New developments on Singapore’s stringent stance towards errant directors
Companies incorporated in Singapore are required to hold Annual General Meetings of their shareholders, and to file the company’s annual returns with the Accounting and Corporate Regulatory Authority of Singapore (“ACRA”). Though this is neither a new nor novel statutory requirement, companies persist in failing to comply.
Under the Singapore Companies Act, directors who breach the statutory provisions will have to face severe legal consequences. If convicted more than once, the director will be disqualified and barred from being a director in the company. Furthermore, disqualified directors will not be able to assume directorship or manage any companies (whether local or foreign) within five years from the date of their disqualification.
Strengthening deterrent measures
An article published in the Straits Times in 2015 mentioned that about 10,000 summonses are filed with the Singapore Courts against errant directors each year and these are almost entirely charges for non-compliance. Worryingly, 40% of these are repeat offenders.
To arrest the trend of directors brazenly flouting statutory regulations, ACRA has increased the amounts payable in the event that such offences can be compounded (in lieu of prosecution).
> In mid-July this year, a director pleaded guilty to 38 charges for failing to hold annual general meetings and failing to file annual returns for 19 companies. He was fined a record amount of S$57,000. Another 78 charges were taken into consideration for sentencing.
> In mid-February this year, a director was filed S$10,000 for filing a false declaration regarding the date of her appointment with ACRA in order to meet a bank’s requirements to obtain financing (only directors that have served a minimum of two years can apply on behalf of his/her respective companies).
> In mid-February this year, a director was sentenced to four week’s imprisonment for continuing to manage his company for six years as an undischarged bankrupt.
Increasingly stringent measures
ACRA has cautioned that the above examples should not be brushed off as isolated incidents.
From 25 July 2018 onwards, company directors who have been disqualified for repeated breaches of the law will have their status listed on the ACRA’s public register. ACRA will also publish a director's disqualified status in the business profile and directors profile report of a company.
Publishing the identities of disqualified directors on a publicly accessible list is an unprecedented approach. However, this will no doubt assist the public when they conduct due diligence checks on their business counterparties before entering into transactions.
Hopefully, these stringent measures will also serve as a starting point to raise awareness as to why certain legal regulations are enacted and encourage compliance with the same.
In the meantime, we encourage all companies and their directors to comply with statutory regulations at all times.
Samantha Kong, Associate, Incisive Law LLC