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Directors' Duties and Responsibilities in Singapore (February 2021)

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Directors' Duties and Responsibilities in Singapore (February 2021) 1.1. CONTENTS 1. INTRODUCTION ....................................................................................................................... 1 2. DIRECTORS’ ROLE .................................................................................................................. 1 3. DIRECTORS DEFINED ............................................................................................................. 2 3.1. Identifying the Directors of a Corporation ..................................................................... 2 3.2. Executive Directors ....................................................................................................... 2 3.3. De facto Directors ......................................................................................................... 3 3.4. Alternate or Substitute Directors ................................................................................... 4 3.5. Additional Directors ....................................................................................................... 4 3.6. Associate Directors ....................................................................................................... 4 3.7. Shadow Directors ......................................................................................................... 4 3.8. Non-executive Directors ............................................................................................... 5 3.9. Independent Directors .................................................................................................. 5 4. APPOINTMENT OF DIRECTORS ............................................................................................ 7 5. QUALIFICATIONS AND DISQUALIFICATIONS OF DIRECTORS ........................................... 7 5.1. Essential Qualifications (S. 145(2)) .............................................................................. 7 5.2. Share Qualifications (S. 147) ........................................................................................ 8 5.3. Disqualifications ............................................................................................................ 8 5.4. Age Limit ..................................................................................................................... 11 5.5. Constitution ................................................................................................................. 12 5.6. Effect of Disqualification ............................................................................................. 12 5.7. Application for Leave of Court to Act as Director ........................................................ 12 6. REMUNERATION ................................................................................................................... 13 6.1. Provision and Improvement of Director’s Emoluments ............................................... 13 6.2. The Remuneration Committee .................................................................................... 13 6.3. Remuneration Package .............................................................................................. 13 6.4. Disclosure on Remuneration ...................................................................................... 14 6.5. Golden Handshakes ................................................................................................... 14 7. VACATION OF OFFICE .......................................................................................................... 14 8. OVERVIEW OF THE DUTIES AND LIABILITIES OF DIRECTORS ....................................... 15 9. FIDUCIARY DUTIES OF DIRECTORS ................................................................................... 15 9.1. Introduction to Fiduciary Duties .................................................................................. 15 9.2. Duty to Act in Good Faith ............................................................................................ 16 9.3. Duty to Act in the Interests of the Company ............................................................... 17 9.4. Duty to Use Powers for the Proper Purpose ............................................................... 20 9.5. Special Problems of Nominee Directors and Directors Who Are Shareholders ......... 21 10. CONFLICTS OF INTEREST ................................................................................................... 22 10.1. Introduction to Conflicts of Interest ............................................................................. 22 10.2. Dealings Directly Between the Director and the Company ......................................... 22 10.3. Dealings Between the Company and a Third Party Associated With Its Director ....... 23 10.4. Dealings Between the Director and the Shareholders ................................................ 24 10.5. Business Opportunities of the Company .................................................................... 24 10.6. Directors’ Right to Compete ........................................................................................ 26 10.7. Improper Use of Information ....................................................................................... 27 10.8. Steps to Avoid Incurring Personal Liability in a Conflict-of-Interest Situation ............. 27 11. SUBSTANTIAL PROPERTY TRANSACTIONS ...................................................................... 28 11.1. Disposal of the Whole of the Company’s Undertaking or Property (S. 160) ............... 28 11.2. Shareholders’ Approval .............................................................................................. 28 11.3. Disclosure of Sale to Interested Persons Under the Listing Manual ........................... 28 12. OTHER MATTERS RELATED TO FIDUCIARY DUTIES AND CONFLICT OF INTERESTS . 29 12.1. Loans to Directors ....................................................................................................... 29 12.2. Obligations to Disclose ............................................................................................... 31 12.3. Disclosure Requirements for IPOs ............................................................................. 32 12.4. Disclosure Requirements Under the SGX .................................................................. 34 13. DUTY OF CARE, SKILL AND DILIGENCE ............................................................................. 36 13.1. Introduction to the Duty of Care, Skill and Diligence .................................................. 36 13.2. Contract ...................................................................................................................... 36 13.3. Fiduciary Duty ............................................................................................................. 37 13.4. The Common Law Tort of Negligence ........................................................................ 37 13.5. Statute ........................................................................................................................ 37 13.6. Standard of Care and Skill .......................................................................................... 38 13.7. The Business Judgment Rule ..................................................................................... 39 14. OTHER LIABILITIES OF DIRECTORS ................................................................................... 40 14.1. Contracts by Directors Personally .............................................................................. 40 14.2. Breach of Warranty of Authority .................................................................................. 40 14.3. Fraudulent and Wrongful Trading ............................................................................... 40 14.4. Payment of Dividends Other Than From Profits (S. 403) ........................................... 40 14.5. Delinquent Officers (S.240 of the IRDA) ..................................................................... 41 15. EXONERATION OF DIRECTORS .......................................................................................... 41 15.1. Exemptions and Indemnities by the Company (S. 172) .............................................. 41 15.2. Insurance .................................................................................................................... 42 15.3. Application to the Court for Relief (S. 391) ................................................................. 42 15.4. Release by the Company ........................................................................................... 42 16. SHAREHOLDER REMEDIES ................................................................................................. 43 16.1. Oppression, Disregard of Member’s Interests and Prejudice ..................................... 43 16.2. The English Approach ................................................................................................ 45 16.3. The Australian Approach ............................................................................................ 45 16.4. The Singapore Approach ............................................................................................ 45 16.5. Prerequisites for S. 216 to Operate ............................................................................ 46 16.6. Suits on Behalf of the Company (S. 216A) ................................................................. 47 17. THE SINGAPORE CODE ON
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