Directors

All companies are required to have officers. Directors are officers of the company that manages or directs the business of the Company. The broad guidance for the basic duty of a Director is enshrined in Section 157 of the Companies Act, which states that a director shall at all times act honestly and use reasonable diligence in the discharge of the duties of his office.

Who can be Directors?
Every Company needs to appoint at least one director who is ordinarily resident in Singapore. An ordinarily resident in Singapore. If the company only has one director, that director must be an ordinarily resident in Singapore.

An ordinarily resident in Singapore refers to a Singapore citizen, a Singapore Permanent Resident or a person who has been issued an Employment Pass/Approval-In-Principle letter/Dependent’s Pass and has his or her primary residency in Singapore (We will typically refer to this person a local director).

A foreign individual can also be appointed as a director of a Company so long as the Company has a local director.

Corporate directors are not allowed in Singapore as the Companies Act stipulated that a director must be a natural person, aged 18 and above and is of a sound mind.

Directors’ Transactions of Business
If a company only has a single director, relevant business and statutory decisions requiring directors’ resolutions can be made and approved by the single director alone.

If a company has 2 or more directors, the quorum (minimum number of directors required to make a decision) is commonly fixed at 2. This implies that no transaction of business of the directors can be done without at least 2 directors present. For Director’s Resolutions, a simple majority is needed for decisions to be passed.

The quorum, although commonly fixed at 2, can be amended by the directors.

Key Duties and Competencies of a Director include:

• Discharging of responsibilities in the company;
• Possess a reasonable degree of skill and knowledge to handle the affairs of the company;
• Act honestly and be reasonably diligent in discharging his/her duties and act in the interest of the company without putting himself/herself in a position of conflict of interest;
• Employs the powers and assets that he/she is entrusted with for the proper purposes of the company and not for any collateral purpose;
• Ensure that the company comply with all the requirements and obligations under the Act including those in respect of meetings, requisitions, resolutions, accounts, reports, statements, records and other documents on the company, filing and notices and any other prerequisites; and
• Report to the shareholders for his/her conduct of the affairs of the company and make such disclosures that are incumbent upon him/her under the Act.

Some common responsibilities that a Director is required to fulfill in accordance to the Act include:

• Appointing qualified persons as secretaries [S171]
• Ensuring that company registers or statutory books are kept and up-dated [S136, S164, S173, S190]
• Calling for Annual General Meetings, and convening of meetings [S175]
• Ensuring the lodgement of certain resolutions and agreements [S186]
• Preparing and lodging the Annual Return with ACRA [S197]
• Maintaining of proper accounting records [S199]
• Submission of accounts, balance sheet and directors’ report to shareholders at the Annual General Meeting [S201]
• Ensuring that dividends are only paid out of profits [S403]
• Appointing of first auditors (for non-exempt private companies) [S205]

How are Directors Paid?
Directors are remunerated for their service as directors in the form of Director’s Fees. Director fees are proposed, and subsequently approved by the Members of the Company, in the AGM or EGM of the Company. If the Director is under employment contract, he or she is also entitled to salary and other employment income as stated in his/her employment contracts.

Resignation of Director
Subject to any clauses stated in the Articles of Association of the Company or any employment contracts in place, an existing director can resign as director of a company by submitting a notice of resignation to the company, so long as the director is not the only local director left in the company.

Removal of Directors
The provision to remove directors for private limited company is usually found in the Articles of Association, and not in the Companies Act. The usual Article of Association will often state that the company may by ordinary resolution remove any director before the expiration of his period of office. This decision is to be taken by the shareholders of the company.

Vacation of Office
This means, in general terms, that the Directors have not shown up for Directors’ meetings or not available to the Company for an X amount of days without the consent of the Company. The X amount of days is usually stated in the Company M&A. For standard M&A, the standard period is set at 6 months.

If this scenario occurs, the Company has the right to remove the
offending director from office.