The Company Director Checklist – Singapore

Contact:

[email protected] [email protected] *

*The authors would like to thank Elizabeth Wong, Consultant at Allen & Gledhill LLP for her assistance in preparing this Checklist

The Company Director Checklist - Singapore

1

Item

Section

Check

Item

Section

Understand company’s business and what you can contribute

1

Scope of director’s duties

Potential for conflict of interest

1

Disclosure of conflict between personal interest and company interest

10, 12

Remuneration within expectations

1

Understanding statutory obligations

13-14

Adequacy of corporate governance framework

1

Special circumstances, namely insolvency, float, takeover, joint venture

15-18

Check

5-11

Corporate governance processes

19

Meet 

CEO/CFO

2

Indemnities

20



Other directors

2

Insurance

21



Management team

2



Company lawyers

2



Auditor

2



Articles of Association

3



Board minutes, financial data, business plan and corporate strategy

3



D&O insurance arrangements

3



Announcements to SGX-ST

3

Review

The Company Director Checklist - Singapore

2

INTRODUCTION

This Company Director Checklist provides a snapshot of the duties and liabilities of a director of a listed company under the Companies Act, Chapter 50 of Singapore (Companies Act), the Listing Manual of the Singapore Exchange Securities Trading Limited (SGX-ST) and generally Singapore law. The Checklist is a general guide, and is not intended to be exhaustive and should not be treated as a substitute for specific legal advice. The Checklist is up to date as at 31 March 2014.

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Disclaimer: The content of this Checklist is intended to provide general information. Although we endeavour to ensure that the information contained herein is accurate we do not warrant its accuracy or completeness or accept any liability for any loss or damage arising from any reliance thereon. The information in this Checklist is not intended to be and should not be treated as a substitute for specific legal advice concerning particular situations. In this Checklist, unless otherwise stated, all reference to section numbers are to the provisions of the Companies Act, Chapter 50 of Singapore.

Action/Issue

Comments/Notes

Before Appointment 1. Understand

2. Meet



The precise nature and extent of the company’s business activities.



Is the industry sector one that you are familiar with? Are you expected to be an industry expert?



The skills the company needs or access to resources that the company lacks.



Consider if joining the Board would place you in a position of conflict (discussed in Question 10).



The remuneration package.





The time commitment required.

Consider why the company has approached you and if you can deliver all that they expect.



The company’s corporate governance framework.



Consider if the remuneration meets with your expectation in the context of what will be expected of you in terms of your time and skill/expertise.



Satisfy yourself as to the adequacy of the company’s corporate governance (discussed in Question 19).



You will be responsible for the actions of the management team, as well as your own. Assure yourself of their integrity and competence.



Are you a right fit from the company’s perspective, as well as from your own perspective?



Ascertain if there is any current litigation and the potential liability of the company.



Ascertain if there has been change in company auditors in recent years and the circumstances in which the change was made.



CEO/CFO.



Other directors.



The management team.



The company’s lawyers (external and internal).



The company’s auditors (external and internal).

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4

Action/Issue

3. Review

Comments/Notes 

Ascertain if there have been any queries from regulatory authorities and the circumstances giving rise to such queries.



Ascertain if your inclusion on the board will change significantly the composition and independence of the board.



Articles of Association.





Board minutes and board papers for past six to 12 months.

Consider how often the Board meets and the issues raised, and how decisions are taken.



Consider also the proposals for reform (if any) or other potential changes in the company.



Consider the company’s current financial position and its financial track record over the last three years.



Ascertain whether there has been any change in accounting policies or practices.



A director faces exposure to personal liability. It is therefore very important to review and assess the adequacy of the company’s D&O insurance arrangements that are in place.



Understand how the board works in practice and if independent judgment is truly encouraged.



Consider if your personality fits within that risktaking environment.



Consider if the company has a culture of candour, transparency and voluntary disclosure.



Understand the company’s accounting policies and practices.



Financial data for last three years.



Company’s business plan and corporate strategy.



Company’s insurance coverage for directors.



In the case of a listed company, announcements made by the company to the SGX-ST in the last 12 months.



Press releases by the company.



Press clippings for last 12 months.



How are decisions made within the company?



What is the board’s risk appetite?



Satisfy yourself as to the internal regulation of the company and the corporate governance framework.

