Duties of a Director under Singapore Companies Act

This article discusses the duties of a director under the Singapore Companies Act, including disclosure of interests, acting in good faith, and avoiding conflicts of interest. It also covers the fiduciary duties of directors and the consequences of breaching these duties.

Running head: CORPORATIONS LAW
CASE STUDY ANALYSIS
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1) The common law tradition of English law was inherited by Singapore (Harding and Hien
2017). Actually, Singaporean system of the common law is described by the doctrine of judicial
precedent called the stare decisis (Douglas 2019). As per this doctrine, law is formulated by the
judges by construing to the legal principles as per the facts present in each case. In this respect,
the judges are needed to apply the principle of ratio decidendi of the judges of higher court in the
ambit of the same hierarchy. Hence it can be seen that in Singapore, the ratio decidendi given in
the decisions of the Singapore Appellate court will bind on the judges of the Singapore High
Court, Court of Magistrate and the District court. However, the decisions of the Courts of
England and other Commonwealth countries have no effect on the Singapore courts. The lower
courts in some cases have been given authority to avoid applying the concept of ratio decidendi
provided in the previous decisions of high court. This is possible when it can materially
differentiate between the facts of case that were under consideration in the lower courts from that
in the previous high court decisions. Since Singapore follows common law jurisdiction,
judgments given by the courts are also regarded as law source. However, a judge when hearing a
case may not follow the decisions made previously by other judges in the courts of same level.
Hence, a High court judge is not required to follow decisions given previously by other High
Courts. The courts of the same level usually do this as a matter of rule unless there lies strong
reasons for departing from the usual practice. Being the final court of Appeal in Singapore, the
Appellate court is not bound by the decisions previously given by it or those of its predecessor
courts like the Privy Council.
The English common law has a very strong affect and influence for developing the
Singapore law and it is evident in some of the traditional areas of common law such as Contract,
restitution and tort. However, it is less evident in the other areas of statutes like Criminal law,

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Law of Evidence and Company Law. In respect of the statute based areas, Australian and Indian
jurisdictions have stronger influence on the nature, content as well as approach of some portions
of these statutes. It is observed that major portions of the law of Singapore specially the contract
law, the property law, tort law and laws of equity and trust are judge made law. However, some
parts have been modified now to some extent by the application of statutes (Chan 2015).
It is generally seen that the Singapore courts have an erstwhile tendency to follow and
adhere to the decisions given by English Courts. However, in recent days, a slight departure from
the decisions of the English Courts is observed in their approach even in the traditional areas of
common law. This type of development in local jurisprudence shows the need for indigenous
Singaporean law and this is further motivated by the European legal developments having their
impact on the British system of law.
2) Litigation means the process to take legal action. It forms the primary way of
resolution of dispute in Singapore though there are other methods of litigation namely arbitration
and mediation (Hwang 2018). Litigation is generally contrasted to the procedures of mediation,
arbitration and natural evaluation that are quite cheaper. Litigation can be classified into two
categories namely civil and criminal. For a criminal litigation, Public Prosecutor on behalf of the
State prosecutes a criminal accused of committing an offence. On the other hand, in a civil
litigation, an aggrieved party known as the plaintiff or a claimant makes the initiation of the legal
proceedings against the defendant for pursuing a claim (Siyuan and Han 2018). Here in case of a
civil litigation, both the parties are generally private parties and the State does not be a party to
the proceedings like the criminal litigation except in the cases where the State is actually a
plaintiff or a defendant in particular cases. Claims in civil litigation vary from tenancy related
disputes to corporate disputes.

