Pin Ern LOBO law and rules list

Contents
Company Introduction 3
Piercing the corporate veil 3
Categories of companies 4
Promoters of companies 5
Company’s Constitution 5
Altering the constitution 5
Challenging alterations to the constitution 6
Effects of the constitution 6
Shareholders’ Agreements 7
Shares 8
Classes of shares 8
Class rights 8
Varying class rights 8
Issue of shares 9
Company Management 9
Division of power between the Board and the GM 9
Who are Directors 10
How be? 10
Removal 11
Money that Directors Get 12
Restricted transactions 13
Procedures 16
Irregularities in procedure 17
Director’s duties 18
Duty to act bona fide 18
Who it is owed to: 18
Standard of duty 19
Duty to act for proper purposes 19
Duty of loyalty / to avoid conflict 20
Self-dealing transactions 20
When competing with the Co. 22
When holding conflicting duties 22
Using corporate property, information or opportunity 22
Duty to act with due care, skill and diligence 23
Protection of directors from their breaches 24
Civil liability of directors / company’s remedy 25
Recission 25
 Return of co property 25
Account of profits 26
Damages or Compensation 26
Injunction and/or declaration 26
Broad statutory remedy 26
Corporate acts and liabilities 26
Attribution rules 26
Torts and Crimes 27
Contracting 28
Authority 28
Impact of constitutional limitations 29
Consequences 30
Partnerships 30
Soup Recipe 30
Liability of the Firm to 3P 31
Liability of individual partners 32
Partnership property 32
Dissolution 33
Company Introduction
1. Limited liability, 2. Transferability of shares, 3. Potential separation of ownership and management functions.
4. A separate legal personality

Lee v Lee’s Air Farming -> wife who wanted to claim compensation from her husband’s company for his death, but he
was the only employee. Separate personality, can claim

Macaura v Northern Assurance -> M took out insurance for company’s timber in his own name. Insurance co. said the
timber is the company’s cannot claim. Held, cannot claim as “members of a company do not have an insurable
interest in the assets of a company”

-> applied in SG in Beckkett v Deutsche Bank w.r.t, B had no standing to set aside the sale of the Adaro and IBT
shares, because those shares belonged to Asimco (even though Asimco was 99.9% owned by SME that B owned 75%
of)

But, this separate legal personality can be successfully challenged by:

Piercing the corporate veil

Might be the (normal) forward piercing, where you pierce the veil to get a member; or reverse piercing, where you’re
piercing for the company’s assets.

A few categories where piercing the corporate veil is allowed:

a) Fraud

VTB Capital v Nutritek -> The true fact must be that it is the person rather than the co. that is the relevant actor.

b) Evasion of a legal obligation

Jones v Lipman -> ctt for a sale of a house, but decided to refuse to complete. Lipman creates a company to avoid
specific performance. Can pierce.

Gilford Motor v Horne -> Horne undertook to not compete, but created a company to compete. Can pierce

Prest v Petrodel -> The wife suing the husband’s company for property during divorce. Held that even though
husband was controller of the company, when it was made 10 years ago it was not to evade divorce obligations,
cannot pierce. Evasion is the use of co. to defeat personal rights or frustrate its enforcement – can pierce.
Concealment is the interposition of many companies to conceal their identity, is legally banal and does not need
piercing.

c) Sham or façade (This is a difficult ground to deal with)

The Saudi Al Jubail -> Orri Group’s 3 companies. 2 of them were non-existent and the company that charted and
defaulted on the vessel was a non-entity. Plus, Mr Orri used the vessel as his own. Can pierce.

d) Alter ego (mere extension of self)

Alwie v Tjong Very Sumito -> Alwie made no distinction between himself and the company, was his mouthpiece, had
absolute control, beneficially received sums, used sums in the co. account for his own personal use. Can pierce.

Further, other laws can achieve the same effect, without piercing the corporate veil. Eg

Agency: Smith, Stone & Knight v Birmingham Corp -> Birmingham Waste Co. found to be agent of SSK, could pierce so
SSK could get their compensation from the Corp. Waste Co. had no books, profits, people, control or agreement with
SSK. It was just there.

Torts: Of all kinds, can be personal or director liability, or vicarious liability especially for employers.

Trusts / Implied statutory powers / Express statutory powers

Categories of companies
As can be seen in the Companies Act, limited and unlimited liability companies, limited by shares or by guarantee.

exempt private companies: s 4(1) / ss 162 & 163 -> No restrictions on loans, quasi-loans etc to directors (unlike
disclosure requirements for normal co.)

“exempt private company” means —

a private company in the shares of which no beneficial interest is held directly or indirectly by any
(a)
corporation and which has not more than 20 members; or
any private company, being a private company that is wholly owned by the Government, which the
(b) Minister, in the national interest, declares by notification in the Gazette to be an exempt private
company;
Small company and small group: s 205C -> exempt from audit requirements & 13th schedule: two of the following

(i) the revenue of the company for each financial year does not exceed $10 million;
(ii) the value of the company’s total assets at the end of each financial year does not exceed $10 million;
(iii) it has at the end of each financial year not more than (aggregate, for group) 50 employees.

Holding companies, subsidiaries: s 5 & s 21 (restriction on cross-holdings, subsidiary cannot own share in holding co.)

5.—(1) For the purposes of this Act, a corporation shall, subject to subsection (3), be deemed to be a
subsidiary of another corporation, if —
that other corporation —
(i) controls the composition of the board of directors of the first-mentioned corporation; or
(a)
(ii) controls more than half of the voting power of the first-mentioned corporation; or

the first-mentioned corporation is a subsidiary of any corporation which is that other corporation’s
(b)
subsidiary.

(2) For the purposes of subsection (1), the composition of a corporation’s board of directors shall be deemed
to be controlled by another corporation if that other corporation by the exercise of some power exercisable by
it without the consent or concurrence of any other person can appoint or remove all or a majority of the
directors, and for the purposes of this provision that other corporation shall be deemed to have power to
make such an appointment if —
a person cannot be appointed as a director without the exercise in his favour by that other
(a)
corporation of such a power; or
a person’s appointment as a director follows necessarily from his being a director or other officer of
(b)
that other corporation.

Ultimate subsidiary co: s 5A

5A. For the purposes of this Act, a corporation is the ultimate holding company of another corporation if —
(a) the other corporation is a subsidiary of the first-mentioned corporation; and
(b) the first-mentioned corporation is not itself a subsidiary of any corporation.
Wholly-owned subsidiaries: s 5B

5B. For the purposes of this Act, a corporation is a wholly owned subsidiary of another corporation if none of the
members of the first-mentioned corporation is a person other than —
(a) that other corporation;
(b) a nominee of that other corporation;
a subsidiary of that other corporation being a subsidiary none of the members of which is a person other than
(c)
that other corporation or a nominee of that other corporation; or
(d) a nominee of such subsidiary.
Related companies: s 6 = When you’re a holding company of A, subsidiary of A, or the subsidiary of the holding
company of A = related.

Interest in the company or in the shares s 7

(4) Where a body corporate has, or is by the provisions of this section deemed to have, an interest in a share
and —
(a) the body corporate is, or its directors are, accustomed or under an obligation whether formal or
informal to act in accordance with the directions, instructions or wishes of a person; or
(b) a person has a controlling interest in the body corporate,
that person shall be deemed to have an interest in that share.

(4A) Where a body corporate has, or is by the provisions of this section (apart from this subsection) deemed
to have, an interest in a share and —
(a) a person is;
(b) the associates of a person are; or
(c) a person and his associates are,
entitled to exercise or control the exercise of not less than 20% of the voting power in the body corporate,
that person shall be deemed to have an interest in that share.

(5) For the purposes of subsection (4A), a person is an associate of another person if the first-mentioned
person is —
(a) a subsidiary of that other person;
(b) a person who is accustomed or is under an obligation whether formal or informal to act in
accordance with the directions, instructions or wishes of that other person in relation to the share referred
to in subsection (4A); or
(c) a body corporate that is, or a majority of the directors of which are, accustomed or under an
obligation whether formal or informal to act in accordance with the directions, instructions or wishes of that
other person in relation to the share referred to in subsection (4A).

Promoters of companies
Owe a duty of disclosure to the investors, as they stand in a fiduciary r-s to the investors.

Erlanger v New Sombrero Phosphate Co -> E bought an island for 55 000 pounds, sold it through a nominee to the co.
for 100 000 pounds and E got the public to invest in the co. Co. sued him for non-disclosure. Held, could rescind the
contract as promoters of a co. stand in a fiduciary r-s to investors.

Re Cape Breton -> mine sold to the company. Company affirmed the contract, no more right to rescind.

Company’s Constitution
It “may have” the objects of the company but does not have to s 23(1A)

Internal regulations are often inside, and these restrictions affect the capacity of the co. and directors later on.

Altering the constitution

Generally, anything can be altered by a special resolution s 26(1) CA.

