Duties of Singapore Company Directors

Section 114 of the Companies (Amendment) Act 2014 states that every company shall keep accounting records which explain its financial position. These records should be kept in a place considered fit by the directors. The financial statements should at all times be easily accessible for inspection by the directors. Failure to comply with this section will render the company and the directors guilty of an offense.

This requirement can be met by setting up an efficient accounting and filing system. The system should record all the business transactions which will help avoid any discrepancies at a later stage.

Section 116 of the Companies (Amendment) Act 2014 states that directors shall submit the financial statements of the company at its Annual General Meeting (AGM). These financial statements mut be presented to the shareholders every calendar year at the AGM. The first financial statements should be submitted within 18 months of incorporation at the AGM and no more than 15 months should pass between any two such meetings. The financial statements should be made up to the date:

1. Not more than 4 months before the date of the meeting in the case of a public listed company
2. Not more than 6 months before the date of the meeting in the case of any other company.

The Companies Act lays down three important meetings to be held by a company as follows:

1. Statutory Meeting: Section 174 of the Companies Act states that every public limited company having a share capital has to hold a general meeting called “statutory meeting” within no less than one month and no more than three months from the date of commencement of business. This is not a recurring meeting and instead is held only once.
2. Annual General Meeting (AGM): Section 91 of the Companies (Amendment) Act 2014 lays down the requirement of holding an annual general meeting. The provision states that the meeting shall be held once in every calendar year and not more than fifteen months should pass between the annual general meeting of the preceding year. The first annual general meeting of a company shall be held within a period of eighteen months from the incorporation date.
3. Extraordinary General Meeting (EGM): As per Section 92 of the Companies (Amendment) Act 2014, the directors, on request of the members who hold at minimum ten percent of the total paid-up shares and carry the right to vote at general meetings, should proceed to convene an EGM which is to be held no later than 2 months from the date of such request. In the case of a company not having a share capital, the request should be made by members who represent at least ten percent of the voting rights of the company. If the directors do not proceed to convene the meeting within a period of 21 days from the receipt of the request, the members can themselves convene the meeting.

Section 88 of the Companies (Amendment ) Act 2014 states that the secretary of the Company has to be appointed by the directors. The directors have to ensure that the secretary appointed has the requisite experience, qualification and industry membership before he or she is appointed. The office of the secretary shall not be kept vacant for more than a period of 6 months.

Section 125 of the Companies (Amendment) Act 2014 states that the directors of the company shall appoint either an accounting entity or entities as an auditor, within 3 months of the incorporation of the Company. The auditors appointed will hold office up to the conclusion of the first AGM of the Company.

Section 403 of the Companies Act states that the dividend can be paid only out of the profits generated by the company. The directors of the company are entrusted with the responsibility of ensuring that this is the case.

Section 161 of the Companies Act states that the directors of the company can issue shares only after approval is sought from the shareholders at the annual general meeting. Any shares issued in contravention of this section will be considered void.

Section 77 of the Companies (Amendment) Act 2014 states that every director of the company should disclose his interest in any transaction with the company. The interest in the transaction or proposed transaction should be disclosed at a meeting of the company directors. The section further states that a director joining a company shall disclose his or her affiliation (in the form of membership, officership or partnership) with any other corporation, firm or a limited liability partnership. This disclosure is made to the company, so that the company can assess the director’s potential conflict of interest in any transaction that may arise with the other corporation, firm or limited liability partnership at any future date.

The directors must also ensure that other disclosures are made to avoid any conflict of interest. Conflict of interest arises when the personal interests of a director conflict with the interests of the company. For example, a conflict of interest will arise if a director of the company is also a shareholder of a competitor company. The Singapore Institute of Directors (SID) through its Statement of Good Practice 5, categorizes the following as situations where conflict of interest may arise:

1. Where directors have a material interest in the transaction of a company,
2. Where directors possess property as well as hold positions in the company that gives rise into duties of a conflicting nature, and
3. Where directors receive information due to their position and benefit from them.

If a director holds any office or property whereby any conflict of interest is created with his own duties and interests, the director should declare the nature and extent of the conflict at a meeting of the directors. A notice should also be sent to the company with respect to the conflict of interest. For example, if the company rents office space that is owned by one of the directors, the nature of the relationship must be declared.

The duty to avoid conflict of interests and ensure full disclosure is vested in the director.

The list of duties of directors is very comprehensive. The directors should be familiar with their duties and responsibilities. For a company to run efficiently, its directors have to comply with all the statutory requirements as outlined by the law. Breach of duties can result in penalties and, in serious cases, criminal prosecution and civil action against directors. To ensure proper compliance with these duties, it is usually a good practice to engage the services of a reputable corporate services firm that can guide and assist the directors to execute their duties in accordance with the law.