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Before starting any legal proceedings, where the claimant or the plaintiff has consulted a
law firm to act or litigate for him, his appointed lawyer may send a letter of demand first asking
the other party or the defendant to comply with the demands made by him or to continue with the
law suit. When the demands are not met by the defendants, the lawyer may proceed with the
legal proceedings. A civil suit is usually started when a filing of writ of summons is done and is
processed by the court. Then such writ has to be served on the defendant. Such service is
generally done by the clerk of the law firm who has the duty to deliver the writ in person to the
defendant.
In case of criminal trial, when a crime is committed, then the accused is arrested first and
then officially charged in the court. It means that the accused will be informed and explained
about the offence with which he is charged. Then the accused is asked whether he pleads guilty
or not. He pleads not to be guilty, then it means that he disputes the charge and thus the trial
starts. When the accused claims for trial by not pleading guilty, a pre trial conference is arranges
for the case. The accused can be released on bail or allowed a pre trial remand till the pre trial
conference is started.
3) In Singapore, the law of contract follows the common law principles where a contract
consists of a legally enforceable agreement among two or more than twoparties having legal
capacity in exchange of consideration to form a legal obligation between them (Hunter 2017).
The main elements of a contract are as follows:
 Agreement: To form an agreement, meeting of the minds of the parties is mandatory. A
contract is created by an offer by one party showing his willingness to get bound on the
terms of the contract. It has to be accompanied by the communication of another party

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expressing his assent to the offer made by the offeror. It can be bilateral or multi lateral.
The offer and acceptance give the intention of one party to be bound with the terms of the
agreement given by other. The court determines the intention of the parties objectively.
 Consideration: In order to validate a contract, consideration must be given. It can be
anything from services to monetary amount. A promise will be enforceable to be a
contract only when it is provided by consideration. However, past consideration cannot
be considered.
 Legal capacities of parties: The parties must have capacity to enter into the contract.
Minors, drunks and mentally impaired people are prohibited by law to enter into
contracts. Contracts entered by them are void. When the parties to the contract do not
have the required capacity to contract, it will be denoted as void.
 Intention: the parties have the intention of having legal obligation to enter into the
contract.
 Certainty: In order to form a contract, the agreement has to be certain and complete
sufficiently such that the rights and obligations of the parties can be determined and
enforced.
There are several methods by which an offer can be terminated are as follows:
 When the offeror revokes the offer, or
 When the offeree made a counter offer, or
 When offeree rejects an offer, or
 When the time of the offer is over, or
 When one of the parties has died or become disable, or
 When performing the contract has become illegal after the offeror made the offer.

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The usual rule states that revocation becomes operative only when it is known to the
offeree that such revocation is made. Until and unless it is communicated, either directly or
indirectly, to the offeree, he has the reason to trust that there lies an offer which can be accepted.
When the offeror wants to revoke any offer, but if the offer is accepted by the offeree prior to the
revocation notice, then a valid contract is said to be created.
Counteroffer is regarded as conditional acceptance. For instance, if a price of 10,000 $ is
accepted by a person, but further a term is added that new tires must be installed in the car, it
construes to a conditional acceptance and hence forms a counter offer. The offer is often
terminated by the rejection to it. When the offeree communicated that the offer cannot to be
acceptable constitutes a rejection.
When the offer refers to that it is open up to a particular date, the offer will terminate on
that very date if it is not accepted. It is natural when the offeror states that the offer will become
void after a specific time period expires. If time passes and the offeree makes an attempt to
accept it, this can be regarded as a counter offer given by the offeree and the offeror can either
accept or reject it. If no time is specified in the offer, it will be inferred to be terminated after the
lapse of a reasonable time. If performing of the contract turns illegal after making of offer, offer
will terminate. Again, offer is terminated, if either of the parties dies or becomes incompetent
mentally.
4) The defences that can be claimed by the tort feasor are as follows:
 Contributory negligence: This type of defence occurs when the plaintiff failed to take
reasonable steps that combined with the negligence of the defendant for causing the
injuries to the plaintiff (Fordham 2016). In other words, the plaintiff may avoid the

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injuries if both of them are not negligent. In order to claim the defence of contributory
negligence, it has to be proved by the defendant that the claimant failed to take
reasonable care in the situation for own safety. This can be entrenched in Davies v Swan
Motor co [1949] 2 KB 291 case. The burden of proof is on the defendant to prove these.
Moreover, the defendant has to show that the failure of taking care forms the contributory
reason behind the damage suffered. This is seen in Froom v Butcher [1976] QB 286
case where failure to wear a seat belt can be regarded as the contributory negligence.
 Volenti non fit injuria: It is actually a doctrine of common law that states that when
someone willingly places themself in such a position where harm may cause harm, then
they are barred of bringing claim against each other for tort. It is observed in Nettleship v
Weston [1971] 3 WLR 370 case.
 Ex turpi causa: The latin maxim states that action cannot be made on immoral or illegal
conduct. It is observed in the case of Kirkham v Chief Constable of the Greater
Manchester Police [1990] 2 QB 283.
 Absence of duty: if the tort feasor can prove he had no duty to take care of the plaintiff,
it can amount to a valid defence against the claim of the plaintiff as seen in the case of
White v Blackmore [1972] 3 WLR 296.
5) The duties of a director under the Singapore Companies Act 2006 are mentioned under
sections 156, 157 and 162 of the Act. These duties are discussed in detail:
 Under the provision of section 157A of the Companies Act (CA) the management of the
company has been vested upon the board of directors.

