Appointing a Company Director: Things to Know
To register a Singapore company, whether you are a local or foreigner, one of the requirements includes the appointment of a resident director. Thus, it is vital for business owners to be well versed with the requirements and process to appoint a director of a Singapore-based company.
Eligibility of a director
In order to be appointed as a company director, here are some of the qualifications that fall in line with the Singapore Companies Act.
Things you need:
- A director will have to be an actual person, which means that an enterprise or corporate entity will not be able to act as another company's director.
- A director must have legal capacity and is at least 18 years of age
- A director must be in a good mental state and physically fit to perform the director’s duties
Take note that the Accounting & Corporate Regulatory Authority (ACRA) also has guidelines that disqualify a person from being a company director.
Things that disqualify someone from being a director:
- Someone who is an undischarged bankrupt or have been declared bankrupt by a local or foreign panel
- A criminal convicted of offences like dishonesty or fraud
- A person issued with a disqualification order by a court
- A person convicted for at least three years or more for offences that fall under the Companies Act (including the failure in filing accounts, returns, or submitting other documents) within a span of 5 years
- A person who has had a company closed down due to reasons of national interest or security
Types of directors and their roles
Once you’ve managed to successfully appoint a director, here are the types of directors and the roles they perform.
Executive Director
The Executive Director is usually an existing company employee with a full-time position that may involve the company's daily operations management. This includes the Managing Directors, who carry out different functions from a company's CEO.
John is a full-time Managing Director at TBWC Singapore. He can undertake the role of an Executive Director.
Non-Executive Director
The Non-Executive Director is not a current company employee and does not play a part in the company's day-to-day operations. This person typically sits on the panel to offer outside experience, prestige by the name that he carries, impartiality or independent judgement of the management.
Lily is on the board of directors for Ogily, but does not interfere in their daily operations. In this instance, she can be a Non-Executive Director.
Independent Director
The Independent Director is someone who does not have a relationship with the company, its affiliated corporations or shareholders that could obstruct the exercise of the Director's unprejudiced judgement. An Executive Director cannot be regarded as an Independent Director as they are normally a company employee, which makes the relationship a conflict of interest that could possibly cloud their judgement.
Isabelle has been asked by Hana Singapore to be their Independent Director. She is not an employee there, and has no affiliations to the company whatsoever. As such, she has the capacity to take up this role.
Nominee Director
The Nominee Director is someone nominated by a major stakeholder. He or she formally holds a director's position to act in the interests of the company and is bound by the same obligations enforced by the Companies Act.
Fret not if you're unable to find a resident director for your company. Simply hire a local nominee with East river to solve your problem, and you can become the director yourself or appoint another executive from abroad. At East river, we provide Nominee director services for both brand-new companies and existing ones.
Joshua is a major stakeholder of LinkedOut Singapore, and can attest to the character of Lincoln. He nominates Lincoln to act as a Nominee Director, trusting that Lincoln would be able to exercise his judgement and act in the company’s best interests.
De Facto Director
The De Facto Director is a person who openly acts as a company's director despite no formal appointment. As with formally appointed directors, this individual will have to adhere to rules and regulations that fall under the Companies Act and are liable to perform the full range of director's duties.
Michael is one of the major decision makers of SPL Singapore although his position was never formally announced. As the company’s De Facto Director, he has to abide by the guidelines and carry out the director’s duties in full.
How a director is appointed
Before you appoint an official director appointment for your company, here are some things you’ll need.
Documents you’ll need
- A declaration consenting to act as the company's director
- The appointed director's full disclosure of his or her other shareholdings or directorships
- The board's signed resolution approving the appointment
Appointment with ACRA
Once the paperwork is out of the way, you'll have to file an Appointment of Director with ACRA. You’ll have 14 days from the date of appointment to inform ACRA.
For an incoming director who is already a Singaporean resident, the company's existing director or company secretary can go through BizFile to file an appointment of director notice with ACRA online.
Get to know BizFile:
BizFile or BizFile+is ACRA's online filing and information retrieval system. Using this system, anyone can access a over 300 electronic services ranging from the submission of statutory documents, to retrieval and purchases of information pertaining to business entities registered with ACRA.
In a scenario where the director is not a local resident, the company will have to file the appointment of director via a registered corporate service provider. Once the appointment has been successfully filed with the paid fees, the appointment of the director is considered official.
Powers and Functions of directors
A Board of Directors carries out the following processes:
- Establishing broad policies to govern the company
- Approving annual budgets
- Setting strategic objectives
- Selecting and appointing key executive officers including the Chief Executive Officer.
The Board of Directors is given the autonomy to carry out all the powers of a company unless the Companies Act or company constitution explicitly states that a particular act cannot be performed without the approval of shareholders.
Under the Companies Act, these following acts cannot be executed without the approval of shareholders:
- The issuance of shares
- Payments to any Director as a form of compensation for the loss of position within the company (i.e. as a result of this person being removed)
- The provision or increment of "emoluments" (i.e. allowances and fees for expenses) for any Director
- Disposing of the company’s business assets
Director’s duties
The company's director will have to make business decisions and utilise their powers according to their duties bound by the law. Failing which, they could face civil liabilities in a lawsuit, criminal penalties and possible removal from the company.
Their other duties include ensuring corporate governance, adopting ethical, socially responsible practices, performing corporate social responsibility and engaging with society.
Director’s liabilities
If a director fails to perform his or her duties, this person can face both civil or criminal action. While ACRA imposes the directors' statutory duties, the company enforces the common law duties.
| Statuary Law Duties | Common Law Duties |
| This is enforced by ACRA | This is imposed by the company |
| Criminal and civil liabilities | Civil liabilities only |
| The company does not have the power to stop ACRA from taking action against a company director for breaches | The company and as the courts have the power to pardon breaches |
Director’s salary
As a director of the company, the company is allowed to remunerate its directors for his or her services. While the Companies Act does not have a particular cap on the fees a director can receive, this amount must be approved by the company's shareholders.
Executive Directors who are also company employees would be remunerated according to their employment contract.
Register of directors
Companies are obligated to keep a register of directors that includes the following information for each director:
- Director’s full name as well as any former name(s)
- Residential address or alternative address given by the direction
- Nationality
- Identification
- Date of appointment and
- Date of appointment cessation
Removal of directors
According to the Companies Act, a director can be removed from his or her position by an ordinary resolution of shareholders prior to his or her expiration period in office -- so long as it is in compliance with the company's memorandum and articles of association. Upon removal, the company will have to file for the removal of director notice within 14 days. Similar to the appointment of director process, the company can file this notice via BizFile.
Resignation of directors
In accordance with the Companies Act, a director may choose to resign as long as there is at least one other director who is a Singaporean resident. A director typically has to give notice of resignation in writing and must be compliant with the resignation process in the company's memorandum. This part can be done through BizFile, which is so much easier!
Once the company receives this notification, they are required to file a cessation of director with ACRA within 14 days.
Conclusion
Once you've gotten a better understanding of the roles of company directors and what it encompasses, it's time to get the paperwork done so you can get your business up and running in the fastest possible time!
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