This "Directors' Good Practice Checklist" is prepared for the benefit of all newly-appointed directors of companies. Readers are advised that there will be further impending changes arising from the proposed Companies (Amendment) Bill.

Exercise of Duty
A director must always act honestly and in good faith in the discharge of his duties.

A director should use reasonable diligence in carrying out the Company's business.

The interests of employees and shareholders must be taken into consideration when directors exercise their powers.

A director who is also shareholder must distinguish between the two roles. The duties and liabilities of both roles differ.

A director must observe the prohibition against fraudulent trading, i.e. the carrying on of business with the intent to defraud creditors.

It is a director's duty to disclose potential conflicts of interest.

Accounts & Dividends
The directors of a company must appoint auditors within three months after the company is incorporated. They must also be aware of the accounting procedures required by the Companies Act and ensure that proper and timely accounts are kept.

Every calendar year, the directors must produce to the shareholders a profit and loss account and a balance sheet, together with a directors' report. Failure to produce these may amount to mismanagement.

The directors must hold an Annual General Meeting (AGM) to lay the Company's audited accounts before its shareholders. The first AGM must be held within eighteen months and thereafter every AGM must be held once every calendar year and not more than fifteen months after the last AGM. The audited accounts laid before the shareholders at the AGM should be made up to a date not more than six months before the date of the AGM.

With effect from 15 May 2003, dormant companies and exempt private companies as defined under Section 4 of the Companies Act, Cap. 50 with an annual turnover of less than $2.5 million are exempted from audit requirements. In such case, no statutory auditors need to be appointed. However, the provisions in the Companies Act, Cap. 50 also provide that any member or members holding in aggregate not less than 5% in nominal value of the Company's issued share capital or any class of it or, if the Company has no share capital, not less than 5% in number of members of the company may request for an audit of the company's accounts.

Companies which are not exempted from statutory audit are required to appoint auditors to audit their accounts.

The directors must file the Company's Annual Return and audited accounts with the Accounting and Corporate Regulatory Authority (ACRA) within one month from the date of the AGM. The directors may recommend dividends but must ensure that dividends are paid out of profits only.

Shares
The directors of private companies have the discretion to refuse the transfer of shares but the exercise of this power must be in the interest of the company.

The issuance of shares must first be approved by the company in a general meeting, i.e. by shareholders.

Companies Act Requirements
Directors
With effect from 1st April 2004, a Singapore incorporated company need only have a minimum of 1 director but that director must be ordinarily resident in Singapore i.e. Singapore citizen, Singapore Permanent Resident or Valid Employment Pass Holder. Directors must not forget to notify ACRA on the changes of directors, e.g. appointment and resignation, within one month.

Shareholders
With effect from 1st April 2004, a Singapore incorporated company need only have a minimum of 1 shareholder. There is no restriction on foreign equity.

Secretary
The directors must appoint a secretary within six months after the company is incorporated. With effect from 15 May 2003, a private company is no longer required to appoint a professionally qualified secretary. Where a director is the sole director of the company, he shall not act or be appointed as the secretary of the company.

Registered office
The directors must notify the ACRA on any change of address of the Company's registered office within two weeks.

Change in particulars of officers
The directors must also notify the ACRA on any changes of particulars of officers, i.e., name, residential address, nationality, passport numbers within one month, except for changes in addresses of Singapore NRIC holders. This is taken care of by the One-Stop Change of Address Reporting Services (OSCARS) implemented by the government in 1995. OSCARS will automatically update such changes with the ACRA.

However, the directors must still inform the company secretary on the said changes. This is to ensure that the statutory records maintained by the company secretary are properly updated.

Year published : 2003 (April), updated 2004 (October)