Are you looking to add a someone new to your Board of Directors? Or maybe you’ve recently set up a firm, and need to add your first director. This article will give you a step-by-step guide on how to appoint company directors in Singapore.
- 6 steps to appoint company directors:
- Ensure individual is qualified to be a company director
- Decide on the type of company director
- Hold a shareholder’s general meeting
- Pass an ordinary resolution
- Have the nominated director provide written consent
- Notify ACRA within 14 days of the appointment
- Directors’ responsibilities
- Paying fees to company directors
- Removing a company director
- Directors & officers’ liability
All companies in Singapore must have a minimum of 1 director. This director must be ordinarily resident in Singapore. If you’re living here, that’s an easy condition to fulfil. If you’re based overseas, you may need to use nominee directors. Many corporate secretary firms in Singapore will offer this service. If you need to utilise nominee director services, check out our list of the top 5 online corporate secretaries in Singapore that offer this service.
The 6 steps to appoint company directors:
Step 1: Ensure your chosen individual is qualified to be a company director
The person you appoint as a director must:
- Be at least 18 years’ old
- Possess full legal capacity, meaning they can’t be mentally incapacitated
- Not be an undischarged bankrupt (ex-bankrupts are OK)
- Not have been the director of 3 or more companies that have had their names struck off the corporate register in the last 5 years
- Not have been convicted of any crime related to fraud or dishonesty, and been imprisoned for such a crime for 3 months or more
- Not have failed to comply with directors’ duties in previous companies. Examples include failing to file annual returns, filing tax documents, and other requirements under the Companies Act
The above requirement are laid out under the Companies Act, and reiterated by ACRA.
Step 2: Decide on the type of company director
There are 4 main types of company directors that you can officially appoint. Decide which one of these your new Board member will be:
- Executive Director: Typically, an Executive Director will serve both as an employee of the company, and as a member of the Board. Usually, only the most senior members of management will serve in this role – e.g. the CEO.
- Non-Executive Director: Not an employee of the company, and is not involved in the day-to-day affairs of operating the firm. Non-Executive Directors typically serve an advisory role.
- Independent Director: Someone with no relationship to the company, and the company’s affiliated entities, that could interfere with the director’s judgement. An independent director should not have any of these relationships or vested interests. This will allow them to exercise free and objective judgement that will serve the best interest of the shareholders.
The Code of Corporate Governance in Singapore has spelled out qualifying guidelines for independent directors:
– Not have more than 5% shareholdings in the company or its related entities
– Not be an immediate family member of any employee of the company, or anyone who has been employed by the company in the last 3 years
– Not be receiving any kind of compensation from the company, except for directors’ fees paid by the company
– Not be an executive officer of any for-profit company that has transacted over SGD 200,000/year with the company
– Not have been employed by the company or its affiliates in the last 3 years
- Nominee Director: An individual who’s nominated by a significant shareholder to act as a director on their behalf. Nominee directors are frequently used by foreigners, or business owners based overseas, to fulfil directorship requirements in Singapore.
The law also recognises alternative types of company directors. These are not directors that you will formally appoint, but whose position or behaviour qualifies them as a director:
- De Facto Director: An individual who is not officially nominated as a director, but who acts like one. A de factor director, even though he is not a director in name, has the same responsibilities and liabilities as a director.
- Shadow Director: An individual who is not officially nominated as a director to the company, but who instructs or advises other directors on their duties. Shadow directors are similar to de facto directors, and also have the same duties and liabilities as fully appointed directors.
Step 3: Hold a shareholder’s general meeting
To hold a shareholder’s meeting for the nomination of a director, send out a notice to all shareholders. Usually, such notices are meant to be sent at least 14 days before the meeting. However, in practice, you don’t have to adhere to this 14-day advance notice if all your shareholders agree to a shorter timeline (e.g. 2 days advance notice).
It’s not necessary to actually organise a meeting in person. If you’re holding a meeting to appoint a new director, you can simply send out a notification of the meeting electronically.
At the shareholder meeting, here are some general discussion points that may be helpful to review:
- Qualifications of the chosen company director
- What value would the chosen director add to the company
- Disclosure of potential conflicts of interest, like other shareholdings and directorships currently held
Step 4: Pass an ordinary resolution
To pass an ordinary resolution, hold a vote amongst all the shareholders in the company. If 50% or more of the shareholders vote in favour of the ordinary resolution, then the resolution is passed. You may hold this vote electronically.
Step 5: Have the nominated director provide written consent
Once the ordinary resolution to appoint your director is passed, you’ll need the director’s written consent. You must use ACRA’s Form 45 (click here to access a sample) to do this.
Form 45 is just a simple 2-page document for the appointed individual to declare that they are fit to stand as a director, and for them to provide their personal details (e.g. name, NRIC, birth date, etc.).
Step 6: Notify ACRA within 14 days of the appointment
Once your director has been appointed, you must notify ACRA within 14 days. You can do this online using BizFile+, which is ACRA’s online business services platform.
Here are the steps to notify ACRA of your newly appointed director:
- Go to BizFile+ (click here for the link)
- Log in using your CorpPass
- Click “Change in Company Information”
- Click “Change in Officers”
- Provide the details of your new director, and the date of appointment
How long does it take for ACRA to process updates on company directors?
ACRA will usually take about 1-2 days to reflect the newly appointed director, in most cases.
As a member of the highest echelon of power in the company, a director possesses certain key powers not available to management.
Directors can do the following without passing an ordinary resolution (i.e. holding a shareholder vote):
- Borrowing funds for the company
- Lending funds to other entities
- Investing company funds
- Selling company assets
- Opening a corporate bank account
Directors can the following with a shareholder vote:
- Declare dividends
- Appoint new directors
- Appoint auditors
- Make changes to the company constitution
As a member of the Board of Directors, Directors must always act in the best interests of the company and its shareholders. Directors must also fulfil their responsibilities that are laid out in Section 156 of the Companies Act.
Paying fees to company directors
You can choose to pay fees to your company directors. If your newly appointed director is providing advisory services to your company, or is on your Board to lend prestige/credibility to your firm, then it’s customary to pay them a fee. There aren’t any limits or minimum fees required – it’s up to you to decide the amount.
All directors’ fees must be approved by the Board of Directors. To do this, you must pass a resolution in a shareholder’s meeting. However, if your director is an employee of the company (i.e. an Executive Director), then you don’t need Board approval to pay them directors’ fees.
For directors residing in Singapore, directors’ fees are taxed at the rate of the individual’s personal income tax bracket. Non-resident directors’ will have their fees taxed at at a flat rate of 22%.
Removing a company director
To remove a company director, you must pass an ordinary resolution, just like you did when trying to appoint the director.
You must inform ACRA within 14 days of the removal of a director. Use ACRA’s online portal at BizFile+.
If you run a Pte Ltd entity, and the company is sued, you generally have limited personal liability. That’s the whole point of running a Private Limited firm.
However, if you are sued personally as a director, you have unlimited personal liability. This is a point that not many directors are aware of.
As such, it’s critical to have Directors and Officers Liability Insurance in place.