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Role and Responsibilities of a Singapore Company Resident Director and the Risk Involved Being a Nominee Director in Singapore
Singapore is well known as one of the most-preferred investment hotspots in Asia due to its thriving economy and strategic position as the leading financial hub in the region. Many foreign investors have since thronged to this country to start or expand their business. According to the Singapore Companies Act, all companies in Singapore must register with the Accounting & Corporate Regulatory Authority (ACRA) and compliance with the Singapore Companies Act.
Among others, having at least one resident director is one of the key requirements for registration of a company in Singapore. In other words, it is mandatory for all private limited companies in Singapore to appoint at least one local resident director. The eligibility of a local resident director includes that he or she must have a Singapore address with either of the following resident status: Singapore citizen, permanent resident, entrepass holder, or employment pass holder. However, the option of having a nominee director is accepted if your company is fully owned by a foreign entity without a local director.
As the name implies, the role of a director is the most important one because he or she is responsible to manage the company as well as to determine the company’s direction. Under such definition, ACRA will “recognise that person as a director if other directors of the company follow his instructions or if he is involved in the management of the company” even though he or she is not formally appointed as a company director.
The Eligibility of Company Resident Director
In Singapore, the minimum age to be appointed as a company director is 18 years, with the conditions that the person is physically and mentally fit to carry out the director’s duties and responsibilities. For a public or a subsidiary of a public company, the age-limit is set at 70 years (unless the person is reappointed at company’s annual general meeting) while there is no maximum age-limit to be the director of a private company.
The Roles and Duties of a Director
Other than the duties of managing and steering the directions of a company, the duties of directors include they need to comply with disclosure (or reporting requirements) under the Singapore Companies Act. Also, the Directors need to comply with their financial reporting obligations under the Companies Act that include maintaining financial statements, lay the profit and loss account, balance sheet and directors’ report before the members at the annual general meeting, to report on the state of the company’s affairs and to provide members with copies of the financial statements
1. Statutory Duties
The statutory duties of the Director are outlined in the Companies Act, namely Sections 145, 156, 157, 165, and 197.
a) Duty to Disclose interests in transactions
Under the Company Act, a director is required to make a disclosure about the nature and extent of his interest in an entity that is transacting with the company. On top of that, the director must also disclose the nature, character, and extent of any conflicts with his directors’ duties that may (or may not) arise due to his holding any office or possessing any property. He or she will face a fine penalty not exceeding $5000 or to imprisonment for a term not exceeding 12 months if he or she fails to do so.
2. Duties under common-law
a) The company’s interests are the director’s interests as a separate legal entity that includes the interests of all its members and employees. Hence, a director should not do any act to further his own personal interests.
b) The director must avoid conflicts between his personal interests and those of the company.
c) A director shall avoid abuse of his powers for personal benefit, collateral purposes or improper purposes but to make sure that he uses his powers for proper purposes
Please note that the duties of a Director in Singapore company are sanctioned by statutes and derived from common law. Any breach of statutory duties (as enforced by ACRA, CAD (or the Singapore Police Force)) will cost the Director a criminal prosecution and criminal sanctions. In addition, any breach of common-law duties (enforced by the company or individual member) would result in civil liabilities and remedies. In the case of breach of duty, the company can file a lawsuit against the directors for damages or for the return of specific property or secret profits, they have made. Failure to comply with the statutory compliance requirements is an offence and may result in fines (not exceeding $5,000) or prosecution (imprisonment for a term not exceeding one year).
The Potential Risk Involved being a Nominee Director in Singapore
Earlier this, the Singapore High Court has convicted and imprisoned a director for charges relating to money laundering activities facilitated by his companies. The case is the first reported case of a director being imprisoned for failing to comply with the Companies Act (CA). In fact, the case shows that directors and officers (including local resident nominee directors) are liable to any breach of lawful duties and they will be prosecuted and sentence to imprisonment for failing to comply with the law.
In Singapore, money laundering and other financial crimes (or frauds) are serious offences and are being scrutinised closely by the authorities. Directors and officers (that include non-executive directors) should be vigilance in identifying and preventing unlawful activities within their companies. There is a real risk that the Directors will face the lawsuit and penalty, be it the fine penalty or imprisonment, regardless of whether they masterminded the financial crime.
However, you can always make sure that such negligence and mistake never happened when we are doing business in Singapore. For one thing, you need to find the right person to be your nominee director. 3E Accounting, the reputable and trusted one-stop service provider in Singapore, offers their reliable Singapore Nominee Director Services at the affordable price. If you are setting a company in Singapore and you need assistance in nominee director, feel free to reach out to 3E Accounting to get their professional service!