At the foundation of every company is built on these stakeholders - Directors. They hold crucial appointments that chart the direction and operation of the company. The longstanding relationship of directors in the company reflects the health of the company’s performance. To pick and appoint the right director can boost the company’s market position or set them back in their efforts. Here is an easy guide to all you need to know about appointment of directors.
Who is a director?
A director is the officer in charge of managing the operations and setting directions for the company. He/she must be objective in decision making, executing his duties with diligence and integrity and act in the best interest of the company.Definition of Director in Companies Act:
A director is any person occupying the position of director of a corporation by whatever name called and includes a person in accordance with whose directions or instructions the directors of corporation are accustomed to act and an alternate or substitute director.
A person may not be formally appointed as a director, but he will still be recognized as one under law as long as he is participating in the company’s management or the other company directors follow his instructions.
How many director(s) does a company need?
Singapore law requires a minimum of one director in all companies who must be a natural person as it does not allow for corporate director. However, listed companies require at least three directors to form the audit committee as this committee should consist of minimum three directors.
What are the requirements to become a director?
Anyone above the age of 18 and who is not disqualified to be a director can act as a director in a Singapore company. The director must be an ordinary resident in Singapore. The director cannot hold the post of secretary concurrently, unless if there is one other director in the company.
Directors can also be shareholders although there is no obligation for a director to hold shares in the company.
Is there an age limit?
There is no age limit for directors in private companies. However, directors in public or subsidiary of public firms face a limit of 70 years unless the person is reappointed at the company’s Annual General Meeting.
What does Ordinary Resident mean?
It signifies the director’s normal residence is located in Singapore. An ordinary resident can be a Singapore Citizen, Singapore Permanent Resident or Employment Pass (EP) holder. EP holder can be accepted as an ordinary resident director, subjected to compliance with prevailing laws and employment of foreign manpower regulations.
For secondary directorship position in another company (apart from the approved company for the EP), there must be no objection from EP holder’s employer. EP holder is required to apply for and granted a Letter of Consent (LOC) by Ministry of Manpower (MOM). MOM will give approval only if the company is related to shareholding to the EP holder’s employer and the purpose for secondary directorship is related to their primary employment. If approved, the director should receive his/her LOC in five weeks and register his/her secondary directorship position with Accounting and Corporate Regulatory Authority (ACRA).
Who cannot become a director?
A person may be disqualified from holding directorship in Singapore for the following reasons:
- Undischarged Bankruptcy
- Convicted for fraudulent or dishonest offences
- Company wound up due to threat to national security
- Convicted for more than two filing offences under Companies Act within five years
- Issuance of three or more High Court Orders with regard to compliance matters relevant to Companies Act within five years
- Disqualification order issued by court
- Director for three or more insolvent companies
Once disqualified, the person will not be allowed to participate in managing any foreign or local firm unless with the permission of the High Court or Official Assignee.
To find out more on the disqualification of directors, click here.
Nomination & Selection of Directors
The Board is responsible for the long-term success of a company and its first responsibility is to provide direction and leadership within a framework of prudent and effective controls. Thus, it is the responsibility of the Board for the selection and nomination of directors in order to ensure that the Board consists of members with diverse skills and competencies, whilst ensuring a formal and transparent process of appointment.
It is therefore important for companies to consider adopting a process for the search, selection, nomination and appointment of Directors to the Board. In evaluating the suitability of candidates, the Board should consider based on the following criteria:-
- Clear understanding of the company’s business, finance and other relevant aspects that contributes to the company’s success.
- Knowledge in various disciplines that affect the core competencies (like business management, strategic expertise, industry knowledge, risk management, people management, legal and government regulations etc.)
- Ability in fulfilling duties and responsibilities, putting the organisation’s interests before personal interests, acting ethically
- Long term commitment to the welfare and interest of the company
- Potential conflict of interests with that of the company
Appointing the Director
New appointments are governed by the company’s constitution. Normally, the constitution will allow the company to appoint additional directors up to the maximum number stated in the company’s constitution.
When appointing a director, the following information is required for the purpose of lodgement with ACRA:
- Full name as in national identification card or passport
- Date of their appointment
- Date of birth
- Residential address
- List of other directorships, if any
The new appointment can be approved by the board of directors via a directors’ meeting or a written resolution. There are other scenarios whereby a director can be appointed, e.g. an Annual General Meeting or Extraordinary General Meeting. In addition, certain company constitution or existing shareholders’ agreement may allow shareholders to appoint a director.
Should the company prepare a written resolution, majority or all directors’ signatures (depending on the company’s constitution) must be obtained for the resolution to be effective. Once the minutes of the meeting or written resolution is completed and signed, the company secretary must place the same in the company’s minute book.
Note: Directors have an option of reflecting their service address instead of their residential address on ACRA’s record at an additional fee payable to ACRA. This is for those who do not wish to display their residential address in the public record
Director Appointment Procedures
Before the official appointment of a director, the company must first fill up a series of documents and file a director’s appointment notice with ACRA.
Documents required to Appoint a Director
- A declaration of consent to act as a director using Form 45 (click to view sample)
- The director’s disclosure of all other directorships or shareholdings
- A signed board resolution that approves the appointment (click here for a suggested sample)
Filing an Appointment of Director with ACRA
For an incoming director who is considered an ordinary resident of Singapore, an existing director or the company secretary can file an appointment of Director with ACRA online using BizFile. However, the company can only file the appointment for a local resident. For a foreign resident, the company has to file the appointment of director through a registered corporate service provider.
Such appointment has to be notified with ACRA within 14 days from the date of appointment. Any late submission will result in a penalty being imposed by ACRA.
Once the appointment has been filed with ACRA, the director is considered officially appointed.
After Lodgement of Appointment of Director with ACRA, company will have to update:
- Register of Directors
- Post the signed directors’ resolution approving the appointment into the company’s minute book
- File the declaration of interest, Form 45, ACRA lodgement record with receipt in the company’s secretarial file
Adding a new director to a company usually help bring new life into a business and expand the skills within the company. Nevertheless, the directors have to be aware of their fiduciary duties as any breaches may result in disqualification and/or incurring personal liability. As such, directors need to be fully aware of their duties as defined under the Singapore Companies Act as well as any signed service contract they may have with the company. Therefore, engaging a reliable secretarial agent / company secretary to work for your company ensures that information which you may require relating to Companies Act matters are provided to you in correct and timely manner.
Disclaimer: The information provided is general in nature and is not intended as professional advice. The information contained in this blog were collated as at November 2018 based on information available at that time.