A Comprehensive Guide to the Qualifications and Duties of a Company Director

Company Director

One of the requirements for Singapore company registration is the appointment of a resident director. Being a resident director means that a director must be an “ordinarily resident” in Singapore, one whose usual place of residence is Singapore. Singaporean Citizens, Permanent residents, or holders of EntrePass or Employment Pass with a local residential address may qualify as ordinarily resident of Singapore. Where there is no available resident director, a nominee director can be appointed in lieu of the former.

Among all stakeholders, it is the role of a director which is most crucial, as he undertakes to manage and oversee the affairs of the company. A company director is responsible for steering the firm toward the right direction and its consequent success or failure depends on his stewardship.

Definition of Resident Director

The Accounting and Corporate Regulatory Authority considers an individual a director when he occupies the position of a director regardless of the designation of his role or when other directors act in accordance with his directions. ACRA’s definition of a director is crucial because a person not accorded the formal title or designation of a company director, but so acts in such capacity, will still be deemed as a company director, thus required to comply with the Companies Act and may be held liable when circumstances so warrant. The definition set forth is inclusive and likely includes de facto directors, independent directors, executive directors, substitute directors or shadow directors.

Qualifications of a Company Director

Who can be appointed as company director? Here are some of the qualifications prescribed by the Singapore Companies Act:

  1. A director must be a natural person. This means that a corporate entity/enterprise cannot act as a director of another company.
  2. A director must have legal capacity and attained the age of majority (at least 18 years old).
  3. A director must be of sound mind, mentally and physically fit to render statutory duties.
  4. A director must not be subject to disqualification. Among those considered unfit to become a company director under Section 148 of the Companies Act are as follows:
    • those who are undischarged bankrupts or those who have been declared bankrupt by a local or foreign tribunal
    • felons convicted of criminal offences like fraud or dishonesty
    • those who are disqualified pursuant to court order
    • those convicted for at least 3 years or more for an offence punishable under the Companies Act (like failure in filing returns, accounts or submitting other documents) within a period of 5 years

Duties of A Director

Imposed upon a company director are various duties, arising from both the Singapore Companies Act as well as common law.

Under the Singapore companies Act, a director is required to:

  1. Disclose Material Interest in Transactions

    Under section 156 of the Companies Act, a director is required, subject to certain exceptions, to disclose his material interest in certain transactions to the Board at a directors’ meeting.

    A situation may arise where a director is more beholden to the other entity (in view of his material interest) and acts in conflict with his duties as a director of the company. The rationale behind the legal requisite that a director must reveal the nature, extent of his interest in an entity that intends to do business/transact with the company is to prevent disloyalty and possible breach of a director’s fiduciary duties. A director who fails to make disclosure may be meted out a fine of not more than S$5000 or incarcerated for a period of not more than 12 months

  2. Act with honesty and reasonable diligence

    Under section 157 of the Companies Act, a director is prohibited from using any information given to him in such capacity for purposes of causing detriment to the company or gaining an advantage (profits) for himself or a third person. A violation of this provision renders a director liable criminally and civilly.

The duties of a company director under Common Law, are as follows:

  1. Act in good faith pursuant to company interests

    A director is appointed to ensure that the company’s business interests are protected and excellently steered in the right direction. Among the fiduciary duties of a director is to prioritize the growth of the enterprise, acting solely in the interests of the company, and not that of his own personal agenda. He is not permitted to use his personal interests and close ties with third persons to affect his decision-making process.

  2. Act with due care and skill

    One of the qualifications of a company director is that he must be knowledgeable and experienced. A director is therefore reasonably expected to perform his duties with due care and skill, not guilty of any omissions amounting to tortious acts of negligence.

  3. Avoid conflicts of interests

    A director must at all times be loyal to the company where he sits as a member of the board. A director is thus mandated to disclose any relevant factual matter in a transaction where he has a direct or indirect interest to the Board of Directors at a meeting. Various forms of conflict of interests include holding different directorships between competing firms, participating in transactions disadvantageous to the company or taking advantage of corporate information to the detriment of the company. For instance, a director cannot use confidential company information to usurp a business opportunity from the company and compete for contracts.

  4. To use his powers legitimately

    A director shall not misuse his powers to obtain personal benefit or cause injury to the company or a shareholder. For instance, even if a director dislikes a certain shareholder, the former cannot draft a resolution designed to oppress the latter. A director cannot also issue shares for purposes of diluting a shareholder’s stockholdings or retaining control over the board.

What Statutory Requirements Under the Companies Act Must be Accomplished by a Director?

Among the responsibilities of a company director is to collaborate with the company’s main compliance officer, the Corporate Secretary, and ensure on-time compliance with the following statutory requirements:

  • Convening the annual general meeting along with the filing of annual returns
  • Reporting of changes in shares and rights of shareholders
  • Registering an actual office address
  • Reporting changes in company officers (secretary, managers and directors)
  • Maintaining appropriate accounting records
  • Preparation of profits and loss balance sheets for a transparent state of affairs of the company
  • Drafting and implementation of board resolutions

It is apparent that taking on the role of a company director entails hardwork and diligence. Singapore’s existing statutes are riddled with positive and negative duties (to do and what not to do) to guide a director to fulfill what is expected of him competently and conscientiously. Thus, only highly qualified individuals, skills-wise and personality-wise, can become a company director and manage the affairs of a corporate entity with success.

Hiring Corporate Services Singapore As a Nominee Director

Should you have problems looking for a resident director, you can engage companies offering nominee director services in Singapore. As a nominee director, Corporate Services Singapore can help you comply with the statutory requirements under the Companies Act, without ever wrestling control from you or delving into the finances of your company. Contact us today for a free quote!

Posted in Corporate Business Tips.