Ongoing Duties 4. Think

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Action/Issue 5. To whom are your duties owed?



Company, not members: General rule is that a director owes his duties to the company and not to members of the company individually. Hence, only the company may commence legal proceedings against a director for any breaches of duties.



Employee: Directors must take into consideration employees’ interests as well as those of the shareholders when exercising their powers (Section 159).



Creditors: Case law has indicated that when a company becomes insolvent, a director must also take heed of the creditors’ interests to ensure the property of the company is not improperly dissipated and that its affairs are properly managed.

(Section 159)

6. What is the duty of skill and care? (Sections 157(3), 157C)

A director is under a mandatory duty, at all times, to act honestly and use reasonable diligence in the discharge of the duties of his office (Section 157(1)). The courts, in determining a director’s duty of care and skill, have expanded on this general proposition and the law as it now stands may be summarised into three propositions: 

Degree of skill: The standard of care and diligence expected of a director is objective, i.e. whether he has exercised the same degree of care and diligence as a reasonable director found in his position. This standard is not fixed but a continuum depending on various factors such as the individual’s role in the company, the type of decision being made, the size and business of the company. This standard will not be lowered to accommodate any inadequacies in the individual’s knowledge or experience. The standard will, however, be raised if he held himself out to possess or in fact possesses some special knowledge or experience (Lim Weng Kee v PP [2002] 2 SLR(R) 848; [2002] SGHC 193).

The Company Director Checklist - Singapore

Comments/Notes Please see Questions 6-11 for a discussion of a director’s duties.

Protection is accorded by Section 157C to directors for reasonable reliance on information and advice prepared or supplied by employees, professionals and experts with respect to matters within their respective areas of competence. This is discussed in Question 8. Breaches of these duties by a director may lead to criminal or civil liabilities (Section 157(3)). In certain circumstances, the court may also make an order disqualifying a person from being a director. The Listing Manual requires a director to resign from the board of directors of the listed company immediately after he is disqualified from acting as a director in any jurisdiction for reasons other than on technical grounds (Rule 720 (2) of the Listing Manual).

6

Action/Issue

7. What is the duty of good faith? (Sections 156, 157(3)) (Section 218 of the SFA)



Attention to the business: A director is not bound to give continuous attention to the affairs of his company. His duties are of an intermittent nature to be performed at periodical board meetings and meetings of any committee of the board upon which he happens to sit.



Proper delegation and discretion: Having regard to the exigencies of business, a director may delegate some of his duties to some other official. A director is, in the absence of grounds for suspicion, justified in trusting that official to perform such duties honestly (Please see Question 8 on discussion of the delegation of Director’s duties).

Directors’ duties of good faith are derived from the fiduciary relationship the directors have with the company, the major characteristics of which are to act in good faith / bona fide in the best interests of the company. A director’s fiduciary duty has four aspects: 



Bona fide and for the benefit of the company: A director must act bona fide for what he considers to be the best interests of the company and not for any collateral purpose. This is a subjective test. Provided that a director’s motives are honest, and it can be shown that he was satisfied in his own mind that the course of action is beneficial to the company or correct, a director is normally immune from proceedings that he should have acted in some different way or that, with hindsight, a better judgment was possible. Exercise powers for a proper purpose: A director must exercise his powers in the company’s interests and only for the purpose or purposes for which they are given, even if he believes that to do otherwise would be in the best interests of the company. The director will be exceeding his power if he exercises it

The Company Director Checklist - Singapore

Comments/Notes



By virtue of Section 157(2), an officer of a company is not allowed to make improper use of any information acquired by virtue of his position, to gain, directly or indirectly, an advantage for himself or for any other person or to cause detriment to the company. Should he do so he is guilty of an offence and is liable to the company for the profit and damages it suffered. He may also be criminally liable.



A director of a company who buys or sells securities of the company while he is in possession of any inside information concerning the company commits an insider dealing offence under Section 218 of the Securities and Futures Act, Chapter 289 of Singapore (SFA). Similarly, a director who procures another person to buy or sell securities of the company while he is in possession of inside information, commits an offence under the SFA.

Breaches of a director’s duty of good faith may lead to criminal or civil liabilities (Section 157(3)). In certain circumstances, the court may also make an order disqualifying a person from being a director. The Listing 7

Action/Issue for an improper purpose.

