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:
- Failing to act honestly and use reasonable diligence at all time during the discharge of the duties. (Section 157(1) of the Companies Act)
- 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.
- 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