What are the Duties and Responsibilities of the Board of Directors in Singapore?

Directors in Singapore must fulfil both fiduciary duties and statutory duties. These duties ensure that the director acts in the best interest of the company and complies with all relevant legal regulations. 

Here are the duties of board of directors in brief:

1. Fiduciary Duties

Fiduciary duties refer to the responsibility of a board of director to act in good faith and with loyalty to the company. Key fiduciary duties include:

• Duty of Loyalty: Directors must act in the best interest of the company, putting the company’s interests ahead of personal gain.

• Duty of Care: Directors must make decisions with reasonable care and diligence, ensuring they are fully informed before taking action.

• Duty of Good Faith: Directors must always act honestly and transparently in their dealings with the company, avoiding conflicts of interest and self-dealing.

2. Statutory Duties

Directors in Singapore are required to fulfill various statutory obligations under the Companies Act to ensure compliance with legal and regulatory standards. These statutory duties are designed to promote transparency, accountability, and good governance. Key statutory duties of directors include:

• Keep Accounting Records: Directors are responsible for ensuring that the company keeps accurate accounting records that reflect the financial position of the business. These records must be maintained in a manner that allows inspection by the directors, providing transparency and clarity about the company’s financial health. An accounting service provider can assist in this regard for smaller companies without their own in-house accounting team.

• Maintain Annual Accounts: It is the duty of the directors to prepare and submit annual financial statements to shareholders, typically presented during the company’s annual general meeting (AGM). This ensures shareholders are kept informed of the company’s financial performance. Your accounting service provider can also assist in preparing annual accounts that meet Singapore requirements, or this can be done in-house by company staff.

• Hold Annual General Meetings (AGM): Directors must ensure that the company holds an AGM at least once a year. During this meeting, shareholders are provided with key updates, including the financial statements, the election or re-election of directors, and any other important company decisions.  Your company secretary or corporate services provider can assist in tracking and managing your Annual General Meeting, as well as other regulatory requirements and filings, to ensure the company and directors meet their key statutory requirements.
  

• Hold Statutory Meetings: Directors of public companies must convene a statutory meeting within the first three months of starting business operations. This meeting is required to cover specific regulatory matters and is an essential part of the initial phase of operations.  It is also considered good practice for the Board of Directors to meet on a regular schedule.
  

• Hold Extraordinary General Meetings (EGM): If requested by shareholders who collectively own at least 10% of the company’s shares, directors are obliged to hold an EGM. This type of meeting is typically convened to address urgent matters that cannot wait until the next AGM.

• Appointment of a Company Secretary: Directors must appoint a company secretary within six months of the company’s formation. The appointed company secretary should meet the expected experience and qualifying conditions in Singapore, and is responsible for ensuring the company complies with legal requirements and for maintaining the company’s statutory records. A corporate services company registered with Singapore’s Company Registry (ACRA) as a Registered Filing Agent or Corporate Service Provider, can assist to appoint a suitably qualified and experienced company secretary to perform this mandatory company officer role.
  

• Appointment of an Auditor: Directors are required to appoint an auditor or a committee of auditors within three months of the company’s incorporation. unless exempt from the Audit requirement (exemption available for specified smaller companies in Singapore). The auditor’s role is crucial in providing an independent assessment of the company’s financial health and verifying that the financial records are accurate.

• Payment of Dividends:  Directors have the responsibility to decide on the payment of dividends to the company’s shareholders, but only from the company’s profits. Ensuring that dividends are paid in accordance with the law and from appropriate sources is an essential duty of directors.

• Issuance of Shares: Directors must ensure that shares of the company are issued only after receiving approval from the shareholders. This ensures that the shareholders have a say in the company’s capital structure and can approve significant financial decisions.

• Duty to Disclose Conflicts of Interest: Directors must avoid situations where their personal interests conflict with the interests of the company. If a conflict arises, such as a director benefiting personally from a company transaction, they are obligated to disclose the conflict to the company and recuse themselves from decisions where they have a conflict of interest. This transparency helps maintain trust and ensures that decisions are made in the best interest of the business.

3. Other Duties

In addition to fiduciary and statutory duties of board of directors, also have specific restrictions, known as “negative duties.” These duties impose restrictions on actions directors can take, such as:

• Loans to Directors: Under Section 162 of the Companies Act, a company cannot grant loans to its directors, except under specific conditions. Violating this provision can lead to penalties including fines of up to $20,000 or imprisonment for up to two years.

• Issuing Dividends from Non-Profit Sources: Directors are prohibited from paying dividends if the company does not have sufficient profits. Such actions can result in fines and imprisonment.
  

• Creditor Duty / Wrongful Trading: Directors have a duty to consider creditor interests in a situation where the company’s solvency may be in question. Directors should exercise oversight such that the company does not take on debts in a situation where it has no reasonable prospect of repaying these.