Significant changes to the Singapore Companies Act (CA) are expected to come into force by way of the Companies (Amendment) Act 2014 (Amendment Act).
The changes will be implemented by the Accounting and Corporate Regulatory Authority (ACRA) in two stages: the first phase will take effect on 1 July 2015 (for legislative amendments that have no link to ACRA’s online business filing portal, Bizfile), and the second phase (for all remaining legislative amendments) is anticipated to come into effect in the first quarter of 2016.
The Amendment Act will introduce wide-ranging revisions designed to reduce the regulatory burden on companies, promote business flexibility and improve corporate governance.
We focus here on the impact these legislative amendments will have on directors, including the enhancement of protections for directors, the clarification of the roles and duties of directors, and the widening of certain director’s liabilities:
• The definition of director will be clarified to include a person who controls the majority of the directors (however a separate definition of shadow director will not be included).
• Companies will be permitted to appoint a director by ordinary resolution passed at a general meeting, subject to any contrary provision in the company’s constitution.
• The maximum age limit for directors will be removed.
• Private companies will be permitted to remove any director by ordinary resolution, subject to any contrary provision in the company’s constitution.
• Companies will be permitted to pay compensation to a director without shareholder approval, subject to certain conditions.
• Directors will be automatically disqualified for five years if they were a director of at least three companies struck off within a five-year period.
• It was determined that there is no need at present to exhaustively codify directors’ duties (as has been done in the UK) as the CA already contains a statutory statement on directors’ duties, and ACRA has published a guidebook for directors. The Ministry of Finance will continue to monitor developments in the UK and other jurisdictions with a view to revisiting this issue down
• Criminal liability for the breach of certain duties will be retained as a deterrent. The Ministry of Finance has, however, left open the possibility of introducing a civil penalties regime and it is anticipated that a review of the current penalties regime will be carried out in the future.
• Directors’ fiduciary duties will expressly be extended to cover the improper use of a director’s position to gain an advantage for himself, for any other person or to cause detriment to the company (for which a director will be criminally liable).
• Companies will be permitted to provide indemnity against liability incurred by their directors and officers to third parties, however such indemnity cannot be provided for payment of fines in criminal proceedings, payment of penalties in respect of regulatory non-compliance, defending criminal proceedings where the officer is convicted, and defending civil proceedings brought by the company in which judgment is given against the officer.
• Companies will also be permitted to indemnify directors in respect of potential liability, by providing loans to directors to defend themselves against any proceedings or regulatory investigation or in making an application for relief.
Mr Ian Roberts is a Partner and Ms Vanessa Kilner is an Associate, both at Clyde & Co Clasis Singapore.