8. How much can you delegate and rely on others?

Manual requires a director to resign from the board of directors of the listed company immediately after he is disqualified from acting as a director in any jurisdiction for reasons other than on technical grounds.



Conflict of interest: A director must not put himself in a position where there is an actual or potential conflict between his duty to the company and his personal interests. To avoid the likelihood of liability should an actual or potential conflict arise, a director must ensure that the conflict is disclosed to, and approved by, the company. An area in which conflict of interests often arises is the entering into transactions between the company and the director.



Proper delegation and discretion: This is discussed under Question 8.



Having regard to the exigencies of business, a director may delegate some of his duties to some other official. A director is, in the absence of grounds for suspicion, justified in trusting that official to perform such duties honestly.

Protection provided in Section 157C is available only if the director acts in good faith, makes proper inquiry where the need for inquiry is indicated by the circumstances, and has no knowledge that such reliance is unwarranted.



Section 157C also accords protection to directors for reasonable reliance on information and advice prepared or supplied by employees, professionals and experts with respect to matters within their respective areas of competence.

The articles of association of a company usually provide for the delegation of powers of directors to committees. The board of directors cannot however delegate all of its responsibilities to another person, to the effect of absolving the board from exercising proper supervision and managerial control over the company. In addition, a director cannot fetter his discretion by entering into any contract with fellow directors or a third party governing or restricting the manner in which he may vote at future board meetings.

(Sections 157(2), 157(C))

9. What is the Business Judgment Rule?

Comments/Notes

There is no formal business judgment rule in Singapore.

The Company Director Checklist - Singapore

However, in Vita Health Laboratories Pte Ltd & Ors v Pang Seng Meng [2004] 4 SLR(R) 162, it was stated that incompetence is not ipso facto considered a breach of fiduciary duty even though it may attract other heads of liability. A director who by action or inaction causes losses to a company may find his conduct being questioned. Without evidence of a lack 8

Action/Issue

Comments/Notes of bona fides however, it cannot properly be contended that directors are invariably liable by their failure in business judgment for all losses sustained by a company.

10. What is the position on conflicts of interest? (Sections 156 and 162)

As stated under Question 7, a director must not put himself in a position where there is an actual or potential conflict between his duty to the company and his personal interests. To avoid the likelihood of liability should an actual or potential conflict arise, a director must ensure that the conflict is disclosed to, and approved by, the company. An area in which conflict of interests often arises is the entering into transactions between the company and the director.

The Company Director Checklist - Singapore



Notwithstanding anything in the articles of association of the company, a director who is in any way, whether directly or indirectly, interested in a transaction or proposed transaction with the company must, as soon as he is aware of the relevant facts, declare the nature of his interest at a board of directors’ meeting and the secretary is required to record the declaration in the minutes (Section 156).



A director who is an officer or member of another corporation or of another firm may give a general notice that he is to be regarded as interested in any future transactions which may be made with that company or firm (Section 156(4)).



Also, a director who holds any office or possesses any property which directly or indirectly might create interests in conflict with his duties as director is required to declare the fact and the nature, character and extent of the conflict to a meeting of directors (Section 156(5)).



Section 156(8) of the Companies Act extends the ambit of this statutory duty of a director to disclose any interests by pronouncing that “an interest of a member of a director’s family shall be treated as an interest of the director”. Members of a director’s family include his spouse, children, adopted children and step children.



A statutory restriction is placed on a company making a loan, entering into any guarantee or providing any security for any loan made by a third 9

Action/Issue

Comments/Notes party, to its directors (Section 162).

11. What are your other key duties under the Companies Act? (Sections 199 to 204)

Among other things, directors need to comply with disclosure / reporting requirements under the Companies Act and the Listing Manual. This is discussed further under Question 12.



In addition, directors are not permitted, without the consent of the company or as permitted by the articles of association, to obtain any advantage by way of commission, gift, profit or any other benefit by reason of his office or in the course of the business of the company.



A failure to observe these requirements exposes a director to criminal liability.



