Recourse Available for Resident Nominee Directors Unable to Exit Directorships and Corporate Service Provider Obligations upon Employment Termination

Mr Chua Kheng Wee Louis asked the Prime Minister and Minister for Finance (a) what recourse do Singapore-resident nominee directors of companies have to exit a directorship when no replacement resident director can be found; and (b) what obligations do registered corporate service providers currently have to ensure an orderly exit for employees placed as nominee directors when the employment relationship ends.

The Companies Act 1967 requires each company to have at least one director who is ordinarily resident in Singapore. This ensures that there is at least one person in Singapore whom regulators hold accountable for statutory obligations.

Individuals who intend to accept such directorship appointments should be aware of the duties of a director, and the risks when taking on such appointments, especially where they are the sole director who is ordinarily resident in Singapore.

There are situations where a sole director who is ordinarily resident in Singapore is unable to resign because foreign directors and/or shareholders are unresponsive or uncontactable and hence no replacement can be appointed. In such a scenario, the sole director has the option to wind up the company under the Insolvency, Restructuring and Dissolution Act 2018 via application to the Court. The Accounting and Corporate Regulatory Authority may also strike off companies that are not carrying on business, based on prescribed circumstances under section 89B of the Companies Regulations.

Corporate Service Providers (CSPs) do appoint their own employees as nominee directors of their clients’ companies as part of their business model. As it is the individual who is personally appointed as the company director, the appointment does not automatically cease when the person leaves the employment of the CSP. As part of the appointment, individuals are required to sign Form 45 under the Companies Act, where they would acknowledge their duties, responsibilities and liabilities specified in the Companies Act. To ensure an orderly exit for their employees, some CSPs obtain their client companies' pre-approval to replace employee nominee directors upon their resignation from the CSP.