Singapore Companies Act sets out the general duties of company directors. Breaching of these duties can be severe, with the company, its creditors, or shareholders having the right to pursue for any losses, they have suffered.

Directors’ Breach their Duty

Before we go into that, let’s understand that company directors are personnel elected or appointed to manage a company’s business and affairs.

 

A Director’s Duties will include:

  • Reviewing and implementing policies and decision making of the company
  • Preparing and filing statutory documents with the company secretary
  • Calling for meetings (EGM and AGM)
  • Maintaining and keeping records of companies binding the company to contracts with suppliers, debtors, creditors, etc.
  • Being the middle man when dealing with suppliers, debtors, creditors, etc.
  • Dealing with the company’s constitution

 

It is required for one director to act honestly, in the best interests of the company, and with reasonable care always. The consequences of a breach of directors’ duties can be detrimental.  A shareholder, creditor or even the company can bring proceedings against a director personally for a breach of any of their duties, provided loss or damage was caused as a result of a breach. 

 

Types of a Directors’ Breach 

As the saying goes, with great the power comes great responsibilities. The same can be said of directors come certain provisions in the Companies Act, when defining offences and breaches and their corresponding penalties. If breached, companies and authorities are to deal with the via common law.

 

Breach might include:

  1. Failing to act honestly and use reasonable diligence at all time during the discharge of the duties. (Section 157(1) of the Companies Act)
  2. Made information given in an improper manner by virtue of his position at the time of offence, to gain, directly or indirectly, an advantage for himself or any other person or cause detriment to the company. This is violating Section 157(2) of the Companies Act as well as common law.
  3. Failing to disclose potential conflicts of interest in any transaction, or else arising from his or her position. (Section 156(10) of the Companies Act).

 

If the above takes place, as such, it is the company, through its board of directors (and/ or shareholders) that decides whether to act against the director. If a director breaches his duties, the company can do any of the following: 

  • Sue for damages, or a fine of up to SG$5,000 or to imprisonment for up to one year.
  • Demand the return of a secret profit or specific property
  • Declare the act invalid
  • Removal from office
  • Setting aside transactions
  • Claim damages or compensation for financial losses incurred
  • Criminal fines

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Changes for a Directors’ Breach of Trust 

Various rights also exist against directors under the Singapore Companies Act. Other possible offences include criminal and civil violations. In this case, a director would have to be subject to be charged under Singapore Common Law procedures for criminal and/ or civil offences.

The consequences of the charges imposed, if taken to court; upon directors for these breaches are usually claimed in damages representative of the director loss and the prospective loss.

It is not uncommon for a director to be pursued personally, be dismissed from the company and that such proceedings lead to a loss of his property and ultimately, becoming declared bankrupt directly as a result of the mentioned circumstances.