Consequences of non-compliance: A director’s failure to notify the company is an offence. Under the Companies Act, the offence is punishable with a fine not exceeding S$15,000, or imprisonment for a term not exceeding three years. There is a further fine of S$1,000 for every day that the offence continues after conviction (Section 165(9) and

The Listing Manual sets out the requirements which apply to listed companies, the manner in which securities are to be offered, and the continuing obligations of listed companies. In addition there are specific disclosure obligations imposed upon directors of Singapore companies under the Companies Act, which are discussed further under Question 12. Directors also need to comply with their financial reporting obligations under the Companies Act. This entails maintaining financial statements, laying the profit and loss account, balance sheet and directors’ report before the members at the annual general meeting, reporting on the state of the company’s affairs and providing members with copies of the financial statements (Sections 199 to 204). 12. Understanding your disclosure obligations as a director of a listed company (Sections 165, 166)



Who should disclose: The Companies Act presently provides for the disclosure of interests in securities of a Singapore-incorporated company by its directors (Section 165). In the case of listed companies, the Companies Act and the SFA lay down the statutory framework governing directors’ dealings with the company and securities of the company (Section 133

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Action/Issue

Comments/Notes

of the SFA).



13. Understanding what the company must do to comply with its statutory obligations (Sections 164, 190, 199-204)

Nature of interests subject to disclosure: A director of a Singapore-incorporated company is required to disclose to the company both his personal and family members’ (spouse and infant children (including adopted and step-children)) holdings of and dealings in shares, debentures, rights or options, units in collective investment schemes, or contracts for delivery of shares, in the company or its related corporations (Section 165(1)). A director of a listed company is subject to similar requirements under the SFA. In addition, the disclosure has to be made in the prescribed form (Section 133 of the SFA).



When and to whom to disclose: Reporting of a discloseable interest is to be made within two business days upon being appointed as director and subsequently, upon any changes thereto (Section 165(2) of the Companies Act and Section 133(3)(b) of the SFA).



Disclosure obligations of listed company: A listed company is required under the SFA to announce via SGXNET the notifications received from directors (except where the notification relates to participatory interests made available by the listed company) (Section 137G of the SFA).

The following are some of these statutory obligations: 



Keeping registers: Maintaining register of members (Section 190) and register of director’s shareholdings (Section 164). Filing of returns: The Companies Act imposes numerous and diverse obligations on the company and its officers to prepare, file or distribute various documents or returns with the Registrar of Companies or to a company’s shareholders. A failure to comply

The Company Director Checklist - Singapore

166(2)). Under the SFA, the offence is punishable with a fine not exceeding S$25,000. There is a further fine not exceeding S$2,500 for every day that the offence continues after conviction (Section 134(2) of the SFA). If the non-compliance is intentional or reckless, or if false or misleading information is furnished, the SFA imposes a heavier fine not exceeding S$250,000, or imprisonment for a term not exceeding two years, or both. There is a further fine not exceeding S$25,000 for every day that the offence continues after conviction (Section 134(1) of the SFA).



Disclosure on appointment: On appointment, the director must disclose, and the company must announce the information set out in Appendix 7.4.1 of the Listing Manual. The information to be disclosed includes convictions for past offences, past (for the last five years) and present directorships and whether he has been disqualified from acting as a director in the past.



Disclosure on cessation: On cessation, the director must disclose, and the company must announce the information set out in Appendix 7.4.2 of the Listing Manual. The information to be disclosed includes any difference in opinion between the director and the board of directors.



If a director fails to carry out these statutory obligations, he may be liable for criminal offences.



In addition to being criminally liable, a director who commits a breach of his fiduciary duties or wilfully commits certain breaches of the Companies Act (for example, paying a dividend otherwise than out of profits (Section 403 of the Companies Act) or allowing a company to incur obligations which it cannot meet as the company is insolvent (Sections 11

Action/Issue

Comments/Notes

with such statutory obligations, is, in most cases, ordinarily accompanied by liability which is imposed on the company and every officer “who is in default”.

14. Understand your potential liability under other acts and the systems adopted by your company to minimise breaches



Audited accounts: Sections 199 to 204 of the Companies Act deal with the obligation of a company and its officers to maintain financial statements, to lay the profit and loss account, balance sheet and directors’ report before the members at the annual general meeting, to report on the state of the company’s affairs and to provide members with copies of the financial statements.



Obligations under Listing Manual: Including continuing listing obligations (Chapter 7), announcement of interested person transactions (Chapter 9), announcement of acquisitions and realisations (Chapter 10) and reporting on corporate governance.

