Need for a Nominee Director

Foreigners who wish to set up Company in Singapore may require a Nominee Director to
temporarily assume the role of “Local Director” so as to kick-start the Company while they
apply for the EntrePass or EP. In some instances, the company need the “Local Director”
because the existing Director in the Company is no longer considered a “Local Director” due
to expiry or their work passes.

When the only “Local Director”resigns from his or her position, the company may also face
the same situation. A quick fix to the situation is to engage a Nominee Director to assume the
position immediately so that the Company continues to comply with Companies’ Act and
regulations.

Duties and responsibilities of a Nominee Director

Nominee Director has the same fiduciary duties as that of a regular director as mentioned in the
Company’s Act, including but not limited to duties to act honestly and in good faith, to avoid conflict of
interest, to exercise care, skill and diligence and to not misuse powers and information.

Fiduciary duties of a director

Whether the director is an “active”, “in-active”, “shadow”, or a “sleeping” director, the director is an agent
of the company appointing the director. This means the director act for the company and in turn, the
company is bound by the director's acts. It is important that the director fulfills the key duties owed by him
to a company as stipulated in the common law and the Companies Act. The following summarizes four
key duties:

1 - To act honestly and in good faith in the interest of the company

A director is expected to act honestly and in good faith in the interest of the company. This means
undivided loyalty to the company when it comes to company decision-making.

Personal and third party interests should play no part in a Director’s company decision making process and
any decision made while sharing opinions or company information with other parties to gain self-
advantage over the company will be regarded as dishonesty, and may result in civil action or criminal
prosecution.

2 - To avoid conflict of interest

Directors shall not place himself in a circumstance where there is conflict between his interests and the
company’s. Some of the potential areas of conflict include:

Transactions with company: A director directly or indirectly buys from or sells property to the company

Taking advantage of corporation information or opportunities: A director diverting businesses meant

for the company to a third party or to himself, or setting up a rival firm to compete for contracts
Conflicting duties: Where a Director holds various directorships in two or more companies, there may be
a potential conflict of interest. It is important for the Director to declare this on the First Board Meeting to
the company’s board. The Director shall also be absent from meetings that involve discussions of subjects
involving competing companies to avoid conflict of interest.

Nominee Director: A nominee director may have a dilemma as to whose interest he should represent,
often between that of the company or that of his appointer. It is important that the Director makes full
disclosure to the board in case he is in a position of conflict. He is required under the common law to
disclose his conflicting interest with the company at the board meeting.

3 - To exercise care, skill, and diligence

Directors should manage their companies with care, skill and diligence. Honesty and reasonable diligence
are expected when directors carry out their duties. Often times, the actual skills and experience that the
Director possesses is used as a yardstick to determine the standards expected of him.

4 - To not misuse power and information

A director should not misuse his power or the information he has on the company. All the powers that are
held by a Director should only be directed towards the benefit and proper purposes of the company. One
commonly misused power is that of issuing shares, which is commonly intended for capital raising.
However, if a Director issues shares to dilute a member’s shareholdings, or preserve control of the board,
he may be abusing his power as a director.

When it comes to information, all the information that a Director has on the company should be used for
the company’s proper purposes and not for his personal benefit or for that of others.

Common statutory requirements under the Companies Act

Below lists certain common statutory requirements under the Companies Act. A director is responsible to
ensure the company compiles with the requirements on time.

1 - Annual General Meeting (AGM) and Annual Return (AR)

AGMs and the subsequent filing of annual returns (ARs) are mandatory on an annual basis, where the
Director is responsible for convening. At the AGM, the company’s financial statements will be presented
before its shareholders and members where queries could be raised. The financial reports must be sent to
members 14 days prior to the AGM date and annual returns be filed with ACRA within one month after
the AGM is held.

2 - Keeping records of Statutory Registers

A Singapore company needs to maintain a statutory register and it’s the Director’s responsibility to ensure
the company maintains so. Common registers include the Register of Members, Register of Charges,
Register of Directors shareholdings, and Register of Directors, Managers, Secretaries, & Auditors.

The company’s accounting records and other documents that explain the company’s business transactions
and financial standing shall also be safe-kept and kept up-to-date to compute the company’s annual
accounts as required by Law.

3 - Registering an office address

Singapore companies are required to maintain a local registered business address that is not a PO Box.
This helps in the delivery of office related mails, as well as where company officers may be reached. In
case of change of office address, a record has to be lodged with ACRA within 14 days and failure to do so
is an offence.

4 - Reporting changes in Company Directors, Secretary, Auditors, and Managers

All changes in a Singapore company have to be documented and reported to ACRA, and Directors have to
ensure these statutory records are properly maintained and updated.

5 - Reporting changes in the Register for Directors Shareholdings

Any interests, whether its in form of shares, rights, options or contracts, that a Director may have in his
company is recorded in this Register. It’s required by Law that a Director fully discloses his interest and
give proper notice in writing to the company if there are any changes to be effected such that their
respective corporate secretary could keep the Register properly updated.

Statutory liabilities in case of breach of duties

The following lists certain statutory liabilities to Directors of Singapore companies under the Singapore
Companies Act. The list is not exhaustive but in general a breach of statutory duties carries with it certain
sanctions. Therefore, as a Director it is important to familiarize oneself with these obligations and duties:

[Section 8A (8)] Providing misleading information either knowingly or recklessly regarding the company
when required to give information. This offense attracts imprisonment of up to 2 years or a fine running to
$20,000 or both

[Section 8D (1)] Falsifying of documents or destroying documents pertaining to the company with the
intention of hiding company affairs to gain an upper hand over laws. This offense attracts a fine of up to
$10,000 or 2 years imprisonment or both

[Section 157] Acts which are dishonest with reasonable diligence in carrying out duties from office in
order to gain an advantage for self or for other individuals in relation to the company. This includes using
official information improperly and failing to discharge duties as required. This offense attracts an up to 1
year imprisonment, a $ 5,000 fine and liability to damage suffered by the company.

[Section 175 (4)] Failure to hold an AGM (Annual General Meeting) as required. This offense attracts a $
5,000 fine and a default penalty

[Section 197 (7)] Failure to file the AR (Annual Returns) as required. This offense attracts a $ 5,000 fine as
well as a default penalty

[Section 401 (2)] Knowingly prepare or allow the preparation of misleading returns information,
certificates, financial documents, or reports. This offense attracts up to 2 years imprisonment and a fine of
up to $ 50,000 or both.