Directors’ Duties in Singapore

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

Of course, the day-to-day tasks of the company can be assigned to and executed by company executives. 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 disclosure it during a directors’ meeting. Disclosure will not be needed where ‘the director’s interest consists only of being a shareholder or creditor of a company which is interested in the transaction’ and also ‘if the director’s interest can be properly defined as not of a material interest’.

In section 156(3) of the CA, you can find other exceptions for when will a director be considered as having an interest.

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 cost you a fine of not more than SGD $5000, or a jail term not more than 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 found guilty of a breach, he or she will be liable to the company, for all profits gained 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 that were recognised in previous court cases. The duties under common law will definitely overlap with the statutory duties prescribed by law, 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 dealings 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. Of course, 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 actually many more specific restrictions on what the directors can or cannot do or even 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. If such loans are made, contravening any of the provisions, the directors who authorised such loans will be liable for indemnifying the company against any potential losses. Whoever is 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) and they are too many to list them all down. They can be usually found by looking up 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 whether it is prescribed by the CA or not.

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

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