Other statutes may impose duties on directors. The following are some examples;



(Section 55 of the Income Tax Act) (Section 113A of the Employment Act) (Section 48 of the Workplace Safety and Health Act) (Section 71 of the Environmental Protection and



Tax: The manager or principal officer in Singapore of every company is answerable for doing all such acts, matters and things as are required to be done under the Income Tax Act, Chapter 134 of Singapore for the assessment of the company and payment of tax (Section 55 of the Income Tax Act).

339 (3) and 340 of the Companies Act, discussed under Question 15) may also be liable to the company or to third parties for losses so incurred.



Employment: Defence that: (a) the offence was committed without his consent or connivance; and (b) he had exercised all such diligence to prevent the commission of the offence as he ought to have exercised having regard to the nature of his functions in that capacity and to all the circumstances.

Employment: 

Where an offence under the Employment Act that is committed by a body corporate is proved to have been committed with the consent or connivance of an officer of the body corporate (which is defined to include a director), or to be attributable to any neglect on his part, the officer as well as the body corporate will be guilty of the offence and liable to be proceeded against and

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Action/Issue Management Act)

Comments/Notes

punished accordingly. Where an offence under the Employment Act has been committed by a body corporate, it will be presumed, until the contrary is proved, that the offence is attributable to the neglect of, inter alia, an officer of the body corporate who is primarily responsible for the act or omission which constitutes the offence, and who has failed to exercise reasonable supervision or oversight as such officer (Section 113A(1) and (5) of the Employment Act). 

Where an offence under the Workplace Safety and Health Act, Chapter 354A of Singapore has been committed by a body corporate, an officer (which is defined to include a director) of the body corporate will be guilty of the offence and will be liable to be proceeded against and punished accordingly (Section 48 of the Workplace Safety and Health Act).



Environment: Where a body corporate is guilty of an offence under the Environmental Protection and Management Act, Chapter 94A of Singapore, and that offence is proved to have been committed with the consent or connivance of, or to be attributable to any act or default on the part of, any director, chief executive, manager, secretary or other similar officer of the body corporate, or any person who was purporting to act in any such capacity, he as well as the body corporate will be guilty of that offence and will be liable to be proceeded against and punished accordingly (Section 71 of the Environmental Protection and Management Act).



Industry specific: For example, the Banking Act, Chapter 19 of Singapore and the Insurance Act, Chapter 142 of Singapore impose additional duties on directors of companies which are regulated by these statutes.

The Company Director Checklist - Singapore

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Action/Issue

Comments/Notes

Special Circumstances 15. What is the position if the company may be insolvent?



(Sections 339, 340)

16. What special responsibilities and liabilities are associated with a float?

Contracting debts without reasonable expectation of repayment: An officer of the company who contracts a debt which, at the time of contracting, had no reasonable ground of expecting that the company will be able to pay its debt will be personally liable for the payment of that debt (Section 339(3) read with Section 340(2)).



Fraudulent trading: A person who was knowingly party to the use of the company for fraudulent trading to defraud creditors will be personally liable for the debts so incurred (Section 340(1)).



A listed company which intends to make an offer of securities is required to issue a prospectus or profile statement unless the offer is exempted from the prospectus requirements under the SFA. Directors of the listed company are among those legally responsible for ensuring the accuracy of the prospectus.



The overarching statutory requirement is that the prospectus must contain, in addition to the particulars set out in the Fifth Schedule to the Securities and Futures (Offers of Investments) (Shares and Debentures) Regulations 2005, all material information that satisfies the “reasonable investor test”. This would encompass all the information that investors and their professional advisers would reasonable require.



The prospectus is required to contain the information above only to the extent to which is reasonable for investors and their professional advisers to expect to find in the prospectus and only to the extent that a person whose knowledge is relevant actually knows

(Sections 243, 253 of the SFA)

The Company Director Checklist - Singapore

A director found to have conducted both matters will also be criminally liable and punished as follows: 

Contracting debts without reasonable expectation of repayment: Fine not exceeding S$2,000 or imprisonment for a term not exceeding three months (Section 339(3)).



Fraudulent trading: Fine not exceeding S$15,000 or imprisonment for a term not exceeding seven years, or both (Section 340(5)).



