Duties of Private Limited Company Directors in Singapore

The most common corporate structure used in Singapore is the private limited company. This article seeks to discuss and inform you of the obligations placed upon directors of such companies in law.

We shall cover the following topics:

• Who are Directors?

• Types of Directors

• Who Qualifies as a Director?

• How Directors are Appointed

• Duties of Directors

• Main Duties of Directors under the Companies Act – Section 157

• Duties of Directors under the Companies Act and the Common Law

Let us now discuss the foregoing in turn.

Who are Directors?

The law treats someone who manages the affairs of a company on behalf of its shareholders as a director, whether they are called a director or not. What is crucial in determining whether any particular individual is a director is the position that the individual holds and the role that the individual plays in managing the company.

Section 4 of the Companies Act stipulates that “director” includes any person occupying the position of director of a corporation by whatever name called. Directors include alternate directors, substitute directors, and persons whose directions or instructions are acted upon by the directors or the majority of the directors of the company.

Types of Directors

There are 2 separate classifications to consider here – the way Singapore companies name official directors, and the directors in law.

Singapore companies name their directors by any one or more of the following:

• Executive directors – an employee of the company who holds a full-time position that may involve the management of the day-to-day operations of the company.
• Non-executive directors – these directors are typically not employees and do not take part in the daily running and affairs of the company. They are given a seat on the board to offer objectivity, prestige, and general or specialised experience and expertise.
• Independent Director– these directors are rare and are usually people with no link or relationship with the company at all (even to related and affiliated corporate entities, or the officers of the company).
• Associate directors – these directors do not normally perform directorial functions but are high-level assistants who may one day be deemed full directors.
• Managing directors – an executive director of a higher/the highest standing in the company compared to other executive directors.
• Alternate / Substitute / Nominee Directors – these are temporary directors who stand-in for someone else, whether it’s for another director, or for a major shareholder.

As mentioned earlier, the law treats a person as a director (and places obligations upon him or her) whether or not he is formally named a director by the company. These non-formally named directors still have to abide by all the rules and regulations in the Companies Act as well as the obligations placed upon them in the common law.

The law has developed to recognise 2 types of directors who are not formally named as directors, as follows:

• De Facto directors – these are persons who openly act as directors without being formally appointed as one. Like formally appointed directors, de facto directors have to comply with all of the rules and regulations under the Companies Act pertaining to a director and are responsible for the full range of directors’ duties.
• Shadow directors – these are persons who regularly instruct or direct formally appointed directors on issues that are usually decided by the Board of Directors. Take note that these persons may not openly act as directors like de facto directors, but may only instruct the Board on the company’s affairs.

Whatever the classification or title used to describe the directors, it is important to keep in mind that the Companies Act does not differentiate between the types of directors – all of them are subject to the same duties and obligations.