Directors’ Duties in Singapore

>> Powers and Duties in Singapore

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.

Duties – General

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

  • a duty not to compete with the interests of the company
  • a duty of discretion
  • a duty to avoid a conflict of interest

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, skill and diligence
  • the duty to act loyally and in good faith

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.

Duties – Other

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.

  • any serious accidental injury and investigations and environmental breaches if applicable must be reported in accordance with the company’s policy. Under the Workplace Safety and Health Act, an employer has to as far as reasonably practicable, take such measures that are necessary to ensure the safety and health of its employees at work. A breach of this may result in the company being guilty of an offence and being subject to a fine of up to S$500,000 for a first conviction (where no penalty is expressed in the said Act)
  • like all of the company’s employees, you must comply with Anti-Bribery and Corruption legislation, including the UK Bribery Act and the US Foreign Corrupt Practices Act, and must understand, follow and promote the company’s internal policies and procedures
  • you must comply with all competition law and regulations. This could include providing documents and information when requested to do so by the Competition Commission of Singapore as well as making sure that information provided is not false or misleading in a material particular knowingly or recklessly
  • you must comply will all areas of tax law and regulations For example, under the Income Tax Act, the manager or principal officer in Singapore of every company is answerable for doing all such acts, matters and things as are required to be done under the Income Tax Act for the assessment of the company and payment of tax
  • you must comply will all areas of tax law and regulations For example, under the Income Tax Act, the manager or principal officer in Singapore of every company is answerable for doing all such acts, matters and things as are required to be done under the Income Tax Act for the assessment of the company and payment of tax
  • generally, our corporate secretarial provider will maintain our statutory records but there is a duty on directors to ensure certain records are maintained while not necessarily within the premises/offices. For example, if accounting and other records are kept by the company at a place outside Singapore, they shall be sent to and kept at a place in Singapore and be at all times open to inspection by the directors

Latest version updated 9th April 2018

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