The inclusion of false or misleading statements in a prospectus is an offence punishable with a fine not exceeding S$150,000 or imprisonment for a term not exceeding two years, or both. There is a further fine of S$15,000 for every day that the offence continues after conviction. (Section 253(1) of the SFA)

14

Action/Issue

Comments/Notes

the information or in the circumstances ought reasonably to have obtained the information by making inquiries. 17. What special responsibilities and liabilities are associated with a takeover?



(The Singapore Code on Take-overs and Mergers)



The Singapore Code on Take-overs and Mergers (the Take-over Code) applies to the acquisition of voting rights of public corporations. It applies to corporations (including corporations not incorporated under Singapore law) with a primary listing of their equity securities and business trusts or real estate investment trusts (REITs) with a primary listing of their units in Singapore. While the Take-over Code was drafted with listed public companies, listed registered business trusts or REITs in mind, unlisted public companies, unlisted registered business trusts or REITs with more than 50 shareholders or unit holders, as the case may be, and net tangible assets of S$5 million or more must observe, wherever possible and appropriate, the letter and spirit of the Take-over Code as set out in its General Principles and Rules.



The Take-over Code is administered and enforced by the Securities Industry Council (SIC). Although the Take-over Code does not have the force of law and any breach of the General Principles or Guidelines of the Take-over Code does not give rise to criminal proceedings, the SIC may impose sanctions on those who are in breach. These include private reprimands or public censure or, in a flagrant case, to further action designed to deprive the offender temporarily or permanently of its ability to enjoy the facilities of the securities market, etc.



If the SIC finds evidence showing that a criminal offence has taken place, whether under the Companies Act, the SFA or under the criminal law, it will refer the matter to the appropriate authority.

Rule 6 of the Take-over Code sets out the responsibilities of directors of an offeror and offeree during a take-over. Among other things, the Takeover Code prevents a target company from frustrating a bona fide offer. When a target company’s board of directors has been notified of a bona fide offer, or after the target’s board has reason to believe that a bona fide offer is imminent, the board cannot, without shareholders’ approval, take any steps which could effectively result in either the offer being frustrated, or deny the target shareholders the opportunity to decide on the merits of the offer. The target company’s board of directors must obtain competent independent advice when it receives an offer or is approached with a view to an offer being made and must subsequently inform the shareholders of the

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Action/Issue

Comments/Notes

substance of this advice. 

18. What special responsibilities and liabilities are associated with a joint venture? (Sections 158 and 216)

The Take-over Code also imposes an obligation of secrecy before an announcement of an offer. No person who is privy to confidential information, particularly relating to an offer or contemplated offer, should make any recommendation to any other person as to dealing in the relevant securities.

In the context of a joint venture, directors are often appointed by shareholders to represent their interests in the joint venture. A director has to keep in mind that he owes his duties to the company and not to members of the company individually. The Companies Act does not differentiate a nominee director from the others. As such, the rights, powers, duties and liabilities of a director as set out in the Companies Act will also generally fall upon any nominee director. However, note must be taken of Section 158 which seeks to recognise the position of nominee directors and the reality underlying their appointment. Section 158 provides that nominee directors may disclose information to their nominating shareholders provided (a) the nominee director identifies the information to be disclosed and the person to whom the information is to be disclosed, (b) he is authorised by the board of directors to make the disclosure, and (c) the disclosure will not prejudice the company.

Section 216 provides that a member (including a minority shareholder) can apply to the court on the ground either: 

That the affairs of that company are being conducted, or the powers of the directors are being exercised, in a manner oppressive to one or more of the members including himself or in disregard of his interest as a shareholder of the company.



That some act of the company has been done or is threatened, or that some resolution of the members has been passed or is proposed, which unfairly discriminates against or is otherwise prejudicial to one or more of the members (including himself).

The courts have made findings of oppressive or discriminatory conduct where the majority shareholders or directors abused their voting power by voting in bad faith or for a collateral purpose.

Self Defence 19. Good corporate governance processes



A director’s exposure to liability may be reduced if the company has in place good corporate governance practices. In this regard, a director of a listed company should familiarise himself with the provisions of the Code of Corporate Governance (the “CG Code”).

The Company Director Checklist - Singapore

The following are some of the Principles and Guidelines of the Code:



Board’s conduct of affairs: Every company should be headed by an effective board to lead and control the company. The board is collectively responsible for the long-term success of the 16

Action/Issue



The CG Code was first introduced in Singapore in March 2001 and revised in July 2005. The objective of the CG Code is not to prescribe corporate behaviour in detail but to secure sufficient disclosure so that investors and others can assess a listed company’s performance and governance practices and respond in an informed way.



