About Removal of Directors
According to what it says in the Companies Act, the removal of directors depends on the ordinary resolution of shareholders. The term “directors” in this context refers to the directors of the company.
This happens when the company constitution does not have other provisions. The shareholders must give a 14-day written notice to the director unless this requirement is agreed upon by the majority of company votes. The resolution of the shareholders’ discussion takes place during the general meeting. The period of 14 days for general meetings apply.
If you want to have a general meeting, there needs to be a resolution first and a notice of 28 days is given.
If you want to know more about the removal of directors in a Singapore company, read on.
When the Removal of Director is Taking Place
The director must step down once they pass a resolution and he already chose a successor if there are no others. They complete the process of removal when the company updates the new director particulars and/or removes the director. This process is also happening with the help of Accounting and Corporate Regular Authority (ACRA).
It is important to note that ACRA already charges company officers if they do not comply with the Companies Act and the Company Constitution when a director must step down.
Who Can Remove Directors?
Only shareholders have the right to remove directors. However, based on Article 152 (8) in Companies Act, directors of listed companies have no right to remove other directors.
How to File an Appointment for Appointing a Director With ACRA
For a chosen director and a Singapore resident, an existing company director or the company secretary may file an appointment of director notice using the ACRA online BizFile. If the director is a foreigner, the company must file the appointment of the director through a registered service provider.
Make sure you have the necessary documents to appoint a director:
- Declaration of consent that gives the right to be a director using the form 45.
- The disclosure of all the director’s other directorship or shareholdings.
- A board resolution that has been signed to approve the appointment.
After the appointment has been filed with the ACRA and the settling important fees, the director will now be considered officially chosen.
Removing a Director From a Private Limited Company
It is important to remember that when it comes to removing a company director, you must follow the company constitution.
Section 152(9) of the CA says that the shareholders could remove the director through an ordinary resolution. This condition is as long as there is no contrary provision provided in the constitution.
The shareholders must give written notice of 14 days. However, the requirement can be waived if more than 95% of voters agree.
If the company fully applies the Model Constitution, they can remove a director through ordinary resolution with a notice of 14 days.
The company constitution can have other set requirements or conditions. For instance, a special resolution when removing a director.
In order to commence the removal of directors, the shareholders must have a meeting to vote if they will remove the director or not, and give a resolution.
As an alternative to this, the company constitution could also include a clause that governs the removal of directors in specific situations. For example, if the director is terminally ill or it is because of immoral conduct.
If this is the case, they do not require a vote to remove the director unless the requirement is because of the company constitution.
Who is Not Qualified to Be a Director?
There are several circumstances where a person is qualified from a company director, and these are:
- If the person bankrupt.
- If the person is a convict of criminal offences involving dishonesty or fraud.
- Is ineligible based on a court order?
- Is convicted of at least three filing related offences based on the Companies Act within 5 years.
- Has caused a company to be wound up for national interest or security reasons.
Once the person is ineligible, the person does not have permission to be a director. They also cannot handle any company unless they ask the High Court for permission. In case the director is bankrupt, they must get permission from the court official who presides bankruptcy or the Official Assignee.
What if They Still Act as the Company Director?
If there is reason to trust the director continues to act as a director rather than falling under any of the circumstances for disqualification, they can file a complaint at the ACRA.
Anyone can file a complaint, as long as he or she has enough details of the company director.
This complaint must be sent to the ACRA with the important supporting documents like the court order or applicable bankruptcy statement.
According to the investigation, if the complaint succeeds, the director would have to step down.
Length of Disqualification Period
The disqualification period depends on the reason why the director cannot be put in the position, but it is generally 5 years.
For instance, an ineligible director of at least three companies that got stuck in those 5 years, will be ineligible for 5 years. They count it from the time the company was struck.
The company directors that have reasons due to national security or interest will be ineligible for 3 years since the winding-up order.
For the directors who were qualified after their conviction makes them liable for being ineligible, the date when the disqualification started varies according to the sentence of imprisonment because of the offence:
- In the case of imprisonment, the period of disqualification starts after they are convicted. And the disqualification continues for another 5 years after their release from prison.
- In the case of no imprisonment, the director is ineligible for 5 years. The period of disqualification starts from the conviction date.
Nominee Director in Singapore
Each registered company in Singapore needs at least one director who is a Singapore resident. This is a country regulation in the Companies Act. In case a foreigner incorporates a Singapore company but has no local person who acts as a resident director of the company, then the foreigner may hire an acting director and pay a fee. This director is known as an ND or Nominee Director and sometimes they use the term “local director.” The ND has to be a Singapore citizen or a permanent resident of the country.
If the Director Resigns
A director can also choose to resign on their own from directorship. In Singapore, the resignation is valid if:
- The procedure of resignation is according to the company constitution.
- The company must have at least 1 director in Singapore.
Notifying the ACRA About Appointing a New Director
Based on the director’s resignation or disqualification, the company must file a cessation notification.
The filing of this must be within 14 days from the date change for the date of disqualification, or service resignation date where it is applicable.
When you lodge the ACRA notification with ACRA, you must submit important documents like:
- If the director is ineligible, the statement of bankruptcy or court order is applicable.
- If the director leaves the position, the resignation notice and board of directors’ acknowledgement should be submitted.
There are cases when the ex-director is the one to notify ACRA about the resignation or disqualification:
- When there are reasons for the ex-director to believe that the company is not going to do.
- When he or she is aware that there aren’t any company officers who could notify ACRA. This could happen where the company secretary resigns and other directors are ineligible.
What a Former Director Does at When the Disqualification Period Ends
When the disqualification period ends, they will appoint a new person as the director of his first previous company or even incorporate a company.
Upon the incorporation or re-appointment, a company needs to notify ACRA through a director’s appointment within 14 days from the appointment date.
Failure to Let ACRA Know
If there is no termination notice issued to ACRA, this could cause a non-disclosure offence based on Article 165 of the Companies Act.
As part of this section, a director or CEO might be personally liable. Then, there is a fine of S$15,000 or imprisonment for 3 years.
Before issuing the notice, it will not be effective to stop the service. This means directors are still going to be responsible for company management.
If the crime still persists, the director or CEO will have a fine of S$1,000 for each conviction date after conviction.
What Happens to the Shares That Are Held by Directors?
If they are also company shareholders, the question of how they dispose of their shares will come up.
If the articles of association of the company have clauses that require a director to sell shares after directorship termination, the director should sell their shares.
An example of a typical clause is that the director has imposed requirements they must fulfil.
In case there is no clause imposing requirements on the directors, the directors can hold shares freely.
Directors can also consider transferring or selling their shares.
These are the information you need to know about the removal of directors in a Singapore company. If you need Singapore Nominee Director Services, you may contact 3E Accounting to assist you. They are experts in this field.