You must act within the powers imposed upon you by the relevant legislation/governing body, the company’s constitution and any specific power of attorney, if any. You are also required to implement the decisions approved by the shareholders in general meeting and act in accordance with any specific powers that may have been delegated by the shareholders in general meeting or by the board of directors itself, if any.
As a director, you must act in a way which you think is most likely to promote the success of the company. You need to consider a number of statutory factors relating to corporate requirements, including the long term consequences of your decisions, the company’s reputation, the interests of the company’s members and the interests of other stakeholders such as employees, customers and the community.
The affairs of a company are managed by the directors and as a result they have all powers which are useful or necessary to implement the company’s purpose (with the exception of those powers which are explicitly reserved to the GSM). A director therefore has an implied duty to ensure that they work in the best interest of the company and several other duties are captured by this, such as: – a duty of loyalty
In general, directors may exercise all the powers of the company except any powers that, under the CA or the company’s constitution, would require the shareholders to exercise under a general meeting. Examples of matters that require the shareholders’ prior approval include the disposal of the whole or a substantial part of a company’s undertaking and property or issuance of new shares in the company.
When exercising these powers, the directors have a duty to comply with the following requirements under both common law and the CA:
The duty to act with reasonable care and skill is an objective test i.e. whether or not a director has acted as a reasonable director would in their position. This standard will not be lowered due to inadequacies in a director’s knowledge or experience, but may be raised for certain directors with special knowledge/ experience. Therefore, higher standards may be expected of executive directors than non-executive directors, but non-executive directors are still subject to the basic standards of reasonable care and skill required of directors. The degree to act with reasonable diligence will similarly vary based on the background of the director. However, the director should exercise enough diligence to at least stay familiar with the operations of the business and the financial status of the company.
Please note that the duty to act in good faith is generally taken to mean that directors should act honestly. The test of this is whether or not an honest and intelligent man in the position of the director could, objectively speaking, have concluded that the transactions were in the interests of the company. Further, where a director acts in good faith, makes proper enquiries and has no knowledge that such reliance is unwarranted, a director may, in the performance of their duties, rely on information or advice from certain employees.
There are many other areas of law that impose duties on directors and senior managers. Matters likely to be of particular relevance, depending upon the nature of the entity and its activities, are set out below.
Directors should be aware that Singapore’s main anti-corruption and bribery legislation, the Prevention of Corruption Act, covers the private sector as well as the public sector. It generally prohibits the giving, promising or offering of any gratification to any person as an inducement to or reward for any person doing or forbearing to do anything in respect of any matter or transaction whatsoever, actual or proposed. There is no specific monetary threshold. Directors should also be aware that certain foreign statutes that have extraterritorial jurisdiction may apply to them too (e.g. UK Bribery Act).
Furthermore, there are certain statutes that explicitly impose duties on directors. For example, the Income Tax Act provides that directors may be responsible for doing all such acts, matters and things required for tax assessment or payment of tax to the Singapore tax authorities. There are also certain statutes that may impose liability on directors for offences committed by their company. For example,
under the Employment Act and Personal Data Protection Act, where the company commits an offence with the consent and connivance of a director, or can be attributable to the neglect of a director, the director may be personally guilty of an offence too.