-> special resolution as defined in s 184

184.—(1) A resolution shall be a special resolution when it has been passed by a majority of not less than
three-fourths of such members as, being entitled to do so, vote in person or, where proxies are allowed, by
proxy present at a general meeting of which —
(a) in the case of a private company, not less than 14 days’ written notice; or
(b) in the case of a public company, not less than 21 days’ written notice,
specifying the intention to propose the resolution as a special resolution has been duly given.
(2) Notwithstanding subsection (1), if majority of 95% voting for it, it is good.
 (3) At any meeting at which a special resolution is submitted a declaration of the chairman that the
resolution is carried shall unless a poll is demanded be conclusive evidence of the fact without proof of the
number or proportion of the votes recorded in favour of or against the resolution.
(4) You can have a poll if you call for it.

Entrenching provisions under s26A(4) have their own requirements for changes.

26A.—(1) An entrenching provision may —

(a) be included in the constitution with which a company is formed; and
(b) at any time be inserted in the constitution of a company only if all the members of the company agree.
(2) An entrenching provision may be removed or altered only if all the members of the company agree.
(3) The provisions of this Act relating to the alteration of the constitution of a company are subject to any
entrenching provision in the constitution of a company.
(4) In this section, “entrenching provision” means a provision of the constitution of a company to the effect that
other specified provisions of the constitution —
(a) may not be altered in the manner provided by this Act; or
may not be so altered except —
by a resolution passed by a specified majority greater than 75% (the minimum majority required by this Act
(i)
(b) for a special resolution); or
(ii) where other specified conditions are met.

Challenging alterations to the constitution

Can be done by showing that the alternation is not ‘bona fide for the benefit of the company as a whole’

🡺 This is the bona fide test of the UK

Allen v Gold Reefs of West Africa – Man died with shares fully and partly paid. Co. altered articles to have a lien on all
shares, from just the unpaid ones. Executor of estate raised challenge. Held that the change was made bona fide and
applied to all holders of fully paid shares, and made no distinction.

Sidebottom v Kershaw – Amendment to allow for compulsory acquisition of shares from shareholders competing
with the company. This was held (objectively) as for the benefit of the company.

Shuttleworth v Cox Bros – S was appointed to the board for life, but there were some irregularities of accounts and
the other directors wanted to remove him. They proposed to amend articles to allow for removal of a director by
request in writing. Held there was no bad faith, and it was for the benefit of the company.

Greenhalgh v Arderne Cinemas – G was the minority shareholder who wanted to prevent amendment that would
allow majority to sell out. Held, he can’t, as the shareholders do not have to “dissociate” and think for the company.
Considering their own position is allowed as long as it is their honest opinion.

For the most part, bona fide test is a subjective one – but if objectively it looks crazy, you should try to attack that
subjective honest belief. Prof says you need bribes or a smoking gun.

🡺 In contrast to the Proper Purpose test of Australia’s Gambotto v WCP

The majority owned company wanted to buy out the minority who refused to sell, in order to get a tax
benefit. They were offering a decent price, but minority resisted. Thus, tried to amend to get compulsory
acquisition of those shares.

On an alteration to expropriate shares, the Australian court said that:

1. Amendment must be for a proper purpose (not just a benefit, must save the company from a significant
harm)
2. Terms cannot be unfair procedurally or substantively, eg. give chance/notice/fair price
s 216 CA allows for a remedy for statutory oppression – personal remedies in cases of oppression or injustice.

Effects of the constitution

The constitution is a binding covenant, and has a contractual effect between the company and member, and
members inter se. (s 39(1) CA)

Since the constitution is a statutory contract, where is there a gap, it’s fill-able by contractual principles.

- Golden Harvest Films v Golden Village (CA) – you can use past practice of the co. by showing concrete
evidence
- Sembcorp Marine on implying terms

1. Must be a true gap ie. parties did not contemplate the issue

2. Term can implied if necessary for business efficacy

3. An officious bystander given this term would say “of course”

- Chan Siew Lee v TYC Investment

One director disagreed on making payment. Held that implying terms should be limited to occasions of true
necessity. In this case, implying reserve powers in AGM to allow one director to unilaterally sign for specific items.

Limits to effect of constitution

1. Non-members cannot enforce a right in the constitution in their favour.

Ely v Positive Security Life Assurance – Solicitor Eley added his name into the constitution, tried to sue in that
capacity to be the solicitor of the company. Held this was not allowed as no notice to members joining the co.

2. Qua-member rule: the statutory contract applies only to provisions that affect people in their capacity as
members, nothing else.

Hickman v Kent – H didn’t want to register his sheep in the association’s book. Went to court. Articles said for any
dispute between members and association must arbitrate first. Court said, yep, go arbitrate no court for you.

3. Contracts that a company enters into may be impacted by the constitution.

Eg. employee contracts for directors incorporate the constitution.

Swabey v Port Darwin Gold Mining – There was a reduction of director’s salary that was in the articles. Held though
the co. can alter, directors would be entitled to the original salary up until the alteration. Court said, someone who
accepts appointment with notice of the articles are taken to have entered into a ctt with the company to serve on
terms of the articles. -> extrinsic ctt that incorporates the constitution as a term by notice.

Oro Negro Drilling v Integradora – Directors granted power of attorney to attorney without the independent
director’s approval. Held that it was sensible to infer that this contract was “on the footing” of the constitution, thus
binding the attorney even though it was explicit in the contract.

4. A company cannot alter its constitution such that it would breach a contract between itself and an outsider

Southern Foundries v Shirlaw – (officious bystander root) Director who was appointed for 10 years. Held it was
implied he could not resign not be fired for the fixed term. Co amended constitution to sack him, held not allowed.

Shareholders’ Agreements
Can only be altered by consent of all contracting parties, and binds only the contracting parties.

Russel v Northern Bank Development – agreement that no further share capital be created, nor rights be altered
without written consent. Held that though the agreement cannot bind the company, it would bind all the signatories
and restrict their voting choice when it came to the vote on whether or not to issue more shares.
Not enforceable against future shareholders who did not sign, not against the company as the agreement is not
incorporated into the constitution.

🡺 Supremacy clause (of constitution or of the agreement)

Wellness Group v Paris Investment – “prevalence of agreement” clause in the shareholders’ agreement which was
written to agree that the minority shareholders could appoint one director vs the constitution that said the board
appoints directors. All shareholders were party to the agreement. Held, agreement prevails as contracted.

Shares
Borland’s Trustee v Steel Bros – the interest of a shareholder in a co is measured by a sum of money for the purpose
of liability in the first place, and of interest in the second but also consisting of a series of mutual covenants entered
into by all shareholders.

🡺 Give financial rights to dividend, return of capital on liquidation, even pre-emptive rights on further issues of
shares.
🡺 Give general membership rights, to attend and vote, access company information
🡺 Property rights to sell the share

All the rights may be varied and laid out in the constitution, and members are obliged to comply with the
constitution.

Classes of shares
Ordinary shares are normal shares. Preference shares have fixed entitlements to dividends and in liquidation are also
prioritised. Variations may include more or no vote, and be cumulative (on years w/o profit), participating (having
more on meeting targets), convertible (for ordinary shares) or even redeemable (by the company’s call).

Further, deferred shares are lower on the priority list, and then there are golden shares for governments or important
holders who need veto rights.

Class rights
Specifically for public companies, s 64(1) CA states that the constitution must allow for issue of different classes of
shares, and the rights of each class are laid out.

When they issue shares with special, limited, conditional or no voting rights, they can only be done by approval of a
special resolution s 64A(2).

And even for non-voting shares, when there is a voluntary windup, or any resolution aiming to varying their class
rights (eg. their dividend), s 64(4) states they get a vote in that situation.

Varying class rights

As a safeguard and minority protection measure, there are some extra requirements when it comes to varying rights
that are attached to a class of shares.

1. If it is a variation of constitution try to whack it with the bona fide. If it is bona fide, but still want to knock it:
2. Prove that it is a class right: Cumbrian Newspapers v Cumberland – A right annexed to shares of a certain
class, or, even if unattached, confers a benefit on a group of members, conferred in the capacity of a
member, not in any other capacity. Right to appoint director if shareholding > 10% held to be such a right.
(note that personal rights in constitution to specific people would not count. Cumbrian type 2. Rights for
particular people.)
3. Prove variation of class rights:

White v Bristol Aeroplane – issuance of more shares which dilutes voting power may be a variation as a matter of
business, but does not vary the legal right.

Greenhalgh v Arderne Cinemas – similarly, minority shareholder trying to prevent majority from selling out by
preventing a change in constitution. Held, with or without variation, one share one vote was the same, no
variation.
 BUT s 74(6): The issue by a company of preference shares ranking pari passu with existing preference shares
issued by the company shall be deemed to be a variation of the rights attached to those existing preference
shares unless the issue of the first-mentioned shares was authorised by the terms of issue of the existing
preference shares or by the constitution of the company in force at the time the existing preference shares were
issued.

4. Proceed to voting based on the company constitution’s modification of rights clause. The MC’s version is 75%
of all holders of that class or special resolution at general meeting of those holders.

Extra limitations:

Limit on majority rule in cases where people hold more than one class of shares:

Re Holders Investment Trust – Majority voted in their personal interests, and not in the consideration of that
particular class of shares. Held that when they are voting on a variation of class rights, they must give consent in the
capacity of the affected class.

If there is an entrenching provision, look at the constitution section.

5. Also, if you’re still unhappy, and you can get an aggregate of 5% of that class of shares with you, you can
apply to court (within 1 months s 74(3)) under s 74(1), and in that application, the amendment would be
paused. If the court is satisfied that this unfairly prejudices the class, having regard to all the circumstances s
74(4), it can disallow the change.

