Choosing a Right Resident Director and Secretary for a New Singaporean Company
- Posted by Lee Bon
- On 06.03.2017
A secretary and a resident director are pillars your newly-incorporated Singaporean business is holding on. Appointing these managers is a mandatory condition of the Singapore Companies Act all foreign businesses must comply with. Let’s find out how to make a good choice and hire professionals that will help your business reach its goals on Singaporean market faster.
Activity of companies is regulated by the SG Companies Act that sets such requirements for opening a new company by foreigners:
- a new business formation must have no less than 1 shareholder (either a person or a corporate entity);
- the new company must be physically incorporated in SG (i.e. have a physical office address);
- for a start, a paid-up capital must be at least 1 Singaporean dollar;
- beside foreign directors, one or more resident director must be appointed;
- a new company must have a local secretary (SG resident).
As you can see, appointing local secretaries and directors can be the most crucial task as it is associated with the human factor. Directors must be reliable enough so that you could entrust them with your affairs and initiate them into your business’ core activity. They must be objective, diligent, honest, non-confrontational, and faithful to your business. The secretaries are responsible for how the business complies with the local laws by making reports and meeting all related obligations. This officer is your company’s guide through the legal field of a new country.
Qualities of Company’s Resident Director
- The main requirement is the director’s residence. This residency status doesn’t mean only the citizens and holders of the PR visa qualify. It rather means residing in the city-state ordinarily which also includes such categories of people as holders of the EntrePass or Employment Pass who usually live in Singapore and have a local address.
- This must be a person no younger than 18 years old whose physical and mental health is sufficient for carrying out the duties of the director.
- The Singapore’s Accounting and Corporate Regulatory Authority also disqualifies such categories of people for the role of the resident director: undischarged bankrupts, people disqualified by the court or convicted of frauds and other crimes (including a 3-year conviction for an offence of the Companies Act over the last 5 years) as well as people who have more than 3 orders of the High Court concerning complying with the Companies Act.
Of course, it is easy to find a person that fits the above-mentioned criteria. But except these criteria, resident directors are also responsible for meeting specific statutory requirements set by the ACRA. If the director isn’t proficient enough and fails to comply with the laws, the company entrusted to them will have constant issues with paying penalties, loads of tangled paperwork and shameful compliance indices.
A tip: thus, the resident director isn’t a formality you should neglect, but an important chessman on your board. You shouldn’t seek for a cheap fit because saving in the beginning can result in overwhelming losses ultimately.
Resident Director’s Duties
- The ACRA expects the resident director to take care of meeting the 2 main statutory requirements:
- convene and hold the Annual General Meeting of the SG company and
- file tax returns according to the predefined deadlines (usually during a 1 month after the AGM).
The ACRA keeps a close watch on how these requirements are fulfilled, and in case the director fails to convene a meeting or misses the deadlines for filing the return tax, they will be penalised or sued.
- Except these basic duties, the resident director is also responsible for maintaining registers. Things that must be registered are many: members, directors, secretaries, managers, auditors, company’s charges, and shareholdings of the director.
- The director must mind everything associated with opening the company’s physical office in Singapore.
- The director is also responsible for:
- obtaining necessary approvals for disposing of the firm’s property;
- registering transfers and issuances of its shares;
- appointing local staff, auditors, and the local secretary;
- declaring the solvency;
- publishing the firm’s name and making any required changes to it;
- ensuring that only the firm’s profit is used for paying dividends;
- working on firm’s social responsibility and cooperation with the society.
The director must act professionally in the interests of the firm and never misuse their authority or allow destabilising conflicts of interests. In Singapore, these duties don’t depend on the active/inactive or “dormant” status of the director: these executives are responsible for fulfilling the statutory obligations even if they aren’t involved in the affairs at the moment. This feature of Singaporean business legislation, again, proves that companies should appoint only highly professional directors.
