Directors: Statutory requirements,appointment,
resignation and removal● 吕俊昭 Loo Choon Chiaw
Section 145 of the Act (hereinafter referred to as
"Section 145") provides that every company incorporated in
Singapore shall have at least two directors, one of whom
shall be ordinarily resident in Singapore (hereinafter
referred to as the "resident director"). It further provides
that notwithstanding any other provision in the Act, the
company's memorandum and articles of association or in any
other agreement between the resident director and the
company, the resident director shall not resign or vacate
his office unless there are remaining in the company at
least two directors, one of whom shall be a resident
director. Any purported resignation or vacation of office
contrary to Section 145 shall be deemed to be invalid.
As the phrase 'ordinarily resident in Singapore' has not
been defined in the Act, guidance must be sought elsewhere.
The phrase 'resident in Singapore' in relation to an
individual in the context of tax law has been defined in
Section 2(1) of the Income Tax Act (Cap 134) as a person
residing in Singapore, except for temporary absences as may
be reasonable, and includes a person physically present or
employed in Singapore for at least 183 days during the
preceding year of assessment. In the light of the definition
contained in the Income Tax Act, it is suggested that a
person ordinarily resident in Singapore within the meaning
of Section 145 ought to be a person maintaining a regular
presence in Singapore with some degree of continuity,
although he need not be a citizen or a permanent resident in
Singapore. In practice, a person possessing a valid
employment pass will qualify as a person ordinarily resident
in Singapore and be in a position to act as a resident
director in a Singapore company for the purpose of Section
145.
In the light of Section 145, there have been many
instances where a resident director, one of the two
directors appointed, wishes to resign from the office of
director (for instance, when he is uncomfortable with the
financial position of the relevant company) is nevertheless
unable to do so because no one is willing to accept the
appointment as director in his stead. He is thus compelled
against his personal wishes to remain as a resident director
of a company. Those cases typically involve companies
comprising only foreign shareholders and when the resident
director and the foreign controlling shareholder are
appointed merely to satisfy the statutory requirements of
Section 145. The 'reluctant' resident director is in a
precarious position. By the time he decides to resign, the
situation would have become rather unsatisfactory. Quite
frequently, all the foreign shareholders wou
ld have stopped
funding the operations of the company by then and ceased all
forms of communication with the 'reluctant resident
director, leaving the latter in a lurch. The 'reluctant'
resident director would then be obliged to continue to
discharge his statutory duties whilst remaining a director
on record, notwithstanding that he may have tendered his
resignation as a director, as such resignation would be
deemed invalid by virtue of Section 145. In the light of
this, one should accept the appointment of a director only
after careful consideration, taking into account the
background, reputation and track record of the relevant
company and its shareholders. One should also apprise
oneself of the statutory duties of a director and be
satisfied that one is in a position to discharge the same
before accepting the appointment.
Section 145 requires the first directors of the company to
be named in the memorandum or articles of association of the
company. The Act does not prescribe the exact manner in
which directors are to be appointed. This is a matter which
will be addressed in the articles of association of the
relevant company. Ordinarily, the directors are elected by
the shareholders at the annual general meeting.
Section 146 of the Act (hereinafter referred to as
"Section 146") provides that a person shall not be named as
a director unless he has manifested his intention to act as
director by executing and lodging the prescribed Form 45
with the Registry of Companies and Businesses, declaring
that he is not legally disqualified from acting and
affirming his consent to act. A failure to observe the
formality prescribed by Section 146 will result in the
relevant person not appearing as a director on official
record. Readers may recall from our previous discussions
(See: Directors: Who are they? Lianhe Zaobao, October 4,
1998 ) that such a person will be a 'de facto' director and
is obliged to discharge all the statutory obligations of a
director, even though he does not appear on official record.
(The writer is the Senior Partner of Loo & Partners. He
qualified as a Barrister-at-Law at Lincoln's Inn, London,and
obtained his Master of Laws from London University. Mr Loo
is also a fellow of the Chartered Institute of Arbitrators,
London.)
2007-12-06
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