And if any of the people with you changed their mind because of some material facts that the company did not
disclose before they voted, your application is alright s 74 (2).

Issue of shares
Superseding what the constitution says, s 161(1) CA says that the board’s power to issue shares is subject to
shareholder approval – ordinary resolution are the default. This approval would last till the next AGM, or the time
that an AGM is supposed to be held.

But, pre-emption rights on new shares are dependent on the constitution – eg. the MC has it, but not all companies
may have it.

Company Management
Division of power between the Board and the GM
English cases that may be useful:

Automatic Self Cleansing Filter v Cuningham – GM cannot override management decisions, but can refuse to re-elect
directors.

Barron v Potter – Two directors and the train station not on speaking terms. Shareholders held meeting to agree.
Held, if directors having certain powers are in fact a non-existent body for the purpose, GM gets the power

But, the Singapore version is stated in statute.

157A.—(1) The business of a company shall be managed by, or under the direction or supervision of, the
directors.
(2) The directors may exercise all the powers of a company except any power that this Act or the constitution
of the company requires the company to exercise in general meeting.
Most of the power is with the directors, unless constitution says otherwise.

However, in very necessary situations, it is possible to imply a reserve power for the GM.
Chan Siew Lee v TYC Investment – couple were directors but had problems. Wife refused to sign on invoice for KPMG
who had given tax advice for the division of assets due to their divorce. Company had only two of them as directors,
and special provision that both would have to sign. Held that:

1. If there is a deadlock
2. An obligation to a 3rd party
3. No reason to not pay the obligation (eg. efficient breach or thing)

Reserve power implied for GM.

Who are Directors

s 4(1) “director” includes any person occupying the position of director of a corporation by whatever name
called and includes a person in accordance with whose directions or instructions the directors or the majority
of the directors of a corporation are accustomed to act and an alternate or substitute director;

4(2) For the purposes of this Act, a person (A) shall not be regarded as a person in accordance with whose
directions or instructions the directors or the majority of the directors of a corporation are accustomed to act
by reason only that the directors or the majority of the directors act on advice given by A in a professional
capacity.

Shadow directors – Raffles Town Club v Lim Eng Hock – discernible pattern of compliance with person’s instructions

De factor directors – Wellness Group – Not withstanding his not being validly appointed, nevertheless performed the
functions of a director and was held out by the co. as such.

Such directors are also imposed with the duties and liabilities of official directors – Wellness Group – such persons
ought to be held to the stand of conduct required of directors and should not be permitted to avoid liability purely
for want of official appointment.

Of course, de jure directors would be directors – but be careful of the different types.

The qualifications are not onerous, but there must be at least one who is ordinarily resident in Singapore.

Wellness group factors to ascertain if director:

Whether he directed others ; committed the co to major obligations ; participated on an equal level in collective
decisions made by the board ; whether the co. held him out to be a director ; had proper information of the co. ;
made major decisions.

How be?
Appointment is usually in the constitution, but if not the default is s 149B Unless the constitution otherwise provides,
a company may appoint a director by ordinary resolution passed at a general meeting.

s 150(1) directors who want to stand as a team must first have a resolution passed allowing for this, without
any vote against it.

And of course, directors can also be disqualified or barred from standing as directors again if they do bad things.

Disqualification in SG has a “predominantly protective purpose” – Ong Chow Hong v PP (director went to play gold
and gave duty of checking SGX statement to another director.)

You can be automatically disqualified for:

s 148: being an undischarged bankrupt

s 154(1): the person is convicted of any of the following offences:

(i) any offence, whether in Singapore or elsewhere, involving fraud or dishonesty punishable with
imprisonment for 3 months or more;
(ii) any offence under Part XII of the Securities and Futures Act (Cap. 289), where the conviction was on
or after 1 July 2015; or
 (b) the person is subject to the imposition of a civil penalty under section 232 of the Securities and
Futures Act on or after 1 July 2015.

s 155: Disqualification for persistent default in relation to delivery of documents to Registrar

s 155A: Disqualification for being director in not less than 3 companies which were struck off (defunct as in s
344) within 5-year period

Discretionary when:

s 149: court says you’re unfit after seeing your actions in a company that went insolvent or did in the 3 years
after you left.

s 149A: When your co. was wound up for being a threat to national security interests.

s 154(2): The court may, in addition to any other sentence imposed, make a disqualification order against any
person who is convicted in Singapore of any of the following offences:
(a) any offence in connection with the formation or management of a corporation;
(b) any offence under section 157 (director’s duties) or 396B (not keeping proper accounts);
(c) any offence under section 237 or 239 of the Insolvency, Restructuring and Dissolution Act 2018.

Debarment: stay in whatever position you have and no further. Disqualification: immediate, no being a director
directly or indirectly, in local or foreign

Removal
Removal of directors

152.—(1) A public company may by ordinary resolution remove a director before the expiration of his period
of office, notwithstanding anything in its constitution or in any agreement. But if director appointed to
represent the interests of any particular class, resolution to remove him effective only with successor
(2) Special notice shall be required of any resolution under subsection (1) or to appoint some person in place
of a director. Co. must send copy to director and he has right to be heard.
(3) When director concerned makes representations in writing to the public company, not exceeding a
reasonable length, and requests their notification to members of the company, the company shall, unless the
representations are received by it too late for it to do so —
(a) in any notice of the resolution given to members of the company state the fact of the
representations having been made; and
(b) send a copy of the representations to every member of the company to whom notice of the meeting
is sent, whether before or after receipt of the representations by the company,
and if a copy of the representations is not so sent because they were received too late or because of the
company’s default the director may, without prejudice to his right to be heard orally, require that the
representations shall be read out at the meeting.
(4) Notwithstanding subsections (1), (2) and (3), no need to send or read, if on the application either of the
public company or of any other person who claims to be aggrieved, the Court is satisfied that the rights
conferred by this section are being abused to secure needless publicity for defamatory matter. Court can also
order co. costs to be paid.
(5) A vacancy created by the removal of a director of a public company under this section, if not filled at the
meeting at which he is removed, may be filled as a casual vacancy.
(6) A person appointed director of a public company in place of a person removed under this section shall be
treated, for the purpose of determining the time at which he or any other director is to retire, as if he had
become a director on the day on which the person in whose place he is appointed was last appointed a
director.
(7) Director still gets termination money for his appointment as director or of any appointment terminating
with that as director. Also any power to remove a director which may exist apart from this section remains
 (8) A director of a public company shall not be removed by, or be required to vacate his office by reason of,
any resolution, request or notice of the directors or any of them notwithstanding anything in the constitution
or any agreement.
(9) Subject to any provision to the contrary in the constitution, a private company may by ordinary
resolution remove a director before the expiration of his period of office notwithstanding anything in any
agreement between the private company and the director.
If you want to resign, you can

s 145 (4A): Subject to constitution, you can resign by giving notice in writing, and (4B) says it is not
conditional on Co. acceptance.

-> But you can’t if he’s the last remaining ordinarily resident in Singapore director s 145(5)

Money that Directors Get

Director emoluments are =/= to their employee contract fees, so most of them will get away here.

Payments to director for loss of office, etc.

168.—(1) It shall not be lawful —
(a) for a company to make to any director any payment by way of compensation for loss of office as an
officer … or … in connection with his retirement from any such office; or
(b) for any payment to be made to any director of a company in connection with the transfer of the
whole or any part of the undertaking or property of the company, unless particulars … including the amount
thereof, have been disclosed to the members of the company and the proposal has been approved by the
company in general meeting and when any such payment has been unlawfully made the amount received by
the director shall be deemed to have been received by him in trust for the company.
(1A) The requirement for approval shall not apply in respect of any payment to a director holding a salaried
employment or office in the company by way of compensation for termination of employment pursuant to
an existing legal obligation arising from an agreement made between the company and the director if —
(a) the amount of the payment does not exceed the total emoluments of the director for the year
immediately preceding his termination of employment; and
(b) the particulars with respect to the proposed payment, including the amount thereof, have been
disclosed to the members of the company upon or prior to the payment.
(1B) For the purposes of subsection (1A) —
(a) an existing legal obligation is an obligation of the company, or any corporation which is by virtue of
section 6 deemed to be related to the company, that was not entered into in connection with, or in
consequence of, the event giving rise to the payment for loss of office; and
(b) if paragraph (a) or (b) of that subsection is not complied with, the amount received by the director
shall be deemed to have been received by him on trust for the company.
…
As to payments to directors
(5) Any reference in this section to payments to any director of a company by way of compensation for loss
of office or as consideration for or in connection with his retirement from office shall not include —
(a) any payment under an agreement entered into before 1st January 1967;
(b) any payment under an agreement particulars of which have been disclosed to and approved by
special resolution of the company;
(c) any bona fide payment by way of damages for breach of contract;
(d) any bona fide payment by way of pension or lump sum payment in respect of past services, including
any superannuation or retiring allowance, superannuation gratuity or similar payment, where the value or
amount of the pension or payment, except in so far as it is attributable to contributions made by the director,
does not exceed the total emoluments of the director in the 3 years immediately preceding his retirement or
death; or
(e) any payment to a director pursuant to an agreement made between the company and him before he
became a director of the company as the consideration or part of the consideration for the director agreeing
to serve the company as a director.
(6) This section shall be in addition to and not in derogation of any rule of law requiring disclosure to be
made with respect to any such payments or any other like payment.
(7) In this section, “director” includes any person who has at any time been a director of the company or of a
corporation which is by virtue of section 6 deemed to be related to the company.
Provision and improvement of director’s emoluments
169.—(1) A company shall not at any meeting or otherwise provide emoluments or improve emoluments for
a director of a company in respect of his office as such unless the provision is approved by a resolution that is
not related to other matters and any resolution passed in breach of this section shall be void.
(2) In this section, “emoluments” in relation to a director includes fees and percentages, any sums paid by
way of expenses allowance in so far as those sums are charged to income tax in Singapore, any contribution
paid in respect of a director under any pension scheme and any benefits received by him otherwise than in
cash in respect of his services as director.