If the director neglects and breaches these duties and responsibilities, the company can proceed against this director over any damage or illegal interest they have made. Except this measure, the director can get fined (approximately 5k SGD) or get imprisoned for the term of 1 year.
How to Appoint a Resident Director?
While searching for the right candidacy, keep these points in mind.
- According to the SG Companies Act, nominee directors are subject to the same duties and obligations as regular directors.
- The minimum number of the firm’s directors is 1. If the company decides to have more than one, the maximum number must be specified in the constitution of the company.
- If there is only 1 director, they must also be the firm’s sole shareholder. They, however, cannot act as the secretary at the same time. Another person must be appointed to the role of the firm’s secretary.
Qualities of Company’s Secretary
The Companies Act doesn’t define the role of the secretary in details, but this doesn’t belittle its importance for the company as this administrative figure is in charge of keeping records and reporting activity and acts as a connection between the state and the company.
- The same as the resident director, the secretary also must be a resident of Singapore which includes not only citizens and holders of the permanent residence visas but also holders of the EntrePass or Employment Pass who usually reside in Singapore and have a local address. Unlike directors, secretaries can also be holders of the S Pass.
- The secretary must be older than 18 y/o and be proficient in the Companies Act.
- According to the Companies Act, a candidacy for the role of a public company’s secretary must fit at least 1 of these criteria:
- be experienced in working as a company’s secretary during 3 years of the last 5;
- be a registered public accountant (under the Accountants Act);
- be qualified under the Legal Profession Act;
- be a member of any of these Singaporean accountant authorities: the Institute of Certified Public Accountants, the Association of the Institute of Chartered Secretaries and Administrators, the Institute of Company Accountants, the Singaporean branch of the Association of International Accountants and so on.
A newly incorporated Singaporean company is given 6 months for making an appointment of a secretary.
- Handle the company’s records and registers (maintaining and filing documents according to the statutory requirements).
- Know the Memorandum & Articles of Association and take care of how firm’s directors comply with this document.
- When the company goes through any restructuring, disposals, acquisitions, or mergers, ensure that the company’s interests are taken into account.
- Help directors in practising compelling corporate governance (for example, how the crucial decisions are discussed and made and how responsibilities and rights are distributed among the company’s staff).
- Guide directors in any legal or administrative matters and take care of the company’s compliance with local laws. Actually, the Companies Act clearly states that the company’s director depends on the secretary in all statutory matters. This means that the secretary is also responsible before the law in case their company fails to comply with law. If the secretary sees a noncompliance and never reacts and warns the director(s), they become fully responsible for the breach of a statutory requirement that can result in certain penalties and even conviction.
- Prepare necessary documentation for meetings of shareholders and directors.
- Handle all submissions and filings required by the local law.
- Similar to resident directors, secretaries must act professionally and diligently in the interests of the firm and never misuse their authority for gaining illegal interest and never participate in conflicts of interests that destabilise the business.
- A secretary is often authorised to certificate various official documents (for example, the firm’s minute book when required by auditors) and proceedings sharing the same seal with a director.
The director is dependable on the secretary when it comes to any statutory compliance. If the secretary makes a failure, their company may face statutory fines and the director may be found criminally liable. The director can receive a summons from the ACRA. This mustn’t be neglected as enforcement of law is powerful in Singapore, and evasion can lead to pitiful results.
As you can see, both the resident director and their secretary are very important figures in a new company. They work in a team to provide the best fulfilment of the company’s interests and a compelling statutory compliance. These two cannot be just random people from the street as their roles require an experience and knowledge of business management and legislation.
We recommend foreign businesses to enlist professional secretarial services (a secretarial firm) for managing their records and registers. These professionals can also suggest a group of reliable directors they were happy to work with. If the couple “secretary-director” has already worked together successfully in the past, this increases chances that they will adjust quickly to your business realities and show the best result.
If you don’t have a candidacy for any of these positions yet, we can suggest you a couple of professionals with a solid background and the best references.