Directors’ Duties in Singapore

The board of directors, which include the Chief Executive Officer (CEO), usually manages a company’s operations. This is in accordance with the Companies Act (CA) section 157A. In this article, we will discuss what the directors’ duties in Singapore are.

When it comes to the day-to-day tasks of the company, the company executives are responsible for executing them. As prescribed by the CA, there are important company decisions that directors must make in line with their obligations. Failure to do so, the directors potentially face civil lawsuits, criminal penalties (such as jail terms) and can be subjected to being removed or terminated from the company.

Duties prescribed by the law

These are duties under the legislation of Singapore, an example will be the Companies Act.

Disclosure of interests in transactions

As prescribed in section 156 of the CA, if a director has any form of interest in a particular transaction or potential transaction, he or she needs to disclose it during a directors’ meeting. However, such disclosure is not required when:

• ‘the director’s interest consists only of being a shareholder or creditor of the company which is interested in the transaction,
• ‘the director’s interest can be properly defined as not of a material interest’.

In section 156(3) of the CA, there are other exceptions a director is considered to have an interest in.

Other than declaring the nature and extent of his interest in the other company that is dealing with his own, the director must also declare the extent of any potential conflicts with regards to him executing his director’s duties. This could be due to the fact that he is also holding an office in the other company for example.

Failure to do so will potentially result in a fine of up to SGD $5000, or a jail term of up to 12 months.

Duty to be reasonably diligent and act honestly 

As prescribed in CA section 157, all directors have a ‘duty in acting honestly and to use reasonable diligence during the execution of his duties while holding office’.

A director shall not use any information obtained as a result of his position in the company to gain an unfair advantage for himself or for other people or to cause harm or damage to the company.

If the director is guilty of such a breach, he or she is liable to the company. The liability exposure will depend on the profits gained by him or herself, and any damages incurred by the company. There will also be potential criminal liabilities and penalties.

Duties under the common law

They consist of duties recognised in previous court cases. The duties under common law will overlap with the statutory duties, as statutes are considered codification of the duties under common law. However, such codification doesn’t mean it excludes the common law duties.

Acting in good faith for the interest of the company

Directors have a fiduciary duty to always act in good faith towards the company, for the interest of the company.

Avoiding conflicts of interest

AS discussed above, the director must declare any conflicts of interest (whether it has happened or not) he or she has in any company dealing with the board. For example, he or she holds an office in a rival company.

Duties of care, diligence and skill

If the directors fail in these duties, they can be sued for negligence.

The above form some of the main responsibilities and duties with regards to being directors in a company. As more cases surfaced in the commercial world, there will be new rulings pertaining to what constitutes a director’s duties.

Other types of duties

Besides such general definitions, there are more specific restrictions on what the directors can or cannot do, including acts of omission.

An example will be in section 162 of the CA, which talks about loans to directors. By default, subjected to some exceptions, a company is not allowed to give a loan to a director. The directors who authorised such loans will be liable for indemnifying the company against any potential losses. All parties involved will be personally liable for criminal proceedings against them.

Negative duties are normally specific with regards to the transaction types (for example registration of charges). However, there are too many to list them all down. You can find them under the corresponding section in the Companies Act.

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This article only serves as a brief guide to the director’s duties in Singapore. In reality, it entails a larger and wider scope of duties.

If you have any questions, please do not hesitate to contact us!

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