Restricted transactions
Loans and quasi-loans to directors, credit transactions and related arrangements

162.—(1) For the purposes of this section, a company makes a restricted transaction if it —
(a) makes a loan or quasi-loan to a director —
(i) of the company; or
(ii) of a company which by virtue of section 6 is deemed to be related to that company,
(referred to in this section as a relevant director);
(b) enters into any guarantee or provides any security in connection with a loan or quasi-loan made to a
relevant director by any other person;
(c) enters into a credit transaction as creditor for the benefit of a relevant director;
(d) enters into any guarantee or provides any security in connection with a credit transaction entered
into by any person for the benefit of a relevant director;
(e) takes part in an arrangement under which —
(i) another person enters into a transaction that, if it had been entered into by the company,
would have been a restricted transaction under paragraph (a), (b), (c), (d) or (f); and
(ii) that person, in pursuance of the arrangement, obtains a benefit from the company or a
company which by virtue of section 6 is deemed to be related to that company; or
(f) arranges the assignment to the company, or assumption by the company, of any rights, obligations or
liabilities under a transaction that, if it had been entered into by the company, would have been a restricted
transaction under paragraphs (a) to (e).
(2) Subject to subsections (3) and (4) and sections 163A and 163B, a company (other than an exempt private
company) shall not make a restricted transaction.
(3) Subject to subsection (4), nothing in this section shall apply to any transaction which would otherwise be
a restricted transaction that is —
(a) made to or for the benefit of a relevant director to meet expenditure incurred or to be
incurred by him for the purposes of the company or for the purpose of enabling him to properly
perform his duties as an officer of the company;
(b) made to or for the benefit of a relevant director who is engaged in the full-time employment
of the company or of a corporation that is deemed to be related to the company, as the case may be,
for the purpose of purchasing or otherwise acquiring a home occupied or to be occupied by the
director, except that not more than one such restricted transaction may be outstanding at any time;
(c) made to or for the benefit of a relevant director who is engaged in the full-time employment
of the company or of a corporation that is deemed to be related to that company, as the case may
be, where the company has at a general meeting approved of a scheme for the making of such
transaction to or for the benefit of employees of the company and the restricted transaction is in
accordance with that scheme; or
(d) made to or for the benefit of a relevant director in the ordinary course of business of a
company whose ordinary business includes the lending of money or the giving of guarantees in
connection with loans, quasi-loans or credit transactions made or entered into by other persons if
the activities of that company are regulated by any written law relating to banking, finance
companies or insurance or are subject to supervision by the Monetary Authority of Singapore.
(4) Subsection (3)(a) or (b) shall not authorise the making of any restricted transaction, except —
(a) with the prior approval of the company given at a general meeting at which the purposes of
the expenditure and the amount or extent of the restricted transaction are disclosed; or
 (b) on condition that, if the prior approval of the company is not given as aforesaid at or before
the next following annual general meeting, the amount of or liability under the restricted transaction
shall be repaid or discharged, as the case may be, within 6 months from the conclusion of that
meeting.
(5) Where the prior approval of the company is not given as required by the condition referred to in
subsection (4)(b), the directors authorising the making of the restricted transaction shall be jointly and
severally liable to indemnify the company against any loss arising therefrom.
(6) Where a company contravenes this section, any director who authorises the making of the restricted
transaction shall be guilty of an offence and shall be liable on conviction to a fine not exceeding $20,000 or to
imprisonment for a term not exceeding 2 years.
(7) Nothing in this section shall operate to prevent the company from recovering the amount of any loan,
quasi-loan, credit transaction or arrangement or amount for which it becomes liable under any guarantee
entered into or in respect of any security given contrary to this section.
(8) For the purpose of subsection (1), a reference to a director or relevant director therein includes a
reference to the director’s spouse, son, adopted son, step-son, daughter, adopted daughter and
step-daughter.
(9) In determining for the purposes of this section whether a transaction is a restricted transaction under
subsection (1)(e), the transaction shall be treated as having been entered into on the date of the
arrangement.
(10) For the purposes of this section, a reference to prior approval does not include any approval of the
company that is given after the restricted transaction has been made, provided for or entered into (as the
case may be).
(11) In this section and section 163 —
“conditional sale agreement” has the same meaning as in section 2 of the Hire-Purchase Act (Cap. 125);
“credit transaction” means a transaction under which one party (referred to in this section and section 163 as
the creditor) —
(a) supplies any goods or disposes of any immovable property under a hire-purchase agreement
or a conditional sale agreement;
(b) leases or hires any immovable property or goods in return for periodic payments; or
(c) otherwise disposes of immovable property or supplies goods or services on the
understanding that payment (whether in a lump sum or instalments or by way of periodic payments
or otherwise) is to be deferred;
“quasi-loan” means a transaction under which one party (referred to in this section and section 163 as the
creditor) agrees to pay, or pays otherwise than in pursuance of an agreement, a sum for another (referred to
in this section as the borrower) or agrees to reimburse, or reimburses otherwise than in pursuance of an
agreement, expenditure incurred by another party for another (referred to in this section and section 163 as
the borrower) —
(a) on terms that the borrower (or a person on his behalf) will reimburse the creditor; or
(b) in circumstances giving rise to a liability on the borrower to reimburse the creditor;
“services” means any thing other than goods or immovable property.
(12) For the purposes of subsection (11) —
(a) a reference to the person to whom a quasi-loan is made is a reference to the borrower;
(b) the liabilities of the borrower under a quasi-loan include the liabilities of any person who has
agreed to reimburse the creditor on behalf of the borrower;
(c) a reference to the person for whose benefit a credit transaction is entered into is a reference
to the person to whom goods, immovable property or services are supplied, sold, leased, hired or
otherwise disposed of under the transaction; and
(d) a reference to the supply of services means the supply of anything other than goods or
immovable property and includes the transfer or disposal of choses in action or of intellectual
property rights.
Approval of company required for loans and quasi-loans to, and credit transactions for benefit of, persons connected
with directors of lending company, etc.
163.—(1) Subject to this section and sections 163A and 163B, it shall not be lawful for a company (other
than an exempt private company) —
(a) to make a loan or quasi-loan to another company, a limited liability partnership or a VCC;
(b) to enter into any guarantee or provide any security in connection with a loan or quasi-loan made to
another company, a limited liability partnership or a VCC by a person other than the first-mentioned
company;
(c) to enter into a credit transaction as creditor for the benefit of another company, a limited liability
partnership or a VCC; or
(d) to enter into any guarantee or provide any security in connection with a credit transaction entered
into by any person for the benefit of another company, a limited liability partnership or a VCC,
if a director or directors of the first-mentioned company is or together are interested in 20% or more of the
total voting power in the other company, the limited liability partnership or the VCC, as the case may be,
unless there is prior approval by the company in general meeting for the making of, provision for or entering
into the loan, quasi-loan, credit transaction, guarantee or security (as the case may be) at which the
interested director or directors and his or their family members abstained from voting.
(2) Subsection (1) shall extend to apply to —
(a) a loan or quasi-loan made by a company (other than an exempt private company) to another
company or a limited liability partnership;
(b) a credit transaction made by a company (other than an exempt private company) for the
benefit of another company or to a limited liability partnership; and
(c) a guarantee entered into or security provided by a company (other than an exempt private
company) in connection with a loan or quasi-loan made to another company or a limited liability
partnership by a person other than the first-mentioned company or with a credit transaction made
for the benefit of another company or a limited liability partnership entered into by a person other
than the first-mentioned company,
where such other company or such limited liability partnership is incorporated or formed, as the case may
be, outside Singapore, if a director or directors of the first-mentioned company have an interest in the other
company or the limited liability partnership, as the case may be.
(3) For the purposes of subsection (2), a director or directors of a company —
(a) have an interest in the other company if —
(i) in the case of a company with a share capital, the director or directors is or together are
interested in 20% or more of the total voting power in the other company; or
(ii) in the case of a company without a share capital, the director or directors exercises or
together exercise control over the other company (whether by reason of having the power to
appoint directors or otherwise); or
(b) have an interest in a limited liability partnership if the director or directors is or together are
interested in 20% or more of the total voting power in the limited liability partnership.
(3A) Subject to this section and sections 163A and 163B, a company (other than an exempt private company)
shall not —
(a) take part in an arrangement under which —
(i) another person enters into a transaction that, if it had been entered into by the company,
would have required approval under this section; and
(ii) that person, in pursuance of the arrangement, obtains a benefit from the company or a
related company; or
(b) arrange the assignment to it, or assumption by it, of any rights, obligations or liabilities under
a transaction that, if it had been entered into by the company, would have required such approval,
unless there is prior approval by the company in general meeting for taking part in such an
arrangement or for arranging the assignment or assumption of rights, obligations or liabilities under
such a transaction at which the interested director or directors or his or their family members
abstained from voting.
(3B) In determining for the purposes of subsection (3A) whether a transaction is one that would have
required approval under this section if it had been entered into by the company, the transaction shall be
treated as having been entered into on the date of the arrangement.
(3C) The requirement in subsections (1) and (3A) that the interested director or directors or his or their
family members abstain from voting at the general meeting of the company shall not apply where all the
shareholders of the company have each voted to approve the arrangement.
(3D) For the purposes of this section —
(a) where a company makes a loan or quasi-loan to another company or VCC, enters into a credit
transaction for the benefit of another company or VCC, gives a guarantee or provides security in connection
with a loan, quasi-loan or credit transaction made to or entered into for the benefit of another company or
 VCC, or enters into an arrangement referred to in subsection (3A), a director or directors of the
first-mentioned company shall not be taken to have an interest in shares in that other company or VCC by
reason only that the first-mentioned company has an interest in shares in that other company or VCC and a
director or directors have an interest in shares in the first-mentioned company;
(b) the expression “interest in shares”, in relation to a company, has the meaning assigned to it in
section 7 and, in relation to a VCC, has the meaning assigned to it in section 7 as applied by section 2(6) of
the VCC Act and read with section 2(7) of that Act;
(c) a person who has an interest in a share of a company or a VCC is to be treated as having an interest
in the voting power conferred on the holder by that share;
(d) a reference to prior approval of the company in subsection (1) shall not include any approval of the
company that is given after the loan, quasi-loan, credit transaction, guarantee or security referred to in that
subsection has been made, provided for or entered into (as the case may be); and
(e) a reference to prior approval of the company in subsection (3A) shall not include any approval of the
company that is given after the arrangement referred to in that subsection has been entered into.
(4) This section shall not apply —
(a) to anything done by a company where the other company (whether that company is incorporated in
Singapore or otherwise) or VCC is its subsidiary or holding company or a subsidiary of its holding company; or
(b) to a company, whose ordinary business includes the lending of money or the giving of guarantees in
connection with loans made by other persons, to anything done by the company in the ordinary course of
that business if the activities of that company are regulated by any written law relating to banking, finance
companies or insurance or are subject to supervision by the Monetary Authority of Singapore.
(5) For the purposes of this section —
(a) an interest of a member of a director’s family shall be treated as the interest of the director; and
(b) a reference to a member of a director’s family shall include the director’s spouse, son, adopted son,
step-son, daughter, adopted daughter and step-daughter.
(6) Nothing in this section shall operate to prevent the recovery of the amount of any loan, quasi-loan, credit
transaction or arrangement or the enforcement of any guarantee or security whether made or given by the
company or any other person.
(7) Where a company contravenes this section, any director who authorises the making of any loan or
quasi-loan, the entering into of any credit transaction, the entering into of any guarantee, the providing of
any security or the entering into of any arrangement contrary to this section shall be guilty of an offence and
shall be liable on conviction to a fine not exceeding $20,000 or to imprisonment for a term not exceeding 2
years.

