How To Appoint Company Directors?

In Singapore, all companies are required to have a minimum of 1 director who is a Singapore resident. Hence, it is crucial for you to know the requirements on how to appoint company directors in your Singapore company.

Who is qualified to be a director

In order to qualify as a director, the person must be:

• A natural person (i.e. a human being, you cannot appoint another company as a director);
• Must be 18 years old and above; and
• Has full legal capacity (must be of a sound mind)

The person cannot be an undischarged bankrupt and does not fall into automatic disqualification. You can read in detail about how a director can be automatically disqualified here.

Different types of directors

• An Executive Director is normally an employee under the company. This is typically a full-time position that involves managing the daily affairs of the company. Directors have different functions from the Chief Executive Officer (CEO) of the company, inclusive of managing directors.
• Non-Executive Director is not an employee under the company. He or she does not get involved in the daily operations. He or she normally sits on the board of directors to offer neutral opinions, stature, external experiences or an objective opinion of the company’s standing.
• Independent Director is someone who has absolutely nil relations with the company, affiliated companies, shareholders or officers that will interfere with the independent director’s opinion. Executive directors are not independent directors because the employment relationship will potentially impair their independent judgements and give rise to a potential conflict of interest.
• A Nominee Director (ND) is a person that is being nominated by a major shareholder to be the company’s director on their behalf. An ND will have the exact obligations mandated in the Companies Act (CA), just like a regular director.
• A De Facto Director are individuals who are fully responsible for directors’ duties. They openly act like they are formally appointed directors without formal appointment. De facto directors need to comply with all provisions under the CA pertaining to a director who is formally appointed.
• Finally, a Shadow Director is a person who constantly gives advice to the formally appointed directors, who decide on company matters, for example, a business strategy. These are individuals who are not formal directors and don’t openly act in the capacity of directors. A shadow director has to fulfil all directors’ duties under the CA as well.

How to appoint directors

The company’s constitution normally states the process for appointing directors. This can be done through an ordinary resolution passed by the shareholders in an extraordinary general meeting (EGM).

It requires a minimum of 50% majority of the votes in the EGM to appoint a director. The resolution will usually state the exact appointment (e.g. Independent Director) and the date on which this new director is to begin his duties.

The constitution may also state other ways for appointing directors. For example, it may state that only specific shareholders or the board of directors have vested powers for the appointment of directors. The individual needs to provide a written (signed) agreement and a non-disqualification statement in order to act as a director.

After appointing the director in accordance with the constitution, the company must notify ACRA within 14 days from the appointment date of the director.

The personal information of the new director must be provided to Accounting and Corporate Regulatory Authority (ACRA):

• Name
• Identification number (i.e. passport number for foreigners)
• The office he or she is holding (in this case is a director)
• Nationality
• Residential address (the corporate secretary will need to have a copy of the proof of residential address such as utility or credit card bill)
• Primary contact number and email address
• Date of appointment

Once the company files the information with ACRA, the appointment is effective immediately. You can verify this through the register of directors.

What authority a director has

The normal functions of a board of directors are to manage the company by coming up with different policies and company objectives, approval of budgets annually, select and appointing key company executive officers like the CEO and the Chief Financial Officer (CFO).

The CA provides that the board of directors can exercise all the powers unless the company’s constitution or CA states that such a particular act is not legitimate or legal, without the approval of the shareholders.

As stated below, the CA sets out that these tasks are allowed only if the shareholders approve them:

• Disposing business assets of the company
• Issuing of new shares
• Payments being issued to any director(s) as a form of compensation (for example the director has been terminated)
• Giving of payment or increment of salaries (for example, fees and allowances for expenses) to any director(s)

Duties of a director

Directors are the business decision-makers, thus they have to exercise their powers with a duty of care under the law. Failure to do so may potentially face liability in a civil and/or criminal lawsuit. The director may potentially be removed from the company as well. In the case of a criminal lawsuit, penalties such as fines and/or jail terms can apply too.

For more information on the duties of a director in a Singapore company, click here.

How much is a director’s remuneration 

Under normal circumstances, the company ought to pay a form of fees to the directors for the services and tasks they perform. The CA doesn’t put a limit on the amount of fees paid to a director. But as discussed previously, regarding directors’ remuneration, approval must be obtained from the company’s shareholders.

For executive directors, the company pays them a salary in accordance with their contract terms (normally an employment contract).

Removing directors

Directors can be removed from the company by means of an ordinary resolution of the shareholders.

For public companies, you need the shareholders to approve any removal of directors. In the case of private companies (Pte Ltd), the company’s constitution can state other methods for the removal of directors. In some cases, the company’s constitution may even set out that the shareholders have no right to remove any of the directors.

The company needs to adhere to its constitution under all circumstances. It is the so-called ‘rulebook’ of the company.

Contact us

If you are unsure of how you can do so, it is advisable that you get in touch with a lawyer or a corporate secretarial firm like us today!

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