Singapore Companies Act

The duties of company directors in Singapore can be broadly classified as statutory duties and general law duties, commonly known as fiduciary duties.

What are statutory duties of Singapore company directors?

The Singapore Company Registrar, known as the Accounting and Corporate Regulatory Authority of Singapore (ACRA), enforces the statutory duties. Statutory duties are administrative duties such as:

• General duties of disclousre,
• Appointing a Company Secretary,
• Holding an Annual General Meeting (AGM) at the stipulated time,
• Ensuring timely filing of annual returns,
• Presenting audited accounts, balance sheets and directors' reports at the AGM,
• Ensuring that the company maintains a members register and other updated statutory books at its registered office, and
• Appointing an auditor within three months of incorporating the company.

What are the fiduciary duties of Singapore company directors?

Fiduciary duties are generally enforced by the company and include the following:

• Acting in good faith, honestly, and in the interests of the company,
• Discharging the powers vested in them responsibly by making wise decisions on behalf of the company,
• Avoiding the conflict of personal interests and company interests, and
• Avoiding incurring debts knowingly.

A Note of caution: Breach of statutory duties can lead to criminal prosecution or criminal sanctions, while breach of fiduciary duties can lead to civil suits or remedies.

The company secretary is responsible for all the administrative and compliance matters of the Singapore corporation. Some of the major duties of a Singapore company secretary include the following:

• Timely submission of requisite documents to the Singapore Companies Registrar, ACRA.
• Maintaining all company books and registers.
• Coordinating AGMs and shareholder meetings.
• Arranging for shares allotment, transfer and issuance.
• Providing support in preparing Annual Returns.
• Liaising between company directors and officers of the company such as employees.
• Ensuring proper use of company seal and maintaining confidentiality of legal documents.

Broadly speaking,  company shareholders are the owners of the company by virtue of the investment they have made in the Singapore corporation. Usually, shareholders are granted the following rights in the corporation:

• Voting rights,
• Distribution rights (the right to receive money or assets from the company), and
• Right to receive information about the company.

• The Memorandum and Articles of Association (MAA) set out the structure and operating purpose of the company. They are key documents in the formation of a Singapore LLC.
• The Memorandum specifies the key features of the Singapore LLC  such as LLC name, registered office details, liability of members, share capital of the LLC, details about the subscribers of shares, number of shares allotted, etc.
• The Articles of Association detail the manner in which the company will be regulated such as share capital and variation of rights, transfer of shares, transmission of shares, forfeiture of shares, conversion of shares into stock, alteration of capital, holding general meetings, appointment of directors, directors' powers, winding up of the LLC, etc.
• A Singapore LLC is free to adopt the standard MAA format that is prescribed by the Companies Registrar or can formulate its own MAA.

• An Annual General Meeting, also known as the AGM, is a formal meeting between the directors and shareholders of a Singapore LLC that is held once in every year.
• The main purpose of the AGM is to comply with the ongoing administrative requirements for Singapore corporations, such as presenting financial accounts, presentation of annual report, appointment of auditors, election of Board members, proposing amendments to the company's constitution, etc.
• A newly incorporated Singapore LLC must hold its first AGM within 18 months from its incorporation date.
• Subsequent AGMs must be held once in every calendar year, with a maximum of 15 months as the elapsed period between successive AGMs.
• A private corporation can do away with the AGM, provided such a resolution has been passed earlier at a general meeting of shareholders.

• An Extraordinary General Meeting (EGM) is a meeting other than an Annual General Meeting that is held on an urgent basis on short notice by the directors or shareholders of a Singapore corporation to deal with an urgent matter.
• Note that only members with atleast 10% of voting rights on the shares of the corporation are allowed to call for an EGM.
• Typically, an EGM is convened for the following purposes: Appointing a new board of directors, changing the Articles of Association of the company, or deciding on a rights issue.
• Prior notice, at least 21 days ahead of the EGM, must be sent to all the shareholders specifying details such as time, date, venue, and issue to be discussed at the EGM.

