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The Lanturn Blog

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CORPORATE SERVICES

Your Comprehensive Guide About Company Directors in Singapore

April 2022

Veli Kattoulas

Singapore has established itself as one of the most business-friendly regions worldwide. This is due to its stable government, robust infrastructure, and favourable policies for businesses, including tax incentives and schemes that help them grow and thrive. No wonder that big companies such as Spotify, HBO Max, and Facebook headquartered their APAC operations in the Merlion city.

Incorporating your business in Singapore is necessary to do business in the region. You must be registered with the Accounting & Corporate Regulatory Authority (ACRA) and abide by the Companies Act. One of the criteria to do so is the appointment of one residential director. Without it, your registration will be rejected.


What is a director?

As outlined by Section 4 of the Companies Act, a director refers to any person occupying the position of director of a corporation by whatever name called and includes a person in accordance with whose directions or instructions the directors of a corporation are accustomed to act.


What are the qualifications to be a director?

Several criteria and qualifications need to be met by a potential director to be eligible for the position. The qualifications required and criteria are the following:

  • Must be at least 18 years old. There’s no maximum age for directors who serve in a private company, whereas if you serve for a public company or its subsidiary, the maximum age is 70. 

  • Be physically and mentally capable of performing and executing the job.

  • Be financially sound, meaning not considered bankrupt.

  • Have never been convicted of any offence involving fraud or dishonesty punishable with imprisonment for three months or more. 

  • Have a clean track record of complying with the law and regulations, such as never failing to file their tax returns and other activities mentioned in the Companies Act set by ACRA.

  • Is not a director of three defunct companies registered by ACRA within the last five years.

As mentioned above, you must appoint at least one resident director who will stay and have a residence in Singapore. This person could either be a Singaporean, a Permanent Resident, an EntrePass holder, or an Employment Pass holder whose pass is issued so that they can work for the company.


The different types of directors

There are several types of directors that you have to be familiar with if you incorporate in Singapore. They are the following:

  1. Executive Director: This refers to executives who are salaried employees of the company and are responsible for overseeing and managing the business’s day-to-day operations. The positions of Managing Director, Chief Financial Officer (CFO), and Chief Technology Officer (CTO) are included in this category.

  2. Non-Executive Director: As the name implies, this is for directors who sit on a company’s Board without being involved in the company’s daily activities. Instead of receiving salaried compensation, they received a remuneration fee, agreed by the Board in exchange for their objectivity, prestige, outside experience, or independent judgement of its management.

  3. Independent Director: Mostly found in listed companies on the Singaporean Stock Exchange (SGX), an independent director is the one who has no relationship with the company, its subsidiaries, or the majority of its shareholders so that it cannot cloud one’s judgement and independence. Such an appointment is to comply with the Code of Corporate Governance provided by the Monetary Authority of Singapore (MAS).

  4. Nominee Director: This is an individual appointed by a group or person to represent their best interest in board meetings—for example, the company’s employees, a particular group of shareholders, or creditors.

  5. De facto Director: This is someone who acts and assumes the responsibilities of a director without being formally confirmed or appointed in a general meeting.

  6. Shadow Director: Someone who is not recognised or listed as a company director but instructs or tells an appointed director what to do relating to the company.


How are directors appointed or removed in a Singaporean company?

Appointing a director is pretty straightforward. It’s usually done via an ordinary resolution taken during a general meeting. An ordinary resolution means a formal decision where at least 50% of the votes cast at the meeting agreed to the director’s appointment, whether an executive director, a non-executive director or any other types mentioned above. Generally, the resolution will include the director’s title and the date when he or she first will start carrying out duties.

Once the appointment is agreed upon, the company must notify ACRA within 14 days from the appointment date through the BizFile+ portal. Using several forms, including Form 45 (Consent to Act as a Director), your company is required to disclose the following information regarding the appointed director:

  • Name

  • Appointment

  • Identification number

  • Nationality

  • Residential address

  • Contact number/email address

  • Appointment date

The same ordinary resolution approach is sufficient to remove a director from his or her duties, where 50% of the votes cast agreed to the removal. Such removal can be due to several reasons, such as poor personal conduct, breach of duties, poor management and leadership that lead to subpar company performance, or involvement in a scandal. Remember that a 14 days notice to the director and shareholders is necessary before the meeting.

Under Section 152 of the Companies Act, the removal of a director will take effect when a successor has been appointed, and ACRA is notified.


What are the responsibilities and duties of a director?

The company director should ensure that the company complies with the two most crucial statutory requirements: convening and holding the company’s Annual General Meeting (AGM) and subsequently filling its annual returns to ACRA. Failure in doing so can result in penalties for the company or legal action against the director.

While a private company may opt-out of holding AGM, the director is still required to file its annual returns with ACRA.

Aside from that, a director must perform two types of duties, statutory and common law duties. Statutory duties refer to duties written in legislation, including the Companies Act. Meanwhile, common law duties refer to duties that are established due to past court cases. Inevitably, these duties will often overlap.

Examples of statutory duties include disclosing a director’s interest in doing business transactions as written under Section 156 of the Corporate Act or the duty of acting honestly and using reasonable diligence as outlined under Section 157 of the Corporate Act. Meanwhile, common act duties may include but are not limited to exercising power in good faith for the company’s interests or avoiding conflicts of interest.


What you need to know about director’s fees

Like any other position, you’ll need to compensate your director after appointing them. These compensations can come in the form of a monthly salary, ideal for executive directors that are hands-on in the company’s daily operations, or a director’s fee, where they’re not an employee in your company but rather a non-executive or independent director.

Compensations can come in cash, stocks, allowances such as a meal and travel allowances, or other benefits such as using the company’s property like cars, private jets and club memberships. Under the Companies Act, there’s no cap or limitations on how much fee a director can accept.

However, keep in mind that such fees and compensation for the director need to be approved by shareholders via an ordinary resolution meeting, where the majority agree to it. This is different from hiring a director with a monthly salary, where such approval is not required. What’s more, you don’t need to contribute to the director’s Central Provident Fund (CPF) if he or she is compensated with a fee instead of a monthly salary.

Appointing a director for your company is non-negotiable if you want to establish your business here. Given Singapore’s strict and highly regulated environment, not everyone can be appointed as a director; several criteria and requirements need to be fulfilled. After an appointment, the director should follow the laws in performing his or her duties to avoid criminal proceedings. The company is also asked to perform its due diligence and responsibilities, meaning passing an ordinary resolution to appoint or remove a director and compensate accordingly.

As one of the leading technology firms that provide end-to-end financial services and solutions for businesses, Lanturn has a proven track record in fulfilling every client’s needs. This includes helping clients navigate the lengthy process of incorporating in Singapore with ease. Our certified and experienced team is ready to help businesses screen potential directors or the company’s secretary to fulfil and expedite the requirements of incorporating in Singapore without a fuss.

Want to deal with your incorporation needs hassle-free? Contact us now!

Learn about incorporating your company in Singapore by watching our webinar.

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