Appointment, Removal and Remuneration of Corporate Officers Flashcards
Board of directors:
Background
- s157A CA: The business of the company is managed by the dirs or under their supervision or direction.
a. Dirs may exercise all powers of the company by default except those in the Act and Constitution reserved for the general meeting.
b. In theory, biz will be managed collectively by the board. In practice, this is true only of the very smallest companies. - There are certain limitations imposed on dirs:
a. s160(1) CA: Cannot dispose of substantially the whole of company’s undertaking or property without approval in general meeting. Unless there is consideration provided by third party and no actual notice of contravention (s160(3) CA).
b. s161 CA: Need GM where dirs exercise power to issue shares.
c. s168(1) CA: Need GM and approval of members where payment is made to dirs upon retirement or resignation (payments for loss of office).
d. s169 CA: Need specific reso for Dir’s remuneration.
e. s145(1) CA: Must have one dir who is ordinarily resident in SG.
Also allows a company to have a single dir who may also be the sole SH.
In this case, the functions of ownership and mgmt will be united. The business will be run in the same manner as a sole proprietorship, although in legal form it will be a company.
- The larger the company, the more likely it is that mgmt and ownership will be divorced.
a. Larger companies often have an exec comm which deals with day-to-day mgmt, while the rest of the board meets more infrequently (sometimes only once a year).
b. Can also have a delegation of mgmt to employees (i.e. general manager, CFO, group legal counsel, COO, CEO). These employees do not invariably have a seat on the board; they manage without being dirs.
c. The only members of the board of dirs are those named as such in the register of dirs maintained by ACRA under s173 CA.
Board of directors:
Appointment of Directors
Need at least 1 director
S145(1) CA.
If there is only a sole dir, he must be ordinarily resident in SG.
If Company has no Dir, Registrar will direct members of Company to appoint one.
Failure to do so would result in a fine (under s145(7) and (8) CA).
Board of directors:
Appointment of Directors
Sole directors cannot resign from Company + at least one SG resident dir must remain in the company
s145(5) CA.
Anyone who is appointed as dir must consent to the appt through Form 45 (under s146(1A) CA). Copy of the signed consent must be kept by company (under s173C CA).
Hence, no one can be forced to become a D against his own will.
Board of directors:
Appointment of Directors
Unless the constitution provides otherwise, company may appoint a director by ordinary resolution
s149B CA.
BUT, infinite variations on this theme. Closely-held private company may well have constitution which allows a particular person (often the founder of the company) to appoint the board.
Similarly, JVCos will commonly provide for equal representation of the partners on the board.
Based on commercial requirements of the parties.
Public companies’ appt of dirs to be voted on individually (under s150 CA).
Board of directors:
Process of Appointment of Directors
- Execute contract of employment: Can be de facto director if he acts as director before being appointed to the board.
- Pass necessary resolutions to appoint to the board (as stated within the Constitution).
- File requisite notice with ACRA.
Board of directors:
Requirements for Appointment of Directors
- s145(2) CA: Person must be:
a. human (i.e, a corporation cannot be a dir of a company; while this is possible in some jurisdictions it is no longer so in Singapore);
b. 18 years of age; and
c. of full capacity (i.e, not certifiably mad). - Some companies require dirs to own qualification shares. This can be found in the constitution (if it exists).
* * This is quite uncommon nowadays. - s151 CA: Any defect in the appt or qualification of a dir does not invalidate his acts.
a. Can still be binding on the company as against the world.
Board of directors:
Malayan Banking Ltd v Raffles Hotel Ltd [1965-1967] SGFC 11 (Federal Court, SG)
M was lessor of land on which Raffles hotel stood as lessee. R’s constitution provided that lessor may appoint a D for R. M appointed itself as D (this is no longer possible since Ds have to now be natural persons). R sought declaration that this appt was invalid.
Held: Appt was invalid, since M was not a member of R (thus not privy to constitution), constitution did not confer upon M any enforceable right to appoint a D of R.
Board of directors:
Goh Kim Hai Edward v Pacific Can Investment Holdings Ltd [1996] SGHC 49
Appt of D was obtained by means of a conspiracy b/w appointee and another D to further the interests of the appointee, thus Co was entitled to dismiss the appointee.
Held: Appt of Dirs is a fiduciary power to be exercised in Company’s best interest.
While it is common for constitution to allow appointment of Dirs by Board of Directors when a casual vacancy arises, this is only valid until the next AGM; this power must still be exercised in the best interest of the Company.
Board of directors:
Sembcorp Marine Ltd v PPL Holdings Pte Ltd [2013] SGCA 43
Not uncommon for the terms of the SHA or JVA to be different from the wording and effect of the constitution, and this might be due to a variety of reasons; typically, parties would have stipulated a mechanism to resolve such inconsistencies.
Basic rule of company law that no SH has a right to board representation by virtue of being a SH.
Types of Directors:
Primarily executive directors and non-executive directors
MD is the only dir that is always Executive.
Question of fact whether a particular Dir has the authority to bind the Company.
Dirs other than MD do not automatically have the power to enter into contracts on behalf of the Company.
Types of Directors:
Executive Directors are commonly employees of the Company
- Not everyone described as Dir has a seat on the Board of Directors (i.e. creative directors).
a. Where a Company is a subsidiary of another Company, the subsidiary Company Directors are usually the employees of the holding Company.
b. Intraco example:
- Dirs of Intraco Trading (wholly owned sub) and Intraco Motors (non-wholly owned sub) were both employees of Intraco Ltd, they are known as T and M.
None of the Dirs of Intraco Ltd were Dirs in IM or IT
- Boards of IT and IM consisted of employees of IL, and they were paid salaries.
- Dirs of IT and IM were only Dirs of IT and IM, and had to act in the best interest of IT and IM, not IL (who paid their salary).
Types of Directors:
There are also sub-species of Directors
De-facto Dir is a Dir in law, even though not officially.
Has the power to enter into contracts on Company’s behalf (and are likewise subject to the same requirements under CA if applicable).
Extent of powers is a question of fact.
Types of Directors:
Non-executive directors have several types
- Nominee dirs (appointed by major SHs):
a. NDs owe his duty to the Coy, not to the person who appointed him as its nominee.
b. Nominees are allowed to provide info to appointer (under s158 CA).
c. Must be done with board approval.
d. BUT, if the ND is an exec dir, this will be impossible to apply (conflict of interest for appointer and company).
e. They now have to inform the company of who they represent (kept in a Register of Nominee Directors as required under s386AL CA). - Alternate directors:
a. When the principal Dir cannot turn up at board meetings.
b. Note that ADs in the eyes of the law have the power to execute the full range of duties, even though he isn’t treated as a full Dir in practice. - Independent Directors:
a. Required if company is listed on SGX (imposed by SGX listing rules).
b. Appointed for their expertise. - Shadow Directors:
a. Person who controls the board and pulls the string of the board.
b. Note that according to WW, Shadow Directors are treated as Directors in the CA pursuant to s4(1) CA where the definition of Directors includes “a person in accordance with whose directions or instructions the directors or the majority of the directors of a corporation are accustomed to act and an alternate or substitute director”.
c. CA is unclear on whether all fiduciary duties of directors apply to shadow directors.
Disqualification:
Statutes
s148 CA: Person who acts as a dir or participates in the mgmt of a company will commit an offence if he is an undischarged bankrupt.
Cannot be a dir if subject to disqualification under ss149, 149A, 154, 155 or 155A CA.
Disqualification:
Types
- Automatic Disqualification
2. Disqualification subject to court order