Procedures
There are different procedures for conducting of board and shareholder meetings that are usually in the constitution.
But for the shareholder meetings, the yearly AGM -> company must disclose their financial statements (s 201) and
appoint their auditor for the year ahead s 205(2). For an EGM to be convened, there are other provisions in place –

Eg. s 176(1) – shareholders holding more that 10% can require the board to hold their meeting – within 2
months of receipt of requisition.

S 177(1) – two or more shareholders with >10% (or if no shares, >5% of the capital) can call themselves with
14 days of notice (or less if they have 95% of the voters) or more depending on the constitution.

S 182 – Court can call a meeting.

If they’re passing a special resolution, at whichever meeting, private co need 14 days notice, public needs 21 days
notice – unless they have 95% of the voters present.

Otherwise, generally, the quorum requirement for a normal meeting after the notice period to be held is s 179(1)(a)
2 members.

If you think a meeting is unnecessary and just want your members to vote, the board can ask for written resolution
via s 184 C -> if enough approval in 28 days, passes. But any 5% of the voters can ask for a meeting.
And if all the shareholders agree and don’t want to bother with writing or having a meeting, they can use the
Unanimous Consent Rule of Re Duomatic

🡺 Anything that shareholders can do at a meeting can be done by unanimous consent w/o writing or a physical
meeting

Limited by: Dovechem Holdings v Ng Joo Soon -> cannot use it for constitutional amendments

Yong Kheng Leong: Only really works for closed private co. with track record of informality, as it needs sufficient basis
for the court to infer.

Irregularities in procedure
If there are irregularities in the way meetings were called, or the way resolutions were passed, the meeting and
decisions may be invalidated.

In statute, s 392(2) sets out validation of irregular company proceedings that has not “caused or may cause
substantial injustice that cannot be remedied by any order of the court”.

Irregularities
392.—(1) In this section, unless the contrary intention appears a reference to a procedural irregularity
includes a reference to —
(a) the absence of a quorum at a meeting of a corporation, at a meeting of directors or creditors
of a corporation or at a joint meeting of creditors and members of a corporation; and
(b) a defect, irregularity or deficiency of notice or time.
(2) A proceeding under this Act is not invalidated by reason of any procedural irregularity unless the Court is
of the opinion that the irregularity has caused or may cause substantial injustice that cannot be remedied by
any order of the Court and by order declares the proceeding to be invalid.
(3) A meeting held for the purposes of this Act, or a meeting notice of which is required to be given in
accordance with the provisions of this Act, or any proceeding at such a meeting, is not invalidated by reason
only of the accidental omission to give notice of the meeting or the non-receipt by any person of notice of
the meeting, unless the Court, on the application of the person concerned, a person entitled to attend the
meeting or the Registrar, declares proceedings at the meeting to be void.
(4) Subject to the following provisions of this section and without limiting the generality of any other
provision of this Act, the Court may, on application by any interested person, make all or any of the following
orders, either unconditionally or subject to such conditions as the Court imposes:
(a) an order declaring that any act, matter or thing purporting to have been done, or any
proceeding purporting to have been instituted or taken, under this Act or in relation to a corporation
is not invalid by reason of any contravention of, or failure to comply with, a provision of this Act or a
provision of any of the constituent documents of a corporation;
(b) an order directing the rectification of any register kept by the Registrar under this Act;
(c) an order relieving a person in whole or in part from any civil liability in respect of a
contravention or failure of a kind referred to in paragraph (a);
(d) an order extending the period for doing any act, matter or thing or instituting or taking any
proceeding under this Act or in relation to a corporation (including an order extending a period
where the period concerned expired before the application for the order was made) or abridging the
period for doing such an act, matter or thing or instituting or taking such a proceeding,
and may make such consequential or ancillary orders as the Court thinks fit.
(5) An order may be made under subsection (4)(a) or (b) notwithstanding that the contravention or failure
referred to in the paragraph concerned resulted in the commission of an offence.
(6) The Court shall not make an order under this section unless it is satisfied —
(a) in the case of an order referred to in subsection (4)(a) —
(i) that the act, matter or thing, or the proceeding, referred to in that paragraph is essentially of
a procedural nature;
(ii) that the person or persons concerned in or party to the contravention or failure acted
honestly; or
(iii) that it is in the public interest that the order be made;
(b) in the case of an order referred to in subsection (4)(c), that the person subject to the civil
liability concerned acted honestly; and
 (c) in every case, that no substantial injustice has been or is likely to be caused to any person.

Though s 392(1)(a) says that quorum is prima facie an procedural irregularity, the determination of procedural vs
substantive depends on test in Thio Keng Poon:
1. Identify the ‘thing to be done’ meant to be regulated by the procedure.
2. If the irregularity changes that substance of the ‘thing to be done’ = substantive irregularity
3. If it merely departs of the prescribed manners w/o changing substance of the thing = procedural

Thio Keng Poon v Thio Syn Pyn – Failure to serve notice on director to get him to resign as required in the consti.
Precondition to firing director was not satisfied. Thus, it was not a procedural irregularity, and not open to s 392(2)
validation, court also commented that if the director had been served notice and has chance to present his case, he
may not have been removed.

But even if it were a procedural irregularity, to test for the substantial injustice:
1. Establish a direct link between the procedural irregularity and the injustice suffered.
2. Injustice must be of a substantial, real nature (not theoretical or fanciful)
3. Show that a different result may or could have been if not for the occurrence of the procedural irregularity.

These were used in Benety Chang v Tang Kin Fei in assessing the lack of quorum – in shareholder agreement, clause
said quorum is 2, as long as at least one director from each side. But the meeting passing a resolution expanding the
powers of the appointed solicitors was held with only directors from SCM.

As in statute, lack of a quorum is a procedural irregularity – even if it was expressly negotiated as a right (Benety
Chang; Sum Hong Kum for expressly negotiated deadlock right.)

