How To: Removing A Director For Singapore Companies

Company directors have an important role in the company’s business operations. There are a few ways an individual can stop being a director either through resignation, termination or disqualification. In this article, we will discuss the necessary steps and procedures to removing companies directors in Singapore.

1. Removing directors

Reasons why a company will remove a director

A company may want to remove the director before the end date of his or her appointment for a few reasons such as:

  • Personal conduct is poor;
  • Breaching of the director’s duties; or
  • Unsatisfactory management of company leading to dismal performance;

Who has the authority to remove directors?

Only shareholders can remove directors. For public companies, take note that directors are unable to remove other directors, in accordance with section 152(8) of the Companies Act (CA).

Removal of a director in private limited (Pte Ltd) companies

Keep in mind that removing directors must be in compliance with the company’s constitution. Section 152(9) of the CA clearly mention that the shareholders of a company can remove the director(s) by means of an ordinary resolution (more than 50% of shareholders voted in favour of the removal) unless there is a contrary provision in the company’s constitution.

Shareholders must issue a written notice of a minimum of 14 days, but this requirement can be dispensed of in the event total shareholders with more than 95% of the voting rights agree.

If the Model Constitution has been adopted in full by your company, the director can be removed by means of an ordinary resolution with no lesser than 14 days notice.

A company’s constitution can always have some other additional requirements. An example will be requiring the shareholders to pass a special resolution for the removal of the director (more than 75% of votes are in favour of removing the director).

To begin the procedure of the removal of a director, the shareholders must convene a general meeting and come together to vote if they should remove the director or not, and then pass the resolution.

The constitution of the company can also have a special clause or condition on the matter of removing directors in some situations. Such as in the event of immoral or questionable conduct.

If there is such a case, voting to the director’s removal by the shareholders can be waived off, unless of course this requirement is stated in the company’s constitution.

Removing a public company’s director(s)

For the removal of a public company’s director, as stated in section 152 of the CA the following requirements are needed:

  • Unless it is set out in the company’s constitution or there is an existing agreement between the company and director, a public company’s shareholders can remove any director by means of an ordinary resolution (there are more than 50% of the votes in favour of removal);
  • After the shareholders have called a general meeting to start the director’s removal process, special notice must be given with regards to the resolution of the removal of the director, to all shareholders and also that director involved. Such notice has to be given no lesser than 28 days before the actual general meeting. In the event it is impracticable, such notice can be given no lesser than 14 days before the meeting.

When is the director considered as removed?

In accordance with section 152(1) of the CA, a director’s removal shall not be in effect up to the point his or her successor is appointed.

The director is considered officially removed when the company has updated the details of the new director in the records with the Accounting and Corporate Regulatory Authority (ACRA).

2. A disqualified director

If a director is disqualified, he or she is not allowed to continue to act as the director or participate in the running of a local or foreign company. He or she can continue doing so only if he or she seeks clearance from the Official Assignee or the General Division of the High Court.

How will a director become disqualified?

A director will become disqualified under the below circumstances:

  • When a director is declared bankrupt;
  • When the Singapore court makes a disqualification order. In the case of an unfit director of companies which end up insolvent, the company is being winded up for national security reasons, or when the director is guilty of offences relating to the running or incorporation of companies in Singapore;
  • When the director has been charged for fraud or dishonesty, punishable with a jail term of three months or more;
  • When the director has committed three or more filing-related wrongdoings under the CA in a time frame of 5 years;
  • When the General Division of the High Court has given the director 3 or more orders against him. Enforcing the instantaneous checking of the company’s registers, minutes or other documents under section 399 of the CA, or the requirement for filing returns under section 13 of the CA, within a time frame of 5 years; or
  • When 3 or more of the director’s companies were struck off from the register by ACRA within 5 years (counting from the 3rd company’s strike off date).

Disqualification notice

Once the director received the disqualification notice, he or she must present it to the company instantly. The company needs to report his or her disqualification to ACRA not more than 14 days from the date of disqualification.

What will happen if a disqualified director continues to act as the company’s director?

You can lodge a complaint with ACRA if you believe that the director is still acting in the capacity as one, even though he or she falls into one of the categories for disqualification stated above. Anyone who has ample details of the company or the director can lodge the complaint.

You can send the complaint together with supporting documents (for example, court or bankruptcy orders) by post to ACRA. If the complaint is found valid after investigation, the director will be removed.

How long is the disqualification period?

The period of the disqualification depends on the reason(s) but in general, it is 5 years. An example is when a director is being disqualified for being director of at least three companies that have been struck off within five years, he or she is disqualified for five years. Starting from the date of the latest company that was struck off.

For companies that are being wound up on grounds of national security, the directors will be disqualified for 3 years starting from the date of the winding-up order.

Whereas for conviction of offences, the start date of the disqualification is dependent on whether the director is sentenced to imprisonment:

  • If imprisoned, the disqualification will start on the date he or she is convicted. It will continue for the next 5 years after the end of the jail term.
  • If there is no imprisonment, he or she is disqualified for five years (can be a shorter period if the court decides so). Such disqualification will start from the conviction date.

What happens when the disqualification ends?

A person can be reappointed as the previous company’s director or incorporate a new business entity instead. After being reappointed or the incorporation of a new company, the company shall notify ACRA of such appointment not more than 14 days from the appointment date.

3. Resignation

A director can voluntarily resign from directorship. For Singapore context, the resignation is only considered valid provided that:

  1. The procedure for resignation is in compliance with the company’s constitution; and
  2. The company must have 1 remaining resident director in Singapore at the minimum.

Should I inform ACRA of the cessation of directorship?

Upon resigning from the directorship, companies need to file a cessation notice to ACRA. It must not be more than 14 days from the date of the change in directors, for example, the date of resignation or disqualification.

While informing ACRA, you need to prepare and submit certain documents like:

  • For disqualification, the court order;
  • For resignation, the notice of resignation by the director and also acknowledgement from the board.

There can be circumstances when the former director has to inform ACRA by himself or herself:

  • If the former director believes that the particular company is unwilling or unable to do so; or
  • If the former director found out that the current officers of the company failed to inform ACRA. This can happen when the corporate secretary had resigned as well and all other directors are debarred too.

What happens if I fail to inform ACRA?

If no notice of cessation is given, it will constitute an offence of non-disclosure under section 165 of the CA. Chief executive officers (CEOs) or directors can suffer liability personally and incur a fine of up to SGD $15,000 or a jail term of not more than three years.

Until such notice has been submitted, the cessation is considered ineffective. This means that the director must continue to manage the company responsibly. If the offence is found to be ongoing (i.e. cessation notice is not given to ACRA), the director can be fined SGD $1,000 daily, for as long as the offence is perpetuating.

What will happen to the shares that the director is holding?

In this case, if the constitution of the company sets out a clause that the director has to sell the shares when the directorship has ended, he or she must comply. Normally, it will be stated that the director needs to sell his shares to the company’s existing shareholders.

If there isn’t such a clause, the director can keep the shares that he or she is holding. But the director can also decide to transfer or sell off the shares.

Know-hows

Knowing the various essentials to the process of the removal of a director will ensure that the entire procedure is legitimate. Whereas for the incorporation of a new entity, owning the knowledge of such potential issues arising from the removal of a director, will give you an insight into how you should draw up your constitution to prevent future complications.

Contact us

If you have further questions on how you can remove a director from your company, do get in touch with us!

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