Are you a company director in Singapore?
Make sure you do your duties.
If you plan on putting up a company or incorporating your business, then the law here in Singapore says you’ll need to have directors. And if you’re in the process of appointing someone to be a director of your company or you’ve been approached yourself for this position, then you’ll need to know exactly what a director has to do.
Because whether you’re “active”, “inactive” or “sleeping”, being a company director comes with huge responsibilities—and responsibilities come with consequences if they’re not properly carried out. ACRA gives a full description along with case studies of these responsibilities here.
But to help you hit the ground running, here’s a summary of the duties and liabilities of a Singapore company director. Hopefully, this may serve as a sort of quick-start guide for you and your directors in making sure you stay on the right side of company law.
To Be or Not To Be a Director
For starters, it’s your duty to make sure you can even be a director of a Singapore company, which means that if you don’t meet these requirements, it’s best to find somebody who does.
In the first place, you need to be either a Singapore citizen or Permanent Resident, or have an Employment Pass or Entrepass. You have to be at least age 18, you have to be a “real person” (i.e. not another corporation), and you have to agree to be a director.
Finally, you have to be appointed in line with the articles of the company you’re joining during a general meeting, at which they have to make a resolution appointing you to the post. Once you’re appointed, the company will have to file a notice at ACRA (saying that you have been appointed director) along with all the other required documents.
A nominee director is someone who becomes director “just for the sake of compliance”. If you’re a foreigner, for instance, and you want to put up a company in Singapore, but you don’t know anyone who’s a Singapore citizen and so on to become a company director. What you can do is to get a nominee director to meet the legal requirements for you.
As a nominee director, you wouldn’t have to get involved in actually running the company, although take note that there are additional requirements for becoming a nominee director as stipulated by the Companies Act. Also note that you would have the same fiduciary and statutory duties and liabilities (which we’ll go into a little later) as a regular director.
Another example of where a nominee director would come in handy is if a major shareholder couldn’t make it to the director’s meeting—a nominee director could go in his place.
The Power is Yours
As a director, you’ll have certain powers which basically means you can make any decision for the company except those that need to be voted on by the shareholders (such as changing your company’s name or articles in your company’s constitution).
The decisions you can make as a director include opening your company bank account, selling off your company assets, and borrowing, lending or investing your company funds. Since these are major decisions, there are rules in place to make sure directors don’t abuse their powers, which are detailed in the Company Act.
When directors carry out their responsibilities faithfully, they can be said to be fulfilling their duties. Not fulfilling these duties makes them liable or subject to fines or penalties. A director has both fiduciary and statutory duties to perform, and we’ll go into them along with their corresponding liabilities in the event of a breach.
In Directors We Trust
A fiduciary duty may be described simply as the company’s trust in you to do the right thing on its behalf, and that it relies on you to make decisions accruing to its benefit. That said, your fiduciary duties as director include staying loyal to the company, which means that you must subordinate any personal gain or preferences to the company’s welfare.
It’s your duty to put the company above a third party, which means you would always choose the company if any conflict of interest should arise. As director, you would naturally be privy to all sorts of internal or confidential information, which you are also duty-bound to not disclose to competitors and the like, or use against the company in any way.
If you should ever find yourself in a situation where a conflict of interest might be involved, you would also be duty-bound to inform the company, and to get their approval before proceeding.
And while this may seem obvious, it’s likewise your duty to do your best for the company, which is to say that you would use all the skill and expertise at your disposal to further the company’s interests. You would also take great care in the exercise of your duties, and not act rashly or do anything ill-advised.
If there should be a lapse in the performance of any of these fiduciary duties, a director could be subject to no less than criminal prosecution. Other liabilities include a fine of not over SGD5,000 or imprisonment of up to one year for not informing the company of any potential conflict of interest.
The same penalties apply to any failure to act honestly or with reasonable diligence, or for improper use of company information. The director would also have to pay the company back for damages and return any profit made illegally. The company would also be able to legally declare any decisions or actions taken by the director to be null and void.
In Accordance with the Law
Statutory duties, or duties prescribed by law, are duties your accounting services provider in Singapore would be able to help you with.
You need to keep the following books and records at your ACRA-registered address:
- Register of members
- Accounting records (e.g. receipts & payments, sales & purchases, assets & liabilities, stocks) for the last five years
- Annual accounts (e.g. profit & loss, balance sheet) and director’s report
- Minutes of director’s and shareholder’s meetings
Making sure the director’s and shareholder’s meetings take place is your responsibility, as is appointing an auditor for your company. Director’s meetings must be held regularly, although how often they actually happen is up to what kind of company you have and how big it is.
The shareholder’s meeting, on the other hand, has special rules of its own to follow as set forth by the company and the Companies Act. Companies typically have at least one Annual General Meeting or AGM, and if your company is brand new, you, as director, have to make sure that your first AGM takes place within the first 18 months after its incorporation.
The liabilities for failing in any of these statutory duties are huge, with a fine of up to SGD10,000 and up to two years of imprisonment for wilfully failing to keep the company’s annual accounts.
Other fines and penalties for breaches of statutory duties according to the Companies Act include:
Up to SGD5,000 for not appointing an auditor
- Up to SGD5,000 and a penalty for not holding your AGM
- Up to SGD2,000 and/or up to three months of imprisonment for not keeping accounting records
- Up to SGD1,000 and a penalty for not holding a required meeting
Stay Up to Date with Your Duties
It’s important to be aware that changes are made to the Companies Act from time to time which affect your duties as director. Some of the more recent changes in the Act at the time of writing include the changes on statutory requirements for AGM and filing of Annual Returns or AR, and the key changes to Companies Act impacting directors and CEOs.
Unless you’re a nominee director, you might find it challenging to juggle your managerial and operational responsibilities with keeping tabs on these changes as they occur. Yet, it’s the only way to ensure your compliance with ACRA’s requirements, as your conscientious fulfilment of your duties might be outdated and therefore liable be it done unwittingly and in good faith.
This is how outsourcing aid from a reliable accounting services provider in Singapore can help. As entrepreneurs and as experts in incorporation law and procedures, we’ve helped several businesses through their incorporation processes, and continue to help them with our corporate secretarial services and audit & assurance.
Being a company director is a big job, no doubt, but you don’t have to do it alone, nor should you. If you need help with your statutory duties, finding a nominee director, or with any step in your incorporation process, get expert advice and assistance today from your friends at U Ventures.