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 Section 156 of the Companies Act requires a director to make any disclosure regarding
his interest in any transaction o any proposed transaction at the director’s meeting.
Exception of the provision of this section can be found under the section 156 (3) of the Act.
 Section 157 of the Companies Act requires a director to be acting in a honest and
reasonably diligent way for the discharge of his duties as a director of the company.
 Section 162 of the Companies Act restricts a director from taking loan from the company.
Apart from the above mentioned sections there are certain duties known as fiduciary
duties that are required to be followed by the directors under the Common Law. These duties are
discussed as under:
o Acting in honest and good faith for the interest of the company: A director under the
common law is required to act honestly and in good faith for the company’s interest. This
means that a director is required to be acting in the interest of solely the company. A director
is further restricted to share any information relating to the company for his own self interest
or the interests of the others that can be seen as detrimental to the company.
o Avoiding interest confliction: a director’s duty is further mentioned as not placing his
interests in front of the interests of the company. In other words there should not be any
conflict regarding the director’s personal interests and the interests of the company. Some
areas that can be seen as potentially conflicting between the interests of the company and the
directors are:
o Direct or indirect transaction of the director with the company
o Diverging the company’s business to himself or to the third parties
o Confliction of the duties by the way of holding multiple directorships in two or more
companies

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o By being a nominee director
o Exercising skill, care and diligence in the management of the company
o Duty to be not misusing power and information of the company for his personal interest or
the interest of any other person (Koh, 2013).
The consequences of the breach of the duties of a director have been found to be
discussed as follows:
 Under the section 8A (8) of the Act a director would be held liable for imprisonment of 2
years and fine of $20,000 or both for hiding the affairs of the company to law
 Under section 8D (1) a director would be fined with upto $10,000 or 2 years imprisonment or
both for the falsification or destroying of documents of the company
 Section 157 provides for a fine of $5,000, 1 year imprisonment and liability of damage for
breach of duty of the director in acting with honesty and diligence for the company’s best
interest.
 Under section 175 (4) a director attracts $5,000 fine and default penalty for the failure of
holding AGM.
 Under section 197 (7) director attracts $5,000 fine and default penalty for the failure to file
AR.
 Section 401 (2) provides for 2 years imprisonment and $50,000 fine or both for knowingly
preparing or allowing to prepare the misleading information of returns (SME Portal, 2019)`


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References:
Chan, G.K., 2015. Prospective Overruling in Singapore: A Judicial Framework for the Future?.
In Comparing the Prospective Effect of Judicial Rulings Across Jurisdictions(pp. 359-380).
Springer, Cham.
Douglas, M., 2019. Judges' Scholarly Writing as a Source of Common Law.
Fordham, M., 2016. Contributory Negligence and Apportionment. Sing. J. Legal Stud., p.183.
Harding, A. and Hien, B., 2017. Law and Regional Development in ASEAN: A Singapore
Perspective.
Hunter, H., 2017. Modern Law of Contracts.
Hwang, M., 2018. The Future of Arbitration in Singapore. Sing. Comp. L. Rev., p.123.
Koh, P., 2013. Punishment and protection-The disqualification of directors in Singapore. Sing. J.
Legal Stud., p.447.
Singapore Companies Act 2006
Siyuan, C. and Han, E.C.H., 2018. Civil procedure in Singapore. Kluwer Law International BV.
SME Portal. (2019). Directors’ Duties and Responsibilities for Singapore Companies: How to be
an Effective Director | SME Portal. Retrieved from
https://www.smeportal.sg/content/smeportal/en/bizguides/legal/2015/directors-duties-and-
responsibilities-for-singapore-companies.html