Director's Criminal Liability - Singapore Institute of Directors

FEATURESTraining comes in different shapes and sizes; butthe aim is really to suitably equip the directorwhen he first comes on board and on a continuingbasis with sufficient information, knowledgeand updates about the business, the state of theeconomy and the industry, and the relevant rulesand regulations (whether legal, accounting orsectoral) that apply to the company.touching on directors are discussed,such as that relating to shadow directorsand alternate directors for example,although the latter is definitely a positiverecommendation. The discussionhere, which criss-crosses the SteeringCommittee and the CGCS proposals,represents only one view of the writerfor discussion. There are no right orwrong answers, and for every argumentthere will be a counter-argument.Issues Associated With TheAppointment Of DirectorsAppointment, Removal & ResignationFrom a practical perspective, an issuethat has vexed many companies for along while is how should one appointor remove a director, and how could adirector resign from his directorship.These were matters that had been left tothe articles of association of a companyto address, so that if the matter was notaddressed, doubts and queries couldarise as to whether there has been avalid appointment, or a valid removalor a valid resignation. Interestingly aswell was the fact that the CompaniesAct only expressly addressed the issue ofremoval of directors solely from a publiccompany’s perspective.The Steering Committee Report hasfortunately recommended that thesesimple matters be easily resolved byincluding appropriate provisions in theCompanies Act. One recommendationwill see the right to remove directorsgiven to all companies rather than justto public companies. Additionally, apositive change, if it comes to pass, is thefact that when a director resigns, all hewill need to do is tender his resignationand not wait for the acceptance of hisresignation for it to be valid. Whilstthere may be counter arguments asto whether his notice to the companywas in fact received, that is an issue tobe resolved separately outside of theCompanies Act, as it is a technical one.The ability to resign by giving notice willnevertheless remain subject to the ‘lastman standing’ rule, as that is a criticalelement of the corporate structure.Director QualificationsThe Steering Committee Reporthighlights discussion as to whetherminimum academic or professionalqualifications should be prescribedfor directors. It is positive that theSteering Committee did not decide infavour of prescribing such requirements.Companies are varied, and academicand professional qualifications evenmore differentiated. Importantly, thereis no one academic or professionalqualification that provides the perfectfit to be able to supervise, manage orrun a company. Business acumen andcreativity, which are very critical inestablishing, managing and running abusiness, cannot be taught.However, director qualifications, whenbroadly looked at, are an importantcriteria in determining whether anindividual is a suitable candidate to takeon a directorship role or otherwise. It isalso useful in determining whether theindividual is the right fit for any oneparticular company – not all individualscan perform skilfully in all companies.In this regard, the provisions of theCode have always imposed on thenominating committee the obligationto ensure that the persons they identifyto sit as directors on their board must besuitably qualified.Closely linked to qualifications is theavailability of the individual to devotesufficient time and effort to fulfilling hisobligations if appointed as a director.Much has been discussed about this atvarious forums, and it is comforting tosee that the CGCS has recommendedthat the nominating committeeconsider and decide if a director is ableto adequately perform his duties if thesaid directors serve on multiple Boards.Further, the Board has to decide on themaximum number of directorships thatits directors can hold, and state thisnumber in its annual reports.Director TrainingWhilst qualifications per se are notimportant in this writer’s view, requisitetraining is nevertheless important.Training comes in different shapes andsizes; but the aim is really to suitablyequip the director when he first comeson board and on a continuing basis withsufficient information, knowledge andupdates about the business, the state ofthe economy and the industry, and therelevant rules and regulations (whetherlegal, accounting or sectoral) that applyto the company. To this end, the CGCShas recommended new requirements forcompanies to provide training for newdirectors as well as existing directors,ensuring that such training continuethrough the director’s term. Specificallyon this, the CGCS has further suggestedthat the nominating committeerecommend to the Board specifictraining programs. The provision oftraining aside, the CGCS has proposedthat the specific induction, orientationand other training that has been providedto the directors be disclosed. Whilst therecommendation and constant push fortraining as suggested by the CGCS is20