Financial assistance to directors: s162 Improper use of information: s 157(2)
Financial assistance to director-related companies: s163
Directors remuneration and benefits: s168,169&172 Interested persons transactions: SGX Listing Manual
Section 156 disclosures: s156(1)&(5) Duty to retain discretions
Duty to avoid conflicts of interests
Duty to use powers for a proper purpose Duty to act in good faith in the interests of the company
Liability for fraudulent trading: s 340(1)
General law Duties
Loyalty and good faith
Care and diligence
Duty to act honestly and to use reasonable diligence: s 157(1)
Statutory Duties Duty to act with reasonable care and diligence
Administrative duties: Eg general disclosure: s 165; keeping accounting records: s 199; calling AGMs; s174 etc
Liability for wrongful / reckless trading: s 399(3)
Some things to think about…
• Are there others who owe similar duties? • To whom are the duties owed? • Who can enforce the duties? – the link to the ‘proper plaintiff rule’ and derivative actions
A. Directors’ duties under s 157
• S 157(1) : director shall act honestly and use reasonable diligence in the discharge of the duties of his office • S157(2) : officer or agent of co shall not make improper use of information acquired by virtue of his position to gain, directly or indirectly, an advantage for himself or for any other person or to cause detriment to the co • S 157(4) : section is in addition to and not in derogation of other rules • S 157(3) : civil and criminal sanctions
B. Duty of care, skill and diligence
• S 157(1) and common law duty • Includes eg
– acting within Memorandum and Articles – performance of administrative requirements of the Act
• What is the standard expected?
B. Both an objective and subjective test…
• A director of a company must exercise the care, skill and diligence which would be exercised by a reasonably diligent person with both – (a) the knowledge, skill and experience which may reasonably be expected of a director in his position; (objective test) and – (b) any additional knowledge, skill and experience which he has (subjective test). • What would a reasonable director in the shoes of the director in question do, having regard to the circumstances of the case and the skill and experience which he has? 5
B. At the minimum….(AWA case)
– A director must acquire a basic understanding of the business of the company and must be familiar with the fundamentals of the company's business; – Directors are under a continuing obligation to keep informed about the activities of the company; – Detailed inspection of the day to day activities is not required. What is required is a general monitoring of the company's business affairs. Accordingly, a director should attend board meetings regularly; and – While directors are not required to audit the company's books, they should maintain familiarity with the financial status of the company by a regular review of financial statements
C. Delegation and reliance on others
• Directors may delegate their powers and trust their delegates unless there are circumstances that would cause a reasonable man to be suspicious (see section 157C) – 157C(1): Who can the directors rely on?
– 157C(2): When is such reliance acceptable?
D. Court does not interfere with business decisions
ECRC Land Pte Ltd “ The court should be slow to interfere with commercial decisions taken by directors. It should not, with the advantage of hindsight, substitute its own decisions in place of those made by directors in the honest and reasonable belief that they were for the best interests of the company, even if those decisions turned out subsequently to be money-losing ones…”
E. Duty not to engage in reckless trading / fraudulent trading • Where the company is insolvent, the interests of the creditors comes into play. • s 339(3): an offence for...
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