Forum: Nominee directors need a stronger exit framework
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The Accounting and Corporate Regulatory Authority’s (ACRA) reply, “Balancing director accountability with sound corporate governance” (July 8), to the letter “Fix loopholes in corporate regulatory framework to protect local staff” (June 30) rightly noted that a nominee director is not just an administrative name on the register. A director remains personally responsible for statutory duties, and corporate service providers (CSPs) should take reasonable steps to replace employees or former employees who no longer wish to serve.
However, the recent case of a woman stuck with company directorships she could not legally quit also points to a broader regulatory issue.
Singapore has significantly strengthened the entry controls for nominee directorships. Under the Corporate Service Providers Act regime, nominee directors acting by way of business must generally be arranged through registered CSPs, which must assess whether they are fit and proper. ACRA has also strengthened transparency over nominee arrangements.
What remains less developed is the exit framework when the foreign owner becomes uncontactable.
Under section 145 of the Companies Act, a sole resident director cannot resign if that would leave the company without an ordinarily resident director. ACRA has said that, where the company is no longer carrying on business, the director may ask ACRA to initiate striking off.
That may not solve every case. What happens if the company is still carrying on business, holding assets or generating transactions while its foreign owners are unreachable? There is also a potential tension with section 155A, which provides for disqualification where a person was director of three or more companies struck off by the registrar within five years. A nominee director dealing with several abandoned companies could therefore face serious personal consequences despite trying to regularise the position.
Rather than weakening director accountability, Singapore could consider a regulated managed-exit process for nominee directors arranged by registered CSPs. After prescribed notices, documented attempts to contact owners, risk assessment and escalation by the CSP, the nominee director could enter a statutory safe-harbour process. The CSP should then have a defined period to arrange a qualified replacement or escalate the matter to ACRA.
Where an inactive company is struck off because its owners disappeared, the framework should also ensure that a nominee director who followed the prescribed process in good faith is not unfairly penalised.
The principle should be straightforward: Personal accountability must remain real, but it should attach to conduct and responsibility, not to an individual’s inability to escape an abandoned appointment.
Calvin Zhang Song
