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Are you striving to look for a legal way of how to remove a director in Singapore? Or you are tired of covering the poor performance of your company’s director, and you are looking for a legal way to terminate him? Well, there is no need for you to worry about this legal issue anymore. We are here to guide you all about the standard procedures and requirements of removing a director in Singapore.
A director is a crucial functional person of a company. All companies in Singapore must have at least 1 local director who must be Singapore Citizen or Permanent Resident and there is no maximum limit on directorship however one must check its company’s constitution for any restriction on maximum number of director.
As per the law of the land, a business can execute the removal of a director in Singapore in three ways, and they are as follows:
- Resignation
- Termination
- Disqualification
1. Resignation of A Director
The other legal manner of removing a director is when a director submits his resignation by himself. In case a director voluntarily submits his resignation from the directorship, then it can be deemed valid in the following conditions:
- If the resignation procedure is reasonable and is by the constitution of the company.
- The company shall have another director residing in Singapore.
Required Procedure of Resignation on the Part of Company
When the company receives the resignation of a director who voluntarily wants to resign from the directorship or if the director is deemed as disqualified, then in both such conditions, the company shall file a notification of cessation.
This procedure must be followed for 14 days only from the date of such change. i.e., the date of disqualification or the date of resignation. For submitting the notification with ACRA shall be accompanied and prepared with some relevant documents. Such documents are as follows:
- In the cast of disqualification of a director, a bankruptcy statement or a lawful court order must be accompanied when is applicable.
- In the case of voluntary resignation from directorship, the director’s resignation and the acknowledgment of the board of directors must be accompanied.
The former director shall notify the ACRA voluntarily in the following cases:
- When the former director believes that the company might not inform the ACRA regarding his disqualification or resignation.
- The former director knows that no other officers are competent or are in the company to notify the ACRA regarding his disqualification or resignation.
Failure to Comply with Procedure
In case the company and the former director fails to notify the ACRA regarding the company’s changes. Such non-compliance of the disclosure can be deemed an offense under section 165 of the Company Act.
As per Section 165 of the Company Act, the director or the chief executive officer may incur a personal liability and pay a fine amounting to $15,000 or liable for imprisonment up to 3 years. Unless the notification of cessation is submitted and is updated, the cessation shall not occur, and the former director will still be liable and responsible for managing the company’s affairs. In case the offense of non-disclosure is a continuing offense. The director or chief executive officer shall be liable for a fine amount to $1,000 for every day if the violation continues after conviction.
2. Termination of a Director
An individual working as a director can also be terminated but only based on a lawful and valid reason.
Termination of a Director on What Basis
The termination of a director can be made on various grounds such as:
- A company can terminate a director from his crucial position for his poor performance over significant months.
- Moreover, a director can also be released from the breach or non-compliance of his duties.
- A director can also be directly removed or terminated if he has been involved in any corporate scandal or
- Due to his poor management skills or leading skills, that are leading to low corporate performance.
Who has the Power to Terminate
The law of the land specifies the legal procedure to remove a director in Singapore. As per the law, the lawful process of removing a director is defined in section 158 of the companies Act. As per Section – 158 subsections, 8 of the companies act, a director in a company can only be terminated or removed by shareholders only.
The Procedure Of Removing A Director
In a Private Company
The basic rule of the land states that everything must be by the law of the land. The company needs to remove the director through lawful procedures only and according to its constitution. As per section 152 subsection 9 of the company act, only the company’s shareholders can remove or terminate a company’s director through a lawful and valid vote.
The director’s removal is a fundamental matter of the company, so the case goes to the board, and in a meeting, all the shareholders decide to vote for or against the motion. In the forum, at least 50% of votes are required to terminate or remove the director.
Moreover, for the requirement of a lawful removal of directors in Singapore, the shareholders have to give a written notice for 14 days. However, this requirement can also be waived off by putting it to the vote if more than 95% of voters favor not giving the 14 day’s notice.
As per the company’s constitution, a requirement of special resolution is specified, and more than 75% of votes are necessary for the removal of a director in favor of the motion. However, if the company has adopted the model constitution, then such a company can initiate the director’s removal through an ordinary resolution with accompanying 14 days of notice. If your company has adopted the Model Constitution in total, a director may be removed by standard resolution with at least 14 days of notice. However, as the initial process, all the company shareholders have to convene a general meeting to discuss whether they want to remove the company’s director and vote upon it.
If the shareholders decide to go for the director’s removal, they have to convene another meeting to pass the resolution. Moreover, on the other hand, the company’s constitution may also decide upon a clause to be included regarding the director’s termination in some specific situations. For instance, if a director does some immoral conduct or has a terminal disease. In such cases, the company will not be required to convene a meeting to pass a special resolution to remove the director. In case it is specifically required by the company’s constitution, then it is a necessity.
In a Public Company
The lawful procedure of removing a director from a public company is specified in Section 152 of the Company Act. Section 152 of the company act states the following requirement for making a lawful termination. The requirement of a legal procedure is as follows:
- A public company’s shareholders can remove a director by convening a meeting and passing an ordinary resolution. Moreover, for giving the resolution, at least more than 50% of votes must be in favor of removing the director.
- As per the legal procedure laid down in the company act, the shareholders shall convene a general meeting to start the process of terminating a director and must give special notice at least 28 days before the public forum; however, if it is not practicable, then at least 14 days before the date of convening the meeting.
When is a Director Officially Removed?
As per Section 152 sub-section 1 of the Company Act, the director’s termination shall not come to effect unless the company appoints a successor director to replace the former director. The removal of a director takes place and is made official only after the particulars of a new director have been updated in Accounting and Corporate Regulatory Authority.
3. Disqualification of a Director
In case of disqualification of a director, he shall not be allowed to manage any company’s affairs. The restriction of participating as a director shall remain unless the director takes permission from the General Division of the High Court or Official Assignee.
Disqualification of a Director on What Basis
The director can be disqualified from the company for numerous reasons, and they are as follows:
- In case the director announces that he is bankrupt.
- In case the court gives the order of disqualification of the director. For instance, an unfit director of an insolvent company or if a company is winding up due to national security or the director has been charged with offenses in Singapore.
- In case the director is convicted for the offense of fraud or dishonesty.
- If the director has been charged with offenses of three or more filing offenses under the Company Act within the last five years.
- In case the director has three or more of is companies struck off from the register by ACRA in the period of last five years
- In case the director has three or more orders from the General Division of the High Court against him for compelling or obstructing the inspection of the company’s registers, minutes books, or documents under section 399 of the Company Act or the provision to make returns under section 13 of the Act.
Term of Disqualification Period
The disqualification tenure of the director entirely relies on the reason for his disqualification. However, the general tenure of the director’s disqualification is five years.
What Does the End of Disqualification Period Mean for a Former Director?
Once the disqualification tenure of a former director is completed, a person may be appointed as a director of his former company or a new company. When the re-appointment of a former disqualified director is made, the company shall notify the ACRA of the appointment within 14 days from such appointment.
IMC Group