The global world of business typically functions with various accepted norms. One of those is the “board of directors”. With Singapore being a global business hub, it’s no surprise to learn that it’s no different in the city state.
The board of directors is a group of individuals tasked with overseeing a company’s activities and overall performance. Generally, they’re elected by shareholders to represent their interests as well as provide guidance to the CEO and executive team.
In Singapore, there are various board roles and director duties that anyone doing business in the country should be aware of. Here’s a complete guide to the different types of director roles in Singapore and what they entail.
Read Also: What Is Your Responsibility As A Company Director In Singapore?
Understanding Board Director Roles In Singapore
First off, it’s important to understand the actual rules that govern boards of directors in Singapore. For listed companies, the Singapore Exchange (SGX) has a handbook that lays out specific rules. In it, the SGX states that:
“The company is headed by an effective Board which is collectively responsible and works with Management for the long-term success of the company”.
The rulebook also specifies that there must be a clear division of responsibilities between the leadership of the Board and the Management, which effectively refers to the Chairman and Chief Executive Officer (CEO). That ensures that no one person has “unfettered powers of decision-making”.
More broadly, under the Companies Act, Singapore does no distinguish between “active” and “inactive” or “sleeping” directors. It is also within the Act that the company directors ensure accurate and timely record keeping, prepare financial statements (if applicable), and comply with corporate filings and other disclosures. He or she also has the legal duty to advance the interests of the company, act honestly and in good faith in exercising the given powers.
Unlike the importance responsibilities that go with being a director, the requirements to become a company director are relatively straightforward:
- At least 18 years old
- Of full legal capacity
- A Singapore citizen, Singapore permanent resident, EntrePass holder, or Employment Pass (EP) holder
- Not disqualified from acting as a director of a company (e.g. not an undischarged bankrupt)
Read Also: Singapore Companies Act: What Business Owners Need To Know When Starting A Company
Executive Directors
In terms of the various types of directors in Singapore, the first type is what’s called “Executive Directors” or “EDs”. These directors are part of the senior management of the company and are involved in the day-to-day running of the business.
Executive Directors are expected to play a key role in providing insights on the company’s daily operations to the Board and provide management’s views but without undermining management accountability to the Board.
Finally, EDs are expected to collaborate closely with other types of directors (primarily non-executive directors) on the Board to guarantee the long-term success of the company.
Non-Executive Directors
Next up are “Non-Executive Directors” or “NEDs” for short. NEDs are not employees of the company and do not participate in the daily operations of the firm.
Despite this, they’re still expected to play a key role on the Board of Directors. They are expected to be familiar with the business and stay informed of the activities of the company.
Beyond that, NEDs should also constructively challenge Management and help develop proposals on strategy – by doing this the company can avoid “group think” and get various perspectives on critical issues that matter.
Additionally, NEDs are there to help hold Management to account by reviewing their performance and seeing if it has met agreed goals and objectives. Finally, they should also participate in decisions that look at the appointment, assessment, and remuneration of the EDs and key management personnel.
Independent Directors
Finally, we have Independent Directors, or “IDs”. Effectively they are NEDs who are considered independent from the Board. In that sense, they should have no relationship with the company, its related corporation, its substantial shareholders, or its officers that could influence them.
Independent Directors have the same duties as NEDs and should also be an additional layer of independence in that they can provide an objective check on Management.
For certain situations, SGX Listing Rules require that IDs make specific decisions and determination within a company.
There’s also the fact that IDs should try their utmost to act in the best interests of the company as a whole and not make decisions that only take into account a particular group of either stakeholders or shareholders.
Read Also: 7 Things That Make Singapore One Of The Easiest Places To Do Business
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