What Is Your Responsibility As A Company Director In Singapore?
While Singapore is one of the most business-friendly locations in the world, we still need to understand the requirements of opening a company here. Under the Companies Act, we have to appoint at least one director of the company who lives in Singapore.
According to ACRA (Accounting and Corporate Regulatory Authority), there are seven types of company structures in Singapore. If we choose other types of legal entities, we may or may not need to appoint a director.
Read Also: How To Choose The Right Legal Entity To Start A Business In Singapore
Who Can Be A Company Director In Singapore?
Companies can have more than one director, however, at least one of them must be a local resident in Singapore. When there is more than one director in a company, we refer to them collectively as the Board of Directors.
To be appointed a director, you have to be
at least 18 years old
of full legal capacity
a Singapore Citizen, Singapore PR, EntrePass or employment pass (EP) holder
not disqualified from being a director of a company. For example:
being an undischarged bankrupt
convicted of an offence involving fraud or dishonesty that carried imprisonment term of 3 or more months
convicted of the court of 3 or more ACRA filing offences
has 3 or more companies struck off by ACRA within a 5-year period
Shareholders in the company have the power to appoint and remove directors from their board. For many small businesses, the owner(s) of the company are usually appointed as the Board of Directors and they also participate in the daily operation of the company. This is different for larger companies – such as listed companies – where shareholders, Board of Directors and Management Teams are quite separate.
ACRA also made it a point to stress that the Singapore law does not distinguish between “active” and “sleeping” directors. For example, there are Executive Directors – referring to directors who are also part of the management of the company – and Non-Executive Directors – referring to those who do not have an operational role in the the company. This means all directors will be held responsible for any offences and cannot claim to be inactive.
Read Also: What Happens When A Business Owner Passes On?
How To Appoint A Company Director?
In order to be appointed as a company director under the Companies Act, you need to sign Form 45 or Form 45A – consenting to act as a director – and file it with ACRA within 14 days.
Form 45 is the “CONSENT TO ACT AS DIRECTOR AND STATEMENT OF NON DISQUALIFICATION TO ACT AS DIRECTOR”.
Form 45A is the CONSENT TO ACT AS DIRECTOR AND STATEMENT OF NON DISQUALIFICATION TO ACT AS DIRECTOR WITH LEAVE OF COURT OR/AND WRITTEN CONSENT OF OFFICIAL ASSIGNEE”. Form 45A is only applicable if you are acting with written permission of Official Assignee if you have been disqualified from being a director of a company.
Can You Appoint Yourself As Both Director And Company Secretary?
According to ACRA, companies must also appoint a Singapore-resident company secretary within 6 months of its incorporation (and cannot be left vacant for more than 6 months).
If there is only one director in a company, the person cannot also be appointed as the company secretary. If there are more than one director in the company, one of them can be appointed the company secretary. However, you can also engage external company secretarial services – which may help you if you are not familiar with the legal responsibilities of the role.
The company secretary is responsible for the legal administration of the company, including:
Maintain and update the company’s registers and minutes books
Administer, attend and prepare minutes of meetings of directors and shareholders
Keep company directors aware of the deadlines for annual returns and any other filings required by ACRA
Update directors and shareholders on relevant changes in corporate regulations
What Are The Legal Responsibilities Of A Company Director?
The Board of Directors manage the company, and hence may exercise all the powers of a company (except for provisions set out in the Companies Act). This also means that directors have the responsibility to ensure that the company complies with the Companies Act and other relevant regulations, such as the Employment Act, Personal Data and Protection Act (PDPA), Accounting Standards and other regulatory requirements.
Directors also assume the responsibility of company obligations such as providing up-to-date administrative, financial and accounting records to relevant government bodies, holding an Annual General Meeting (AGM), where the audited financial statement for the year must be presented, and others. There are many such obligations of a company that can be found on the Companies Act.
Read Also: Complete Guide To Changing Your Singapore-Incorporated Company Name
The Companies Act also specifically states that directors have to act in good faith when exercising powers or performing duties of a director. Directors must also act honestly and use reasonable diligence in performing their duties. They have to disclose personal interest in any transactions undertaken by the company.
Company directors also cannot carry out the following acts without the approval of shareholders.
Disposal of the company’s business
Issue shares in the company
Increasing director remuneration
There are also restricted transactions that companies cannot make. Directors will be responsible for ensuring that they do not take loans or quasi-loans from the company or receive any guarantee or credit for loans or quasi-loans.
This is why you, as a director, may need to lean on the professional expertise of your company secretary, as well as other professionals such as your accountant and legal counsel.
While directors are typically protected against liabilities of the company, this will be void if there is found to be negligence, default, breach of duty or breach of trust in relation to the company. Punishments may include fines and/or jail terms.
Situations When A Company Director Is Personally Liable For The Company’s Debt
While a company allows business to be conducted by shielding the personal assets of its shareholders and directors from creditors during insolvency, there are certain situations where this principle of limited liability is lifted. This results in directors being personally liable for the company’s debts.
#1 Company Director Is The Co-borrower Or Guarantor Of The Company Loan
You might be personally and/or jointly liable for the repayment of the debt if you co-sign a loan or credit facility that your company has obtained in your individual capacity as a guarantor.
#2 When Court Application Is Made To Hold Director Personally Liable For The Company’s Debts
Another scenario where you could be personally liable as a director for the company’s debts is when a creditor applies to the court to “pierce the corporate veil”. It simply means holding the director personally responsible for the company’s debt. It can only happen if the creditor is able to prove that:
The corporate form and the limited liability that it provides are abused at the expense of third parties.
In other words, the company is used as a vehicle for fraud. In such cases, Section 340 of the Companies Act will hold a person (including the director) who knowingly carries on the business of a company with the intent to defraud creditors personally liable for any or all of the company’s debts.
The company is regarded as the “alter-ego” of the director carrying on his business.
This happens when the company’s major shareholder or company director treats the company’s assets as if they were his own.
#3 Non-Compliance With Statutory Provisions
Additionally, there are another two occasions where the Companies Act imposes liabilities on shareholders and/or directors for the company’s obligations.
First, under Section 145(1) companies must have at least one director who is ordinarily resident in Singapore. If a company carries on its business without a director who is ordinarily a resident in Singapore for more than six months, its shareholders who are aware of this fact, would be made personally liable for all debts incurred by the company until the ordinarily resident director in Singapore is appointed.
Second, Section 144(2) makes it an offence for any director or shareholder to issue or sign a bill of exchange, promissory note or other negotiable instrument on the company’s behalf where its name is not mentioned in the document. Additionally, the person who signs, issues or authorises the signing or issuance of the document can also be personally liable if payment under the document is not eventually made.
How Much Are Directors Paid?
There’s no rule to how much directors can be paid. Younger or smaller businesses may not provide additional remuneration to its directors, especially if all of their directors also perform management duties in the company. Larger companies such as those listed on SGX have directors that are paid close to $100,000 or even more.
Nevertheless, the Companies Act does provide guidance in managing a director’s remuneration. While the amount of director’s fees can be decided by the company, any change in director’s fees, percentages, allowances and other payments must be passed by a resolution at its Annual General Meeting (AGM).
Another thing to take note of is that director’s fees are not subject to CPF contributions – hence no employer or employee CPF contributions need to be made.
Read Also: Complete Guide To Employer’s CPF Contributions In Singapore
This article was first published on 8 October 2021 and updated.
The post What Is Your Responsibility As A Company Director In Singapore? appeared first on DollarsAndSense Business.