as director without the informed consent of the company.
Duties of skill, care and diligence
Failure in these duties can result in directors being sued for negligence.
The above are some of the main duties associated with directors. Further analysis will involve examining cases to determine what exactly can constitute the company’s interests etc.
Aside from such general definitions of duties, there are more specific restrictions or “negative duties” on what directors cannot do.
For example, section 162 of the CA deals with loans to directors. The default stand, subject to exceptions, is that a company cannot make a loan to a director. If a loan is made in contravention of the provisions, then the directors authorising the transaction will be liable to indemnify the company against any loss. They will also be liable for criminal sanctions.
These “negative duties” are usually specific to the type of transaction (e.g. registering of charges) and are too numerous to be listed here. They can be found by looking for the relevant transaction in the statute, which is usually the Companies Act.
This article is an extremely condensed explanation of directors’ duties in Singapore. Further legal advice should be sought before action is taken.
- What are Annual General Meetings (AGMs) in Singapore?
- Anti-Money Laundering Regulations and Your Business: What You Need to Know
- Price-Fixing, Bid-Rigging and Other Anti-Competitive Practices to Avoid
- Dividend Payments Guide for Singapore Business Owners
- Company Audits in Singapore: Requirements and Exemptions
- Guide to Transferring Shares in a Singapore Private Company
- How to Hold Extraordinary General Meetings (EGMs) in Singapore
- How to Issue Shares in a Singapore Private Company
- How to Reduce the Share Capital of Your Singapore Company
- Legally Conducting Lucky Draws for Singapore Businesses
- Dormant Companies and Their Filing Obligations in Singapore
- How to Hold a Board Meeting in Singapore
- Paid-Up Capital in Singapore: A Complete Guide (Is $1 Enough?)
- Restaurant Inspection and Food Safety Rules in Singapore
- Essential Regulatory Compliance Guide for Singapore Companies
- Finding a Suitable Corporate Secretarial Firm in Singapore
- Oppression of Minority Shareholders
- Process Agents in Singapore
- Shadow Directors: Who are They and What Duties Do They Owe to the Company?
- Guide to Directors' Remuneration in Singapore
- 3 Types of Insurance Every Singapore Business Needs
- How to Change the Name of Your Singapore Company
- How to Remove a Director from a Company in Singapore
- Appointing Company Directors in Singapore: Eligibility, Process etc.
- Company Loans to Directors/Shareholders (& Vice Versa) in Singapore
- Share Transmission: What Happens If a Shareholder Dies in Singapore?
- Business Will: How to Pass on Your Business to Your Successors in Singapore
- Shareholder Rights in Singapore Private Companies
- Removal and Resignation of Company Auditor in Singapore
- Shareholder Roles and Obligations in Singapore Companies
- Creating and Registering Charges in Singapore: Guide for Companies
- How to Commence a Derivative Action on Behalf of a Company in Singapore
- Managing Director vs CEO in Singapore: Roles and Obligations
- Appointing an Authorised Representative for a Singapore Business
- Business Partnership Disputes in Singapore: How to Resolve
- Appointing a Company Secretary: Roles and Responsibilities
- Directors' Duties in Singapore
- Company Constitutions in Singapore and How to Draft One
- Company Memorandum and Articles of Association
- Minutes of Company Meeting in Singapore: How to Record
- Guide to Filing Financial Statements for Singapore Business Owners
- Filing Annual Returns For Your Business
- Memorandum of Understanding (MOU): Does Your Business Need One?
- Company Resolutions: What are They?
- Board Resolutions in Singapore
- How to Set Up a Register of Controllers
- How to Set Up a Register of Nominee Directors
- Your Guide to Resolutions Passed at a First Directors’ Meeting
- Your Guide to Resolutions to Appoint a Company Secretary
- Your Guide to Resolutions for Authority to Act on a Share Purchase and Subscription Agreement
- Your Guide to Shareholders’ Resolutions for Share Allotments
- Your Guide to Resolution for Authorisation of Investment in the Shares of Another Company
- Your Guide to Share Certificates in Singapore: Usage and How to Prepare
- Your Guide to Resolution for Transfer of Shares
- Your Guide to Resolution for Change of Registered Address
- Your Guide to Board Resolution for Approval/Allotment of Shares
- Your Guide to Resolutions to Increase a Company's Share Capital
- What is Withholding Tax and When to Pay It in Singapore
- Singapore Influencers: Here's How to Calculate Your Income Tax
- Corporate Tax in Singapore: How to Pay, Tax Rate, Exemptions
- When to Register for GST, How and Responsibilities after Registration
- Start-Up Tax Exemption Guide for New Singapore Companies
- Tax Investigation of Tax-Evading Business Owners in Singapore
- Small Business Accounting Services in Singapore
- Essential PDPA Compliance Guide for Singapore Businesses
- Cloud Storage of Personal Data: Your Business’ Data Protection Obligations
- How Can Companies Dispose of Documents Containing Personal Data?
- Here's a 7-Step Plan for Companies to Prevent Unauthorised Disclosure When Processing and Sending Personal Data
- Appointing a Data Protection Officer For Your Business: All You Need to Know
- Summary: Your Organisation's 9 Main PDPA Obligations
- Check the Do-Not-Call Registry Before Marketing to Singapore Phone Numbers
- GDPR Compliance in Singapore: Is it Required and How to Comply
- Is It Legal for Businesses to Ask for Your NRIC in Singapore?
- PDPA Consent Requirements: How Can Your Business Comply?
- Legal Options If Employees Breach Confidentiality in Singapore
- Insolvency: Claw-back of Assets from Unfair Preference and Undervalue Transactions
- Striking Off a Company
- What Should a Creditor Do When a Company Becomes Insolvent?
- Dissolution of partnerships in Singapore
- Validation of Payments Made by Companies Being Wound Up
- Can a Company that Struck Itself Off the Register Later Apply to Restore Itself?
- Closing Your Singapore Business: What You Need to Settle
- How to File a Proof of Debt against a Company in Liquidation
- Winding Up a Company