However, listed companies are required under the Listing Manual to describe in their annual reports their corporate governance practices with specific references to the principles of the CG Code, and where they deviate from any guideline of the CG Code, the deviation must be disclosed together with an appropriate explanation (Rule 710 of the Listing Manual).



To further enhance corporate governance practices of listed companies in Singapore, the MAS issued a revised CG Code on 2 May 2012 (the “2012 Code”). The changes introduced in the 2012 Code are wideranging, and related to matters such as director independence, board composition, multiple directorships, alternate director and disclosure of remuneration.



As with previous editions of the CG Code, compliance with the 2012 Code is not mandatory.



Listed companies have to describe their corporate governance practices by reference to the 2012 Code beginning with their annual reports relating to financial years commencing on or after 1 November 2012.



Longer transitional periods are provided for: 

(other than the changes referred to in the subparagraph below) changes with regard to the composition of the board, which should be effected by the annual general meeting following

The Company Director Checklist - Singapore

Comments/Notes company. The board works with management to achieve this objective and management remains accountable to the board. All directors must objectively discharge their duties and responsibilities at all times as fiduciaries in the interests of the company. The board may delegate the authority to make decisions to any board committee but without abdicating its responsibility. Any such delegation should be disclosed. Incoming directors should receive comprehensive and tailored induction on joining the Board. This should include his duties as a director and how to discharge those duties, and an orientation programme to ensure that they are familiar with the company's business and governance practices. The company should provide training for first-time directors in areas such as accounting, legal and industry-specific knowledge as appropriate. All directors should receive regular training, particularly on relevant new laws, regulations and changing commercial risks. The company should be responsible for arranging and funding the training of directors. The board should also disclose in the company's Annual Report the induction, orientation and training provided to new and existing directors. Upon appointment of each director, the company should provide a formal letter to the director, setting out the director's duties and obligations.

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Board composition and guidance: There should be a strong and independent element on the board, which is able to exercise objective judgement on corporate affairs independently, in particular, from management and 10% shareholders. Independent directors should make up at least one-third of the board. In certain circumstances, the independent directors should make up at least half of the board,

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Action/Issue

Comments/Notes

the end of the relevant financial year commencing on or after 1 November 2012; and

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e.g. where the Chairman of the board (the "Chairman") and the chief executive officer (or equivalent) (the "CEO") is the same person. The independence of any director who has served on the Board beyond nine years from the date of his first appointment should be subject to particularly rigorous review. In doing so, the board should also take into account the need for progressive refreshing of the board. The board should also explain why any such director should be considered independent. The board should examine its size and, with a view to determining the impact of the number upon effectiveness, decide on what it considers an appropriate size for the board, which facilitates effective decision making. The board and its board committees should comprise directors who as a group provide an appropriate balance and diversity of skills, experience, gender and knowledge of the company. They should also provide core competencies such as accounting or finance, business or management experience, industry knowledge, strategic planning experience and customer-based experience or knowledge. Nonexecutive directors should constructively challenge and help develop proposals on strategy, and review the performance of management in meeting agreed goals and objectives and monitor the reporting of performance.

changes requiring independent directors to make up at least half of the board in certain circumstances, which should be effected by the annual general meeting following the end of the relevant financial year commencing on or after 1 May 2016.

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The Company Director Checklist - Singapore

Chairman and CEO: There should be a clear division of responsibilities between the leadership of the board and the executives responsible for managing the company's business. The Chairman and the CEO should in principle be separate persons, to ensure an appropriate balance of power, increased accountability and greater capacity of the board for independent decision

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Action/Issue

Comments/Notes making. The division of responsibilities between the Chairman and the CEO should be clearly established, set out in writing and agreed by the board. In addition, the board should disclose the relationship between the Chairman and the CEO if they are immediate family members.