Companies can issue shares of different types with different rights attached to each type of share. These rights concern the shareholders' entitlement to dividends, priority in dividend payments, voting rights, priority in repayment of capital on winding up of a company, or a right to share in the surplus assets on winding up.

Most companies elect to issue two classes of shares - Ordinary Shares and Preference Shares.

Preference shares:

• The holders of preference shares are entitled to receive a fixed rate of dividend from the company's profits.
• Preference shareholders are to be paid in priority over other classes of shareholders.
• Preference shareholders usually cannot partake further in the company's profits beyond their specified dividend.
• In the event of liquidation of the corporation, preference shareholders are entitled to a repayment of their capital (after the creditors have been paid), but cannot partake in any surplus assets.
• Usually, such shares do not carry any voting rights.

Ordinary shares:

• Ordinary shares usually form the major portion of  a company's capital.
• The corporation's articles of association will usually specify the rights of different classes of ordinary shareholders.
• Ordinary shareholders are usually entitled to the remaining profits, after payment of dividends on prior ranking shares.
• Ordinary shareholders carry bulk of the voting power in a corporation and can therefore control the composition of the Board of Directors.

Important Note: Bearer shares are not allowed in Singapore.

• Usually, the Singapore corporation's Articles of Association will specify any restrictions on the transfer of shares.
• The most common forms of restrictions are as follows:
  • All share transfers must be approved by the Board of Directors by passing a board resolution at a board meeting.
  • A preemption clause is often included in the Articles, stating that any member who intends to sell any shares must first offer them to the present members.
• The transfer of preference or ordinary shares shares by way of gift, by sale or by asset distribution means attracts stamp duty in Singapore.
  • The Stamp Duty rate is 0.2% of the Consideration or Net Asset Value, whichever results in a higher amount.
  • For documents signed in Singapore
  • For documents signed overseas

Generally the procedure for transfer of shares is as follows:

1. Check the Articles of the corporation for rules on share transfers. Ensure that preemption rights (if any) have been fulfilled or waived.
2. Ensure that the transfer documents are signed by the transferor and transferee.
3. Present the transfer documents and relevant share certificates to the corporation.
4. Pass a board resolution approving the share transfer.
5. Present the documents for stamping and pay the stamp duty.
6. Update registers as appropriate.
7. Cancel old share certificates and issue new ones.

Share-capital can be increased anytime after registration of a Singapore LLC by injecting the requite capital into your bank account; ensuring that the corresponding paperwork is complete; and notifying the Singapore Companies Registrar, ACRA, of the increase in share-capital.

• Dividends must be paid only out of a corporation's profits that is available for distribution.
• Dividends must be distributed to the shareholders in proportion to their shareholding.
• The Articles of Association usually specify the rules governing the declaration and payment of dividends.
• Dividends paid by a Singapore corporation to its shareholders is exempt from tax in the hands of the shareholders. This is because Singapore follows a single-tier tax system where tax paid by a corporation on its chargeable income is the final tax.

A Singapore corporation can be dissolved by the following methods:

• Striking Off: A Singapore corporation can elect to strike its name off the register of companies maintained by the Companies Registrar, ACRA by filing an application with ACRA. The corporation should have ceased trading and must also fulfill other "striking-off" criteria. It will then take about 5-6 months for ACRA to process the application and strike off the company.
• Winding-Up: A company can be wound up either voluntarily by its members or creditors; or compulsorily by the court. A corporation's members can decide to voluntarily wind-up the company only if it is solvent i.e. it can settle all of its debts in full. Creditor's winding-up may be adopted by corporations that are insolvent and have already ceased operations. The court can decide to compulsorily wind-up the company if it finds that the company is unable to pay its debts or if it considers it necessary under certain circumstances. It can take anywhere between 6-8 months to wind-up a company depending upon the complexities involved.