145. Directors Flashcards
- Directors
General overview
[145.01] This section sets out the legal requirements of a minimum of one director in a company and if the company only has one member, that sole director may also be the sole member. Generally, a director must be a natural person, of full age and capacity and ordinarily resident in Singapore. The other subsections deal with the appointment and resignation of directors.
Natural person
[145.02] In Singapore, s 145(2) provides that a director shall be a natural person of full age and capacity. Refer to the definition of “director” in s 4. To be of full age and capacity, the director must be at least 18 years old.
Corporate directors
[145.03] Section 145(4) provides that where immediately before December 29, 1967, the memorandum and articles of association of a company constituted a corporation as a director, it shall be construed as authorising the corporation to appoint a natural person to be a director of the company. In other words, there is no concept of corporate directorship in Singapore, unlike in Hong Kong. Refer to paras [4.25] and [4.26] on corporate directors.
Appointment
[145.04] See regs 67–73 of the Companies (Model Constitutions) Regulations 2015. Generally, the first directors are appointed by the subscribers to the constitution, and thereafter directors will be elected by the general meeting, and a proportion, such as one-third, shall retire and be eligible for re-election. Casual vacancies are usually filled through co-option by the remaining directors. In the absence of any provision in the articles, the general meeting has inherent power to appoint directors by ordinary resolution: Worcestor Corsetry v Witting [1936] Ch 640 . The new s 149B clarifies that a company may, subject to contrary provisions in the constitution, appoint a director by ordinary resolution passed at a general meeting.
Cumulative voting
[145.05] In some jurisdictions such as the United States, a system of cumulative voting of directors is available to ensure minority representation on the board of directors. In this system, the number of votes that a member may cast is multiplied by the number of vacancies, and the total number of votes is either cast in favour of one candidate or distributed amongst a number of candidates. The Steering Committee deliberated on whether to introduce cumulative voting in Singapore but decided against it: see the Report of the Steering Committee for Review of the Companies Act, April 2011, Chapter 2 at paras 149–158.
[145.06] An agreement by directors of a company (X) with directors of another company (Y) that Y’s directors should be appointed to X’s board and further appointment of X’s directors should be sanctioned by Y was illegal and void: Alfred A James, Special Liquidator of the International Contract Co Ltd v William Eve & Ors, Official Liquidators of the West London Wharves and Warehouses Co Ltd (1873) LR 6 HL 335, HL . The articles may provide that a certain person or body will have power to appoint the directors of a company: Malayan Banking Ltd v Raffles Hotel Ltd [1966] 1 MLJ 206, FC. Such a right of appointment, if it arises by contract, may be enforced by an order of specific performance
Managing directors
[145.07] Regulation 95 of the Companies (Model Constitutions) Regulations 2015 provides that the board may appoint one of themselves to be the managing director on such terms as they think fit. The function of a managing director is not fixed by law, but depends on the particular terms of his appointment: Harold Holdsworth & Co (Wakefield) Ltd v Caddies [1955] 1 WLR 352, HL . The contract of employment between a company and its chief executive officer (“CEO”) implies a duty in law not to undermine or destroy the mutual trust and confidence between them. The implied term of mutual trust and confidence or fidelity is not to be confused with a duty of good faith. The duty of mutual trust and confidence, through long use, had acquired a clearer meaning and application than that of good faith. A duty of good faith is a more far reaching concept which might impose positive duties, fettered parties’ freedom to contract and might conflict with written terms. On the facts, the employment agreement granted overall managerial autonomy to the CEO for daily operations and organisational structure and the implied term safeguarded this managerial autonomy, which the board cannot interfere. The board’s acts were calculated and likely to destroy or seriously damage the relationship between company and the CEO, so that they amounted to a repudiatory breach of the employment contract
Power to appoint directors to be exercised for its proper purpose
[145.08] The power of the majority to appoint directors must be exercised for the benefit of the company as a whole and not to secure some ulterior advantage: Re HR Harmer Ltd [1959] 1 WLR 62, CA . The company may dismiss a director who was appointed pursuant to a conspiracy to further the interest of the appointee: Goh Kim Hai Edward v Pacific Can Investment Holdings [1996] 2 SLR 109, HC ; Lim Koei Ing v Pan Asia Shipyard & Engineering Co Pte Ltd [1995] 1 SLR 499, HC. A director who is offered reappointment has to disclose material facts to the board that “might affect their deliberations”
Ordinarily resident
[145.09] The words “ordinarily resident” should be given their natural and ordinary meaning, not a term of art with any technical or special meaning. It is the state of mind of the “propositus” (i.e. the plaintiff, for the purposes of security for costs) that is paramount in determining ordinary residence. Not only should the place of residence be adopted voluntarily (as opposed to enforced presence in a particular jurisdiction), there should also be a degree of settled purpose: Tjong Very Sumito & Ors v Chan Sing En & Ors [2011] 2 SLR 360; [2010] SGHC 344, HC ; applied Corbett v Nguyen [2008] NSWSC 1265 ; Leyvand v Barasch (2000) The Times, March 23 ; Logue v Hansen Technologies Ltd [2003] FCA 81 ; R v Barnet London Borough Council, Ex p Nilish Shah [1983] 2 AC 309 . A person could be ordinarily resident in more than one jurisdiction if that person had voluntarily adopted more than one place as his residence with the necessary settled purpose: Tjong Very Sumito & Ors v Chan Sing En & Ors [2011] 4 SLR 580; [2011] SGCA 40, CA ; applied Akbarali v Brent London Borough Council [1983] 2 AC 309 ; Levene v CIR [1928] AC 217 (it means a degree of continuity and apart from accidental or temporary absences); Robson v Robson [2010] QSC 378 ; Westacre Investments Inc v The State-Owned Co Yugoimport SDPR [2009] 2 SLR(R) 166. Being a permanent resident does not satisfy the definition of “ordinarily resident”: Lek Swee Hua & Anor v American Express International Inc [1990] 2 SLR(R) 514; [1990] SGHC 92. When a person has resided in the country but evinced an intention to leave the country if she cannot find employment, she is still “ordinarily resident” in the country
Resignation
[145.10] Section 145(5) provides that notwithstanding anything in the Act or in the constitution, there shall be at least one director ordinarily resident in Singapore. Act No 36 of 2014 clarified that unless the constitution otherwise provides, a director may resign by giving the company written notice of his intention to resign and his resignation shall not be conditional upon the company’s acceptance of his resignation: s 68 of Act No 36 of 2014. However, such a provision is still subject to the rule on “last man standing” in s 145(5) and any purported resignation in breach of s 145(5) will be deemed invalid. Further, see the Report of the Steering Committee for Review of the Companies Act, April 2011 at paras 51–56 on vacation of office and removal of directors. A resignation by a managing director that was received in silence by the chairman and two other directors had no effect on his service agreement with the company, although it may be construed as an anticipatory breach of his service agreement: Cranleigh Precision Engineering Ltd v Bryant & Anor; Same v Same [1965] 1 WLR 1293, QBD . Where a resolution was passed at a general meeting to remove a director, and this contravened s 122 of the Companies Act 1965 (Malaysia), that resolution was invalid: Hoh Kiang Ngan & Ors v Hoh Han Keyet [2013] 4 MLJ 199, CA.
[145.11] Further, see s 145(6) of the Act which provides the situations where subsection (5) shall not apply.
Registrar’s direction to members
[145.12] The powers of the registrar under s 145(7) should be the same as its power under s 27 of the Act
Training of directors
[145.13] See the Report of the Steering Committee for Review of the Companies Act, April 2011 at paras 28–31.
