Starting a Business in Singapore
  • April 9, 2020

There are usually three ways to remove directors:

  1. Remove Director
  2. Disqualification of Directors
  3. Director Resigns

Under what circumstances should a company change directors?

The company may remove directors before their term expires for the following reasons:

  • Bad personal behavior
  • Breach of directors’ duties
  • Poor management leads to poor company performance
  • Personal involvement in corporate scandal

1. Remove Director

Who can remove directors?

Only shareholders can remove directors. However, please note that according to Article 152 (8) of the Singapore Companies Act (CA), directors of listed companies may not remove other directors.

  • How to remove directors in a private limited company

The removal of any director must comply with the company’s articles of association.

Article 152 (9) of Singapore’s “Company Law” stipulates that company shareholders can remove directors through ordinary resolutions (that is, more than 50% of the votes in favor), and there is no contrary provision in the company’s articles of association.

Shareholders must issue a written notice 14 days in advance, but if more than 95% of the voting consent is obtained, there is no need to send a written notice.

If your company has fully adopted the “Model Articles of Association”, you can pass an ordinary resolution to remove a director from office without notice at least 14 days in advance.

To initiate the process of removing directors, company shareholders must convene a general meeting of shareholders, vote on whether to remove directors, and pass a resolution.

In addition, the company’s articles of association may also include provisions for the exemption of directorship in certain circumstances. For example, in the case of terminal illness or unethical behavior.

In this case, unless the company’s articles of association stipulate this requirement, shareholders will not need to vote to remove directors.

  • How to remove directors in listed companies

If you need to remove the directors of a listed company, you need to comply with Article 152 of Singapore’s “Company Law”:

Unless the company’s articles of association or the agreement between the director and the company have changed, the shareholders of the listed company can remove a director by ordinary resolution (ie, more than 50% of the votes in favor).

When shareholders convene a general meeting of shareholders to initiate the procedure for removing directors, special notices must be sent to shareholders and relevant directors to remove directors. This notice must be sent at least 28 days before the meeting. If it is not practicable, a notice can be issued at least 14 days before the meeting.

When can a director be removed?

According to Article 152 (1) of Singapore’s Companies Act, the removal of any director shall not take effect until his successor is appointed.

Once the company updates the details of the new directors of the Accounting and Corporate Regulatory Authority (ACRA) through BizFile +, the directors will be formally removed.

2.Disqualification of Directors

After a director is disqualified, he cannot serve as a director or participate in the management of any local or foreign company in Singapore unless he seeks the permission of the High Court or a formal assignee.

When can a director be disqualified?

Directors can be disqualified under the following circumstances:

  • When a director goes bankrupt.
  • When the court makes a disqualification order. For example, in an insolvent company, when the company is wound up for reasons of national security or interest, or when a company director is convicted in Singapore of the crime of managing or forming a company.
  • Directors are convicted of fraud or dishonesty and can be sentenced to 3 months or more in prison.
  • The director was convicted of 3 or more crimes related to the submission of documents in accordance with the Company Law within 5 years;
  • If a director receives three or more High Court orders, requiring him to immediately review the company’s register, record book or document issued under Article 399 of the Company Law within five years or made under Article 13 of the Company Law Declaration form.
  • Within five years (from the date when the third company was revoked), three or more companies were removed from the register by the Singapore ACRA.

Note: After the disqualification of the director, the director must provide the company with a written notice of disqualification.

And within 14 days after the director is disqualified, the company must report to ACRA that the director is disqualified.

What if the disqualified director continues to serve as a company director?

When it is found that the director is still serving as a director and meets any of the above disqualifications, he can file a complaint with ACRA.

Anyone can file a complaint, as long as there are sufficient details of the company where the director is located.

This complaint may be sent to ACRA by post along with relevant supporting documents, such as a court order or bankruptcy statement.

Upon further investigation, if the complaint is successful, the director will be removed.

How long is the disqualification period?

The period of disqualification will be determined according to the reasons for disqualification, but generally 5 years.

For example, if directors of at least three companies are disqualified within five years, and directors of the three companies are disqualified within five years, the directors will be disqualified within five years from the date of the latest company disqualification .

On the other hand, directors of companies that are wound up for reasons of national security or interest will be disqualified within three years from the date of the winding-up order.

If a director is sentenced to disqualification for an offence that could disqualify him, the start date of disqualification will vary depending on whether the director is sentenced to imprisonment for the crime:

  • If the Director is imprisoned, when he is convicted, he will begin to be disqualified. After he is released from prison, the disqualification period will be five years.
  • If the director is not imprisoned, he will be disqualified for five years (or shorten the period as ordered by the court). The period of disqualification shall be calculated from the date of conviction.
What can former directors do after the disqualification period ends?

After the disqualification period ends, the person can be appointed as a director of his previous company, or even set up a new company.

At the time of reappointment or establishment, the company must notify the appointment of ACRA directors through the BizFile + website within 14 days from the date of appointment.

3. Director Resigns

Directors can also choose to resign voluntarily as directors. In Singapore, the resignation of a director is valid as long as:

  • The resignation procedure complies with the company’s articles of association;
  • The company must have at least one director living in Singapore.
Failure to notify ACRA

If a termination notice is not issued to ACRA, this may constitute a non-disclosure offence under Article 165 of the Singapore Companies Act.

Under this section, a director or chief executive may incur personal liability and may be fined S $ 15,000 or imprisoned for 3 years.

Before the notice is issued, the stop of service will not take effect. This means that the directors will still be responsible for managing the company.

If the crime continues (that is, no notice of suspension of service has been issued to ACRA), the director or chief executive officer will be fined S$ 1,000 for each day of conviction after conviction.

What happens to the shares held by directors?

If the directors are also shareholders of the company, the question of how to dispose of the shares will arise.

If the company’s articles of association contain clauses requiring directors to sell their shares after the termination of their directorship, the directors must sell their shares.

A typical clause is that the director will be required to sell his shares to other shareholders of the company.

If there is no clause that imposes such requirements on the directors, the directors are free to hold shares.

Alternatively, directors may consider selling or transferring their shares.