Given that the quorum was for the issue of representation, and that this meeting without PPLH directors overrode
the original bargain stuck, substantial injustice to the Appellants as they were deprived of the bargain which they
had struck with the Respondents and WongPartnership. Court described it as symptomatic of a larger power struggle
of shareholding parties -> struggle and benefit via procedure seems to be substantial injustice.

Director’s duties
Duty to act bona fide
Ho Yew Kong v Sakae Holdings – s 157(1) enshrines the common law duties to act bona fide and with due care, skill
and diligence.

157.—(1) A director shall at all times act honestly and use reasonable diligence in the discharge of the duties
of his office.
(2) An officer or agent of a company shall not make improper use of his position as an officer or agent of the
company or any information acquired by virtue of his position as an officer or agent of the company to gain,
directly or indirectly, an advantage for himself or for any other person or to cause detriment to the company.
(3) An officer or agent who commits a breach of any of the provisions of this section shall be —
(a) liable to the company for any profit made by him or for any damage suffered by the company
as a result of the breach of any of those provisions; and
(b) guilty of an offence and shall be liable on conviction to a fine not exceeding $5,000 or to
imprisonment for a term not exceeding 12 months.
(4) This section is in addition to and not in derogation of any other written law or rule of law relating to the
duty or liability of directors or officers of a company.
(5) In this section —
“officer” includes a person who at any time has been an officer of the company;
“agent” includes a banker, solicitor or auditor of the company and any person who at any time has
been a banker, solicitor or auditor of the company.

(The government rejected SCRCA’s recommendation to extend s 157(1) duties to CEOs who are not directors.)
Who it is owed to:
Percival v Wright – directors owe a duty of loyalty to co. Not the individual shareholders. Shareholders approached
the board to sell and directors who had plans to sell the whole co (such that the price would increase) bought from
the shareholder at an independent value price.

- This was distinguished in Coleman v Myers – where the directors and shareholders were found to be in a
fiduciary rs. The shareholders were elderly and less educated while the directors were sophisticated and did
not disclose accurate statements to the shareholders.

Fiduciary duties are those of the highest level – where people have a special duty of “single-minded or exclusive
loyalty”.

The duty is also owed to employees and members in statute s 159(a) – must have regard to “the interests of the
company’s employees generally, as well as the interests of its members;”

Also owed to creditors by directors when they are insolvent or near-insolvent – Liquidators of Progen Engineering v
Progen Holdings.

Intraco v Multipak – Generally, they do not owe the same level of duty to other companies, but, when the company is
part of a group, directors are allowed to consider group interests which are consistent with the co’s interest, as long
as it is not to the detriment of the director’s co.

Standard of duty
The fulfilment of this duty is generally subjective:

Goh Chan Peng v Beyonics – The court is slow to interfere with commercial decisions that were made honestly, even
if in hindsight it was a bad one. The court considers if the director exercised his discretion bona fide. But an objective
element relates to the court’s assessment of whether an intelligent and honest man, in the position of the director
could have reasonably believed that the transaction was for the benefit of the co.

(Re Smith and Fawcett: Focus was on the subjective honest belief of the directors. Cf. Hutton v West Cork – the
‘amiable lunatic’ exceptions, where the decision was so irrational that no reasonable director could have come to the
same conclusion.)

But, when it comes to illegal conduct: eg. Scintronix’s bribes to secure business.

Ho Kang Peng v Scintronix – the court held that though the profit outweighed the bribe, criminal liability was n
unjustified risk. Illegal conduct seems to be the line.

And of course, oddly enough, there’s a duty to disclose your own misconduct. Item Software v Fassihi (director who
tried to direct business to his own side. Held disclosing this would have been in the co. best interest.)

Duty to act for proper purposes

As stated in Scintronix, this duty is a subset of the duty of good faith.

However, this duty focusses on the power of the directors, and the purposes for which the power was given to them.

Eclairs Group v JKX Oil – JKX’s directors had powers to issue a disclosure notice calling for information about the
company’s shares and persons interested in them. In the event of non-compliance with such a notice, the directors
had powers to restrict the rights attached to the shares. JKX perceived that they were the target of a corporate raid
and got Eclairs and Glengary to disclose – they did disclose. The board found them suspicious enough and resolved to
restrict the rights.

This exercise of power to restrict was held to have been for an improper purpose, because it was only for
non-compliance. Here the directors only wanted to prevent a possible hijacking.

The UKSC was a bit mixed on the final outcome of the test, but it remains “the primary purpose”. There was a
suggested (Lord Sumption) “but-for” in the sense that, if even without the improper purposes, the proper ones
would have also resulted in exercise of power, it’s fine.
Duty of loyalty / to avoid conflict
There are overlapping duties of this common law duty:

- Directors must not place themselves in a position where his duty to his company and his personal interests
conflict (no-conflict rule)
- Directors are accountable to the co. for any undisclosed or unauthorised profit made by reason of that
position (no-profit rule)
- No misappropriating co. property.

The test for this rule is objective, and it is a strict standard that does not look at the state of mind of the directors.

Boardman v Phipps – whether there was a “real, sensible possibility of conflict”.

Ng Eng Ghee v Mamata – SG courts left open whether the “mere possibility” of conflict would suffice.

In real life, of course things like this duty will arise in situations as follows:

Self-dealing transactions
This portion of the common law is reinforced by statute s 156 which calls for disclosure of interests or potential
interests. – there is a bar of 20% here, but the common law bar may well be lower.

Disclosure of interests in transactions, property, offices, etc.

156.—(1) Subject to this section, every director or chief executive officer of a company who is in any way,
whether directly or indirectly, interested in a transaction or proposed transaction with the company shall as
soon as is practicable after the relevant facts have come to his knowledge —
(a) declare the nature of his interest at a meeting of the directors of the company; or
(b) send a written notice to the company containing details on the nature, character and extent
of his interest in the transaction or proposed transaction with the company.
(2) A notice under subsection (1)(b) shall be given as soon as is practicable after —
(a) the date on which the director or chief executive officer became a director or chief executive
officer (as the case may be); or
(b) (if already a director or chief executive officer, as the case may be) the date on which the
director or chief executive officer became, directly or indirectly, interested in a transaction or
proposed transaction with the company,
as the case requires.
(3) The requirements of subsection (1) shall not apply in any case where the interest of the director or chief
executive officer (as the case may be) consists only of being a member or creditor of a corporation which is
interested in a transaction or proposed transaction with the first-mentioned company if the interest of the
director or chief executive officer (as the case may be) may properly be regarded as not being a material
interest.
(4) A director or chief executive officer of a company shall not be deemed to be interested or to have been at
any time interested in any transaction or proposed transaction by reason only —
(a) in the case where it relates to any loan to the company — that he has guaranteed or joined
in guaranteeing the repayment of the loan or any part of the loan; or
(b) in the case it has been or will be made with or for the benefit of or on behalf of a corporation
which by virtue of section 6 is deemed to be related to the company — that he is a director or chief
executive officer (as the case may be) of that corporation,
and this subsection shall have effect not only for the purposes of this Act but also for the purposes of any
other law, but shall not affect the operation of any provision in the constitution of the company.
(5) A declaration given by a director or chief executive officer under subsection (1)(a), or a written notice
given by a director or chief executive officer under subsection (1)(b), shall be treated as a sufficient
declaration or written notice under those provisions in relation to a transaction or proposed transaction if —
(a) in the case of a declaration, the declaration is given at a meeting of the directors or the
director or chief executive officer (as the case may be) takes reasonable steps to ensure that it is
brought up and read at the next meeting of the directors after it is given;
(b) the declaration or written notice is to the effect that —
 (i) he is an officer or a member of a specified corporation, a member of a specified firm, or a
partner or officer of a specified limited liability partnership; and
(ii) he is to be regarded as interested in any transaction which may, after the date of the
declaration or written notice, be made with the specified corporation, firm or limited liability
partnership;
(c) the declaration or written notice specifies the nature and extent of his interest in the
specified corporation, firm or limited liability partnership; and
(d) at the time any transaction is made with the specified corporation, firm or limited liability
partnership, his interest is not different in nature or greater in extent than the nature and extent
specified in the declaration or written notice.
(6) Every director and chief executive officer of a company who holds any office or possess any property
whereby, whether directly or indirectly, any duty or interest might be created in conflict with their duties or
interests as director or chief executive officer (as the case may be) shall —
(a) declare at a meeting of the directors of the company the fact and the nature, character and
extent of the conflict; or
(b) send a written notice to the company setting out the fact and the nature, character and
extent of the conflict.
(7) A declaration under subsection (6)(a) shall be made at the first meeting of the directors of the company
held —
(a) after he becomes a director or chief executive officer (as the case may be); or
(b) (if already a director or chief executive officer, as the case may be) after he commenced to
hold the office or to possess the property,
as the case requires.
(8) A written notice under subsection (6)(b) shall be given as soon as is practicable after —
(a) the date on which the director or chief executive officer became a director or chief executive
officer (as the case may be); or
(b) (if already a director or chief executive officer, as the case may be) after he commenced to
hold the office or to possess the property,
as the case requires.
(9) The company shall send notice to all the directors when disclosure is made.
(10) The person should declare at the next meeting.
(11) The secretary must keep minutes
(12) The directors of a company shall permit a CEO to say these things at a meeting
(13) For the purposes of this section —
(a) an interest of a member of a director’s family shall be treated as an interest of the director
and the words “member of a director’s family” shall include his spouse, son, adopted son, step-son,
daughter, adopted daughter and step-daughter; and
(b) an interest of a member of a chief executive officer’s family shall be treated as an interest of
the chief executive officer and the words “member of the chief executive officer’s family” shall
include his spouse, son, adopted son, step-son, daughter, adopted daughter and step-daughter.
(14) Subject to subsection (4), this section shall be in addition to and not in derogation of the operation of
any rule of law or any provision in the constitution restricting a director or chief executive officer from having
any interest in transactions with the company or from holding offices or possessing properties involving
duties or interests in conflict with his duties or interests as a director or chief executive officer (as the case
may be).
(15) Any director or chief executive officer of a company who fails to comply with any of the provisions of
this section shall be guilty of an offence and shall be liable on conviction to a fine not exceeding $5,000 or to
imprisonment for a term not exceeding 12 months.
When competing with the Co.
Taking preparatory steps to compete is not a breach.

