Written by Team Farallon
Directors of Singapore companies play important roles and responsibilities in the company. Do you know what they are?
Having been engaged by various SMEs and larger companies in Singapore as their SME or company lawyer in Singapore, we are able to provide some insight into the matter.
The first is to maximise shareholder value in the company (having regard to interests of other stakeholders). This means acting in the best interests of the company at all times, not acting in competition against the company
The second role is to prevent the company from losing value, financial or otherwise. Directors who act irresponsibly or negligently are liable for litigation lawsuits and criminal prosecution if things go wrong. Directors need to hire the right employees and navigate the company through difficult situations to prevent unnecessary loss or harm to the company.
The third, lesser known, role is to ensure that there is adequate and proper disclosure of information to enable the shareholders or investors to make informed decisions in relation to the company. Many directors are unaware of this as they feel that as long as they do 1 and 2 above, then they are in the clear.
The requirement to disclose interests in transactions, property and offices is set out in the Singapore statute which imposes certain statutory obligations on a director.
Specifically, Section 156 of the Companies Act imposes criminal liability on a director of a Singapore company for failing to declare any conflict of interests to his company’s management.
156. —(1) Subject to this section, every director or chief executive officer of a company who is in any way, whether directly or indirectly, interested in a transaction or proposed transaction with the company shall as soon as is practicable after the relevant facts have come to his knowledge —
(a) declare the nature of his interest at a meeting of the directors of the company; or
(b) send a written notice to the company containing details on the nature, character and extent of his interest in the transaction or proposed transaction with the company.
(2) A notice under subsection (1)(b) shall be given as soon as is practicable after —
Section 157 of the Companies Act imposes criminal liability on a director of a Singapore company for failing to exercise due diligence in the discharge of his duty of care to the company.
As to the duty and liability of officers
157.—(1) A director shall at all times act honestly and use reasonable diligence in the discharge of the duties of his office.
(2) An officer or agent of a company shall not make improper use of his position as an officer or agent of the company or any information acquired by virtue of his position as an officer or agent of the company to gain, directly or indirectly, an advantage for himself or for any other person or to cause detriment to the company.
(3) An officer or agent who commits a breach of any of the provisions of this section shall be —
(a) liable to the company for any profit made by him or for any damage suffered by the company as a result of the breach of any of those provisions; and
(b) guilty of an offence and shall be liable on conviction to a fine not exceeding $5,000 or to imprisonment for a term not exceeding 12 months.
In light of the above, do consider carefully before taking up a position as a Director of the Company. In particular, if you are not adequately remunerated or if you do not know who the shareholders are and what they expect of you, as you may be setting yourself up for future problems and lawsuits.
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