Singapore Companies (Amendment) Act 2014 – Directors

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Singapore Companies (Amendment) Act 2014 – Directors

The Selected Key Legislative Amendments in the Singapore Companies (Amendment) Act 2014 – Matters relating to Directors

1. Removal of Age Limit for Directors

Previous Requirement

Shareholder approval required for appointment of person who is 70 years old and above as director of a public company or subsidiary of a public company.

Changes

Repeal of previous requirement:

A person’s ability to act as a director of a company is not principally determined by his age. Persons of or above 70 years of age can be capable of doing the job of a director, and are often re-appointed in practice.

2. Payment of compensation to executive directors

Previous Requirement

Shareholder approval required for payment of compensation to a director for loss of office as an officer, or payment as consideration for or in connection with his retirement.

Changes

New exception introduced to exempt requirement for shareholders’ approval for payment of compensation to executive directors for loss of employment up to a limit of total emoluments for the past one year. However, disclosure to shareholders is still necessary.

The exception recognizes the distinction between i) loss of office as a director and ii) termination as an executive director, who is both a director and an employee. Many companies provide for compensation for executive directors, including compensation for termination of employment in employment contracts. If shareholder approval is required for payment, company may be in breach if shareholders do not approve.

3. Extension of loan restrictions to quasi-loans

Previous Requirement

A company (other than an EPC) is not allowed to make loans or provide guarantee or security in connection with loans made to:

• Its directors or directors of a related company, their spouses or children; or

• Another company if the directors of the lending company have interest in 20% or more of shares of borrowing company.

Changes

The prohibition is extended to the making of quasi-loans, credit transactions or taking part in arrangements in connection with such director-connected loans by the company.

4. Expressly allowing indemnities for directors against third party claims

Previous Requirement

None.

Changes

A company is expressly allowed to provide indemnity to its officers (including directors) for claims brought by third party, except for certain specified liabilities.

5. CEOs Disclosure

Previous Requirement

Directors required to disclose:

• Conflict of interests in transactions

• Shareholdings in company and related corporations

Changes

Extend disclosure requirements to CEOs. However, for CEOs of non-listed companies, disclosures on shareholding exclude:

  1. securities of related corporations; and
  2. participatory interests made available by the company or its related corporations. (In line with disclosures required for CEOs of listed companies under listing rules.)

ACRA has announced a 2-phase implementation approach to the legislative amendments to Singapore Companies Act, where about 40% of the over 200 legislative amendments will take effect in the first phase on 1 July 2015, while the second phase encompassing the rest of the legislative amendments is expected to take effect in the first quarter of 2016.

For more information on the Key Legislative Amendments of Phase 1 Implementation of the Companies (Amendment) Act 2014, please click here.

For more information on the Key Legislative Amendments of Phase 2 Implementation of the Companies (Amendment) Act 2014, please click here.

For Frequently Asked Questions (FAQs) to the Implementation of the Companies (Amendment) Act 2014, please click here.

For more information, please refer to ACRA at www.acra.gov.sg.

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