Smile Inc Dental Surgeons v Lui Andrew Stewart – absent evidence of wrongfully seeking to disclose confidential
information or trade secrets, a person about to leave employment can prepare themselves for future employment.

Foster Bryan Surveying v Bryant – The surveying co. had most of it’s biz from Alliance. Bryant, the unhappy wife, was
going to be made redundant because of the other director, Foster, and so resigned as a director. Alliance wanted to
keep the Bryants, so fully funded Bryant’s new co a few days before the resignation took effect. Held that this was not
a breach of duty of loyalty because the standard of loyalty must be seen in reference to the circumstances:

Eg. the office held, nature of corporate opportunity (ripeness, specificity and the office’s relation to it), amount of
knowledge, circumstances in which it was obtained, factor of time after termination of rs and circumstances of the
termination.

When holding conflicting duties

Directorships of competing companies are not prohibited under old English case law, but s 156(6) does get directors
to disclose such positions they hold.

In Plus Group v Pyke – The other directors had tried to squeeze Pyke out, severing his salary and excluding him from
management. Without resigning, Pyke set up his own co. and got a ctt with a lucrative In Plus customer. Held that
Pyke’s duty to the co has been reduced to a vanishing point by the acts of his fellow directors/shareholders. For all
the influence he held, he might as well have resigned, so not.

Further, nominee directors who have to serve the interests of their nominee and the co. are not allowed to
subordinate the co. interest to the nominator’s interest – Scottish Co-operative Wholesale Society v Meyer

Finally, a director is allowed to enter into and keep to a contract that binds them even if later events make it
disadvantageous to the co. – Fulham Football Club v Cabra Estates. – As long at the ctt is properly entered into at the
start, it would still bind the director.

Using corporate property, information or opportunity

Cook v Deeks – the corporate opportunity: they were in a railway building biz. 3 of 4 directors, holding 75% of their
shares passed a resolution to take a contract in their own name, and declare that the co. had no interest in it. The
court said that this could not be ratified by the co as it cannot give a gift of co. assets. Thus, there was a breach of
loyalty. There was also a fraud on the minority – the last shareholder.

Regal (Hastings) v Gulliver - Regal the co. needed to put up security to buy a cinema, and so, decided to raise share
capital via a new subsidiary. Some of the directors contributed to this and bough the shares, later selling it for a profit
of 3 pounds/share. Beneficiaries said that the profit was in breach due to not fully informing them. Held liability
arises from the mere fact of a profit having, in the stated circumstances, been made (any kind of valuable benefit,
with no shareholder meeting or disclosure.)

Which opportunities?
The one which is mature – Canadian Aero Service v O’Malley – the degree of maturity is always on a spectrum.

Further, directors are not exonerated by the fact that the co. could not have used the opportunity. Regal (Hastings) –
in order to act as a deterrent and to ensure disclosure, even if the directors did not do it to the detriment of the
company, or in fact had not mala fide, liable if there was profit.

And even former directors can be held liable for breach, based on the tiring of where they got the knowledge or
opportunity from. The fiduciary duty survives a director’s resignation.

Industrial Development v Cooley – where the resignation is prompted by the opportunity, can be held liable

Peso Silver Mines v Cropper – but, where a company has considered and rejected the opportunity and the director is
subsequently approached individually, it is okay for the director to take it up.
For information specifically
Though opportunities are also information, there are statutory restrictions and allowances.

s 157 (2) above which extends beyond directors and s 158 which gives allowances specifically for disclosure.

Disclosure of company information by certain directors

158.—(1) A director of a company may disclose information which he has in his capacity as a director or an
employee of a company, being information that would not otherwise be available to him, to the persons
specified in subsection (2) if such disclosure is not likely to prejudice the company and is made with the
authorisation of the board of directors.
(2) The information referred to in subsection (1) may be disclosed to —
(a) a person whose interests the director represents; or
(b) a person in accordance with whose directions or instructions the director may be required or
is accustomed to act in relation to the director’s powers and duties.
(3) The authorisation referred to in subsection (1) may be conferred in respect of disclosure of —
(a) all or any class of information; or
(b) only such information as may be specified in the authorisation.

Duty to act with due care, skill and diligence

In contrast, this duty is not a fiduciary one. But it’s also statute 157(1).

Lim Weng Kee v PP (approved in Sakae Holdings) – objective approach. The standard of care and diligence is not fixed
and is a continuum depending on various factors: individual’s role, type of decision, size and business of the co.
Further, the standard of care is not lowered to accommodate inadequacies in knowledge or experience, but the SOC
will be raised if he held himself out to posses or in fact possesses some special knowledge or experience.

However, the director is allowed to place reliance on advice of others, via statute (this is a ‘defence’)

Use of information and advice

157C.—(1) Subject to subsection (2), a director of a company may, when exercising powers or performing
duties as a director, rely on reports, statements, financial data and other information prepared or supplied,
and on professional or expert advice given, by any of the following persons:
(a) an employee of the company whom the director believes on reasonable grounds to be
reliable and competent in relation to the matters concerned;
(b) a professional adviser or an expert in relation to matters which the director believes on
reasonable grounds to be within the person’s professional or expert competence;
(c) any other director or any committee of directors upon which the director did not serve in
relation to matters within that other director’s or committee’s designated authority.
(2) Subsection (1) shall apply to a director only if the director —
(a) acts in good faith;
(b) makes proper inquiry where the need for inquiry is indicated by the circumstances; and
(c) has no knowledge that such reliance is unwarranted.

Nevertheless, Directors when delegating duties have to be careful:

Vita Health Laboratories v Pang Seng Meng - Directors are officers who must remain alert and watchful at the helm.
Directors ought to have an inquiring, though not necessarily suspicious, mind in discharging their supervisory
functions. The larger the business, the greater the commercial need for delegation. The more specialised functions
are, the greater the need for independent operations and powers. Legal pragmatism imbued with latitude towards
business efficacy is crucial in assessing a director’s delegation of duties. Admittedly, he must reasonably believe that
his subordinates will competently discharge their duties in the company’s interests.

Factors for needing delegation + reasonable belief in competent subordinates = court reluctant to task directors to
task
Protection of directors from their breaches
Breaches of duty can be ratified by the shareholders of the co. Raffles Town Club v Lim Eng Hock Peter – shareholders
are entitled to make decisions in their own selfish interests, satisfying their own particular wishes and prejudices, and
without any personal obligation to consider or act in the best interests of the co or other shareholders. Further, the
CA says: In our view, in the absence of any factor that would disqualify shareholders from ratifying unauthorised or
unlawful acts of directors, we see no reason why a company may not waive any claims it may have against its
directors for any kind of liability where the company is solvent.

In Raffles Town Club, the directors were the shareholders doing the voting. So, well.

But if you mean indemnifying beforehand, that generally doesn’t work – s 172 says that indemnity and exemption
clauses for director’s breach of duty are void.

Provision protecting officers from liability

172.—(1) Any provision that purports to exempt an officer of a company (to any extent) from any liability
that would otherwise attach to him in connection with any negligence, default, breach of duty or breach of
trust in relation to the company is void.
(2) Any provision by which a company directly or indirectly provides an indemnity (to any extent) for an
officer of the company against any liability attaching to him in connection with any negligence, default,
breach of duty or breach of trust in relation to the company is void, except as permitted by section 172A or
172B.
(3) This section shall apply to any provision, whether contained in a company’s constitution or in any
contract with the company or otherwise.

But all insurance for these things is fine, s 172A. Though when there are 3Ps, consider s 172B.