The Company Director Checklist - Singapore

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Board membership: There should be a formal and transparent process for the appointment and reappointment of directors to the board. The board should establish a NC to make recommendations to the board on all board appointments, with written terms of reference which clearly set out its authority and duties. Among other things, the NC should make recommendations to the board on relevant matters relating to the review of board succession plans for directors, in particular, the Chairman and for the CEO, the development of a process for evaluation of the performance of the board, its board committees and directors, the review of training and professional development programs for the board, and the appointment and re-appointment of directors (including alternate directors, if applicable). All directors should be required to submit themselves for re-nomination and reappointment at regular intervals and at least once every three years. When a director has multiple board representations, he must ensure that sufficient time and attention is given to the affairs of each company. The board should determine the maximum number of listed company board representations which any director may hold, and disclose this in the company's Annual Report.

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Remuneration matters: There should be a formal and transparent procedure for developing policy on executive remuneration and for fixing the remuneration packages of individual directors. No director should be involved in deciding his own 19

Action/Issue

Comments/Notes remuneration. The board should set up a Remuneration Committee, the majority of whom, including the Chairman, should be independent. The Remuneration Committee’s responsibilities include recommending to the board a framework of remuneration, recommending to the board specific remuneration packages for each director and key management personnel.

The Company Director Checklist - Singapore

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Accountability and audit: The board should present a balanced and understandable assessment of the company’s performance, position and prospects. This includes interim and other price sensitive public reports, and reports to regulators (if required). The board should establish an Audit Committee (“AC”) comprising at least three directors, all non-executive, the majority of whom, including the Chairman, should be independent. At least two members, including the AC Chairman, should have accounting or related financial management expertise or experience. The responsibilities of the AC include reviewing the scope and results of the external audit and and independence and objectivity of external auditors.

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Internal audit: The company should establish an internal audit function that is independent of the activities it audits. The AC should ensure that the internal audit function is adequately resourced and has appropriate standing within the company. The AC should, at least annually, review the adequacy and effectiveness of the internal audit function.

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Risk management and internal control systems: The board should ensure that management maintains a sound system of risk management and internal controls to safeguard the shareholders’ interests and the company’s assets, and should determine the nature and extent of the significant 20

Action/Issue

Comments/Notes risks which the board is wiling to take in in achieving its strategic objectives. The board should review the adequacy and effectiveness of the company’s risk management and internal controls systems. The Board should comment on the adequacy and effectiveness of the internal controls, including financial, operational, compliance information technology controls, and risk management systems in the company’s annual report.

20. Indemnities (Section 172)

21. Insurance (Section 172(2))

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A company cannot by provisions in the articles of association or any other contract exempt any officer from or indemnify him against, any liability which by law would otherwise attach to him in respect of any negligence, default, breach of duty or trust of which he may be guilty in relation to the company. Such a provision is void: Section 172(1). However, the general prohibition does not prevent a company from purchasing and maintaining insurance for any officer against any such liability (Section 172(2)(a)).

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A company may indemnify any officer against any liability incurred by him in defending any proceedings in which judgment is given in his favour or in which he is acquitted or in connection with any application under the Companies Act in which relief is granted to him by the court (Section 172(2)(b)).

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As mentioned under Question 20, under Section 172(2) of the Companies Act, a company may purchase and maintain insurance for an officer of the company (which would include a director of the company) against any liability for negligence, default, breach of duty, or breach of trust, by the officer in

The Company Director Checklist - Singapore

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A company may indemnify its directors by entering into a separate indemnity agreement with each of its directors.

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Alternatively, if the director is an employee of the company, the company may indemnify the director in the employment contract between the director and the company.

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The articles of association of a Singapore company would usually contain an indemnity provision which provides that directors of the company are entitled to be indemnified against any liability incurred by him in connection with the execution and discharge of his duties as a director. Although the articles of association do not constitute a contract with a director, a director may have a contract with the company incorporating the terms of the articles of association for the time being applicable and may therefore enforce such an indemnity provision.

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Action/Issue

Comments/Notes

relation to the company. 22. How do I resign? (Section 145(5))

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It would be useful to review the Articles of Association to ascertain if there are specific requirements in relation to resignation. Ordinarily, a resignation may be tendered in writing to the company.

The Company Director Checklist - Singapore



A director is not allowed to resign or vacate his office (notwithstanding the provisions in the company’s memorandum or articles of association or any agreement with his company) unless there is remaining in the company at least one director who is ordinarily resident in Singapore. A resignation or vacation of office of a director in breach of these provisions will be deemed invalid (Section 145(5)).

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