How to Remove a Director from a Company in Singapore: A Comprehensive Guide

 How to Remove a Director from a Company in Singapore: A Comprehensive Guide

Directors are pivotal in steering a company toward success. However, there are situations where a director may need to be removed from office before their term ends. This article will explore the different scenarios under which a director may cease to hold office, focusing on the procedure for removing a director, as well as the implications of disqualification and resignation.

1. Methods of Removing a Director

In Singapore, there are three primary ways a director may cease to hold office:

- Removal of Director

- Disqualification of Director

- Resignation of Director

Each of these methods has its own set of legal and procedural requirements, which we will delve into below.

2. Removal of Director

Why Might a Company Remove a Director?

A company may decide to remove a director for several reasons, including:

- Poor Personal Conduct: If a director engages in unethical or inappropriate behavior.

- Breach of Director’s Duties: Failing to fulfill the responsibilities outlined in their role.

- Poor Management: Leading to subpar corporate performance.

- Involvement in a Corporate Scandal: Damaging the company’s reputation.

Who Can Remove a Director?

In Singapore, only shareholders have the authority to remove a director. According to section 152(8) of the Companies Act (CA), directors in public companies cannot remove other directors.

Procedure for Removing a Director in a Private Limited Company

The removal of a director in a private limited company must adhere to the company’s constitution. Section 152(9) of the CA allows shareholders to remove a director by ordinary resolution (i.e., more than 50% of votes in favor of removal), provided there is no contradictory provision in the constitution.

Shareholders must give a 14-day written notice before the removal, although this requirement may be waived if more than 95% of the votes agree. If your company has adopted the Model Constitution in full, a director can be removed by ordinary resolution with at least 14 days’ notice.

A company’s constitution may also specify other requirements, such as needing a special resolution (i.e., more than 75% of votes in favor) to remove a director. The process typically involves calling a general meeting where shareholders vote on the resolution to remove the director.

Removal of Director in a Public Company

In a public company, section 152 of the CA outlines that shareholders may remove a director by ordinary resolution, unless otherwise specified by the company’s constitution or an agreement between the director and the company. When initiating the removal process, shareholders must give special notice of the resolution to remove the director, which must be communicated at least 28 days before the general meeting. If impractical, the notice period can be shortened to 14 days.

A director’s removal takes effect once a successor has been appointed, and the change is updated with the Accounting and Corporate Regulatory Authority (ACRA) via BizFile+.

3. Disqualification of Director

A director who is disqualified is legally prohibited from acting as a director or participating in the management of any local or foreign company unless they obtain permission from the General Division of the High Court or the Official Assignee.

When Can a Director Be Disqualified?

A director can be disqualified in several situations, including:

-Bankruptcy

- Court Disqualification Orders: Such as for unfit conduct in insolvent companies, involvement in companies wound up for national security reasons, or convictions related to company management or formation.

- Conviction of Fraud or Dishonesty: Offenses punishable by imprisonment for three months or more.

- Multiple Filing-Related Offences: If convicted of three or more offenses related to document filing under the CA within five years.

- Striking Off Companies: If three or more of the director’s companies are struck off by ACRA within a five-year period.

Process and Reporting Disqualification

Once disqualified, the director must notify the company in writing. The company is then required to report the disqualification to ACRA within 14 days. Failure to act on a disqualification can result in further action by ACRA.

Consequences of Acting Despite Disqualification

If a director continues to act despite disqualification, a complaint can be lodged with ACRA, leading to an investigation. If the complaint is upheld, the director will be officially removed.

Disqualification Period

The disqualification period generally lasts for five years, although this may vary depending on the circumstances. For example, a director disqualified due to the striking off of companies will be disqualified for five years from the date the last company was struck off.

4. Resignation of Director

A director may also choose to resign voluntarily. In Singapore, a director’s resignation is valid if:

- The resignation procedure follows the company’s constitution.

- The company maintains at least one remaining director who resides in Singapore.

Notifying ACRA of Cessation of Appointment

Upon resignation or disqualification, the company must file a notification of cessation with ACRA within 14 days. In cases where the company fails to notify ACRA, the director must do so themselves if they believe the company will not, or if there are no other officers to notify ACRA.

Failure to notify ACRA can lead to penalties, including fines or imprisonment. Until notification is lodged, the cessation will not take effect, and the director remains responsible for managing the company.

5. What Happens to a Director’s Shares?

If the director is also a shareholder, the company’s constitution may require the director to sell their shares upon ceasing directorship. Typically, the shares are sold to the remaining shareholders. If no such clause exists, the director may retain, sell, or transfer the shares as they see fit.

Conclusion

Removing a director from a company in Singapore involves a careful adherence to legal procedures and the company’s constitution. Whether it’s through removal, disqualification, or resignation, it’s crucial to follow the appropriate steps to ensure compliance with the Companies Act and to avoid potential penalties. By understanding these processes, companies can manage leadership transitions smoothly and maintain regulatory compliance.

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