Managing Director vs CEO in Singapore: Roles and Obligations

The terms “Managing Director” (MD) and “Chief Executive Officer” (CEO) are often used to refer to the most senior executive decision-maker in a company. But what do they really mean from a legal point of view?

This article will explain the legal roles and obligations of MDs and CEOs in Singapore and the differences between these terms.

Who is a Chief Executive Officer?

Under Singapore’s Companies Act (CA), a “chief executive officer” (CEO) refers to any person, either employed by or acting for the company, who is principally responsible for the management and conduct of the whole or part of the company’s business.

The CA’s definition of CEO applies to any person whose job scope includes the above, regardless of what their official title is. In other words, even if a person is employed as the company’s “Managing Director” (or even its “Founder”), they will be considered a CEO under Singapore law as long as they are principally responsible for the management and conduct of the company’s business.

The reverse also applies: if a person’s job title is “CEO” but they are not involved in the management of the company’s business, then they are not considered a “CEO” under Singapore law.

Who is a Managing Director?

Unlike “CEO”, “managing director” (MD) is not a legal term under the CA. In other words, the law does not define any specific job scope for MDs.

However, the constitution of a company (a document which contains rules on the internal management of the company) typically states that:

• An MD may be appointed from within the board of directors of the company (in other words, the MD is a member of the board of directors)
• The directors are in charge of managing the day-to-day business of the company

As a result, the MD may be involved in managing the company’s day-to-day business.

Such management of the company’s day-to-day business would be covered in the role of the CEO as described above. Accordingly, it’s possible for someone with the official job title of “Managing Director” to be considered a CEO in the eyes of the law (as explained above).

Is It Compulsory for Companies to Have a Managing Director and/or a CEO?

For a company to be validly registered in Singapore, the company just needs to have at least one person ordinarily resident in Singapore to occupy the legal position of “director” and manage the company’s day-to-day business. (This person can give themselves any job title they like, whether it is “Director”, “Founder” or something else.)

Hence, it is not a legal requirement for a company to have a person whose job title is “Managing Director” or “CEO”.

However in larger companies when many people are involved in the managing of the business, they may be given separate titles such as “Managing Director” or “CEO” to differentiate their responsibilities.

For example, a company may have separate MDs for each country that it does business in. Then, these MDs all report to a CEO who oversees the operations of the company as a whole.

What are the Duties and Obligations of an MD and a CEO?

While people who hold the titles of “Managing Director” and “CEO” may all be involved in the management of the company’s business, it is still important to maintain a distinction between the roles. This is because different legal duties and obligations may apply to them.

General duties

As mentioned above, an MD is generally a director in law, which means that the general directors’ duties will attach to them. These include a duty to act reasonably and with reasonable diligence, general fiduciary duties and a duty to avoid conflict of interests.

Breach of such duties may expose the MD to both civil and criminal liabilities.

You may refer to our other article for more information on directors’ duties in Singapore.

In contrast, a CEO may not always be a director. If they are not a director, directors’ duties will not apply to them. Nevertheless, the immense influence of a CEO over corporate decisions means that they face their own set of duties under the CA, which will ultimately depend on the situation as shown below:

• As an officer of the company, a CEO is not allowed to make improper use of their position or any information acquired therein to gain an advantage for themselves or any other person, or to cause detriment to the company. A CEO who breaches this duty may face criminal penalties and be liable to account to the company any profit gained or compensate it for losses suffered.
• Depending on the CEO’s contract of employment and the particular responsibilities undertaken, the CEO may be considered a fiduciary (i.e. a person in position of trust) to the company and thus owe general fiduciary duties to it. You may refer to our other article for more information on fiduciary duties in Singapore.
• Finally, the amount of influence of a CEO over corporate decisions may lead the courts to consider him a de facto director even if he hasn’t been officially appointed as such. If so, the CEO will owe general directors’ duties as well.

Provision of personal particulars 

The CA requires companies to provide the Accounting and Corporate Regulatory Authority (ACRA) with the details of all directors and CEOs within 14 days of their appointment or any change in appointment. Such information includes their:

• Full names;
• Residential addresses;
• Nationality;
• Identification;
• Date of appointment; and
• Date of cessation of any appointment.

This also creates the corresponding requirement for such directors and CEOs to provide the company with such information as soon as practicable within that 14-day period. Default in meeting this requirement may expose the relevant director or CEO to criminal liability.

It should be noted that in providing their residential address, MDs (assuming they are directors in law) and CEOs have the option to substitute their residential addresses for an alternate address. This is due to the MDs or CEOs possibly being high-profile figures (especially if they are helming well-known companies) and thus needing greater protection of privacy.

However, such an alternate address must not be a post office box. It must be one at which the MD or CEO can be located and must be located in the same jurisdiction as the residential address.

Recording of interests in company registers

Due to their position, both the MD (assuming they are a director in law) and CEO face stringent disclosure requirements. This includes the requirement to record their interests in shares of related companies, as well as any interest in corporate transactions, in the register of directors’ shareholdings and register of CEOs’ shareholdings (as relevant). Failure to do so may expose them to criminal liability.

However, the precise extent of such disclosure differs between the MD and CEO, as shown below.

• Both the MD and CEO are required to state their interests in shares in their companies, debentures, rights/options to acquire such shares or any other contract under which they are entitled to call for delivery of such shares. However, the MD must go one step further and also state his interests in shares in the company’s related corporations (e.g. the subsidiaries or holding companies of the company). The CEO merely needs to fulfil his disclosure requirements in relation to the company itself.
• The MD is required to state his “participatory interests” in the company and its related corporations while the CEO is not. “Participatory interests” refer to units in collective investment schemes such as REITs and public unit trusts.
• Both the MD and CEO are required to state their nature of any interest they have in a transaction or proposed transaction with the company.

Frequently Asked Questions

1. Can there be more than 1 MD or CEO in a company?

Yes, companies can have multiple MDs and/or CEOs. The total number of MDs and/or CEOs that a company can have depends on what its constitution provides for.

2. Can the same person hold the position of MD and CEO?

Yes, there are no restrictions on the same person holding the position of both MD and CEO. However, this isn’t commonly done.

3. Can the company appoint either an MD or a CEO but not both? 

Yes, it is possible for a company to decide to appoint just an MD or a CEO, but not both (as may be the case for smaller companies).

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While the above provides a broad overview of the legal roles and differences between an MD and a CEO, it is by no means exhaustive. The scopes of the powers and duties of MDs and CEOs will ultimately depend on the precise situation.

If you need advice on how to appropriately exercise such powers, and/or comply with such duties, of an MD or CEO, we would recommend consulting a corporate lawyer.