Third party indemnity

172B.—(1) Section 172(2) shall not apply (ie. indemnity not void) where the provision for indemnity is
against liability incurred by the officer (to a 3P) to a person other than the company, except when the
indemnity is against —
(a) any liability of the officer to pay —
(i) a fine in criminal proceedings; or
(ii) a sum payable to a regulatory authority by way of a penalty in respect of non-compliance with any
requirement of a regulatory nature (however arising); or
(b) any liability incurred by the officer —
(i) in defending criminal proceedings in which he is convicted;
(ii) in defending civil proceedings brought by the company or a related company in which judgment is
given against him; or
(iii) in connection with an application for relief referred to in subsection (4) in which the court refuses to
grant him relief.
(2) The references in subsection (1)(b) to a conviction, judgment or refusal of relief are references to the
final decision in the proceedings.
(3) For the purposes of subsection (2) —
(a) a conviction, judgment or refusal of relief becomes final —
(i) if it is not appealed against, at the end of the period for bringing an appeal; or
(ii) if it is appealed against, at the time when the appeal (or any further appeal) is disposed of; and
(b) an appeal (or further appeal) is disposed of —
(i) if it is determined and there is no right of further appeal, or if there is a right of further appeal, the
period for bringing any further appeal has ended; or
(ii) if it is abandoned or otherwise ceases to have effect.
(4) The reference in subsection (1)(b)(iii) to an application for relief is to an application for relief under
section 76A(13) or 391.

s76A = where the co. lends money on security of its own shares, or contracts to acquire its own shares outside of
what is authorised, indirectly giving financial assistance for someone to acquire shares.
Power to grant relief
391.—(1) If in any proceedings for negligence, default, breach of duty or breach of trust against a person to
whom this section applies it appears to the court before which the proceedings are taken that he is or may
be liable in respect thereof but that he has acted honestly and reasonably and that, having regard to all the
circumstances of the case including those connected with his appointment, he ought fairly to be excused for
the negligence, default or breach the court may relieve him either wholly or partly from his liability on such
terms as the court thinks fit.
(1A) For the avoidance of doubt and without prejudice to the generality of subsection (1), “liability” includes
the liability of a person to whom this section applies to account for profits made or received.
(2) Where any person to whom this section applies has reason to apprehend that any claim will or might be
made against him in respect of any negligence, default, breach of duty or breach of trust he may apply to the
Court for relief, and the Court shall have the same power to relieve him as under this section it would have
had if it had been a court before which proceedings against him for negligence, default, breach of duty or
breach of trust had been brought.
(3) The persons to whom this section applies are —
(a) officers of a corporation;
(b) persons employed by a corporation as auditors, whether they are or are not officers of the
corporation;
(c) experts within the meaning of this Act; and
(d) persons who are receivers, receivers and managers or liquidators appointed or directed by the Court
to carry out any duty under this Act in relation to a corporation and all other persons so appointed or so
directed.

Civil liability of directors / company’s remedy

Recission
Co. transactions with director – voidable at instance of co.

Co. transactions with 3P – Can rescind only if the counter party is aware of the breach. Eg. when the director in
breach is the controller of that 3P.

BBL v Puvaria Packaging – Actual knowledge is needed. Constructive knowledge is not enough.

However, the usual bars to recission apply – affirmation, restutio in integrum is impossible, 3P rights, laches.

Return of co property
Look at topic 6 p. 4

If it’s the liquidator, under s 240 IRDA, court can get defendant to pay most or restore or compensate.

Power of Court to assess damages against delinquent officers, etc.

240.—(1) If, in the course of the judicial management or winding up of a company, it appears that any
person who has taken part in the formation or promotion of the company or any past or present judicial
manager, liquidator or officer of the company has misapplied or retained or become liable or accountable for
any money or property of the company or been guilty of any misfeasance or breach of trust or duty in
relation to the company, the Court may, on the application of the judicial manager or liquidator or of any
creditor or contributory —
(a) examine into the conduct of such person, judicial manager, liquidator or officer; and
(b) compel such person, judicial manager, liquidator or officer to —
(i) repay or restore the money or property or any part of such money or property with interest at such
rate as the Court thinks just; or
(ii) contribute such sum to the property of the company by way of compensation in respect of the
misapplication, retainer, misfeasance or breach of trust or duty as the Court thinks just.
(2) This section extends and applies to and in respect of the receipt of any money or property by any officer
of the company during the 2 years preceding the commencement of the judicial management or winding up
(as the case may be) whether by way of salary or otherwise, appearing to the Court to be unfair or unjust to
other members of the company.
 (3) This section has effect notwithstanding that the offence is one for which the offender is criminally liable.
Account of profits
Topic 6 p. 4

Damages or Compensation
Topic 6 p. 5

Also, statute for AOP and Damages for breach of director’s duty of good faith and due care, diligence and skill:

s 157(3)(a)

(3) An officer or agent who commits a breach of any of the provisions of this section shall be —
(a) liable to the company for any profit made by him or for any damage suffered by the company as a
result of the breach of any of those provisions; and
(b) guilty of an offence and shall be liable on conviction to a fine not exceeding $5,000 or to
imprisonment for a term not exceeding 12 months.

Injunction and/or declaration

S 409A(1) – Injunction to restrain; (2) Injunction to require.

Broad statutory remedy

Note that s 156 (disclosure of interests) seems to be only criminal liability.

So if these things are replicated in the constitution, you can use s 25C(4) to have it voidable at instance of co. Else get
them under another duty instead. See below on contracting.

Corporate acts and liabilities

Attribution rules
Following Meridian Global Funds Management v Securities Commission – accepted in SG with Scintronix, there are
three types of attribution rules:

1. Primary rules of attribution, as found in the company’s constitution or in company law – duties and powers
2. General rules of attribution that come from other areas of law, applicable in many places – principles of
agency, or rules of tort like vicarious liability
3. Special rules of attribution which are created because attribution based on the other rules is not possible,
and the rule of law in question requires an act or state of mind of a ‘person’ that a company cannot have.
Based on the context and the purpose of the law upon which potential liability is to be established, then you
may have a special rule.

There is a general understanding that there is a non-attribution rule when it comes to fraud.

Jetivia SA v Bilta – where a co. is a victim of its directors, or of actions its directors had notice, this
wrongdoing/knowledge cannot be attributed to the co. to defend a claim brought by its liquidator for the loss due to,
even if there was only one director, or if it were attributable in other proceedings. This exception acts to prevent
attribution to the principal knowledge of his agent’s breach of duty, even when the breach falls short of fraud.

Classically, a company would be attributed the fraud of its directors in relation to a 3P’s liability claim against the co.
However, the co would then go and make a redress claim against the director, and here, in this redress claim, the
director cannot use the ex turpi causa defence.

Red Star v Satwant Kaur – Kaur took co. money with the main director of Red Star knowing and allowing it. This
director held 5099 of 5100 of the co. shares and was the controlling director. Red Star now want to claim the money
from Kaur’s estate, and Kaur, wishing to use the ex turpi defence to attribute the director’s knowledge to Red Star,
had to deal whether a special rule of attribution could be applied. The policy underlying the ex turpi defence is that
the court as a matter of public policy will not involve itself in a dispute between parties where both sides are equally
tainted by the same wrong. Thus, allowing for attribution was assessed in reference to this policy objective. In order
to prevent the director from recovering the fruits of his illegal conspiracy, and allowing the loss to lie where it falls,
the court attributed his knowledge to Red Star.

Torts and Crimes

1. The company can be vicariously liable for the actions of its director/employee
- Tort committed
- The relationship between the co and the tortfeasor is akin to employment such that it is fair just and
reasonable to impose liability
- There is a close connection between that relationship and the tort.
2. Co. can also be primarily liable for the tort/crime eg.

Unlike in Tesco Supermarkets v Nattrass – discount on washing powder but the store ran out and the manager forgot
to take down the sign = crime. Court held that as the manager was the one being directed and did not function as the
directing mind or will of the co (unlike the board of directors), the company was not directly liable. It has taken all
reasonable precautions and exercised all due diligence in its system.

3. There can still be personal liability on the part of the director for various cases:
a) Torts they commit personally.

Standard Chartered Bank v Pakistan National Shipping Corp – fraudulent misrep with the back dating of bills of lading
to get payment which was on credit and had a deadline. = personal on directors.

Williams v Natural Life Health Foods – Failed in suing the managing director for negligent advice and the brochure
because he hadn’t been involved in the negotiations. Personal liability for negligence was based on Hedley Byrne,
where negligent misrep liability requires VAR, a personal assurance, that there wasn’t in this case.

Unlike Sim Tee Meng v Haw Wan Sin David – the respondents were not satisfied by the salesperson and asked to see
the key executive officer. In this capacity, Sim assured them personally, thus, liable. It was open for him to disclaim
personal liability although it might drive biz away.

b) Rarely, the tort of inducing the co. to breach a contract

Said v Butt – theatre ticket and the managing director who refused admission to the ticket holder who had made
serious allegations, but got a friend to help him buy the ticket. When a director acts bona fide within the scope of his
authority, he is immune to tortious liability for procuring his co. breach of contract.

PT Sandipala v STMicroelectronics – Onus is on the plaintiff to prove that the defendant directors; acts were in breach
of their personal legal duties to the co. Directors are ordinarily immune from tortious liability for authorising the co.
breach of ctt in capacity as a director unless it is in breach of his personal legal duties to the co. -> focus is on
director’s conduct and intention in relation to his co. not the 3P.

c) Torts they procure, direct of authorise the co. to do

Gabriel Peters v Wee Chong Jin – Where directors order an act by co that amounts to a tort, they are liable as joint
tortfeasors. In this case, passing a resolution that had libel inside.

TV Media v De Cruz – Director was the only one in the position to direct the company’s negligence in buying the
slim10 pills that were of poor quality.
Contracting
Based on statute s 25(1), even if a contract is ultra vires of the company’s ability, the contract cannot be invalidated
just because of it.

Ultra vires transactions

25.—(1) No act or purported act of a company (including the entering into of an agreement by the company
and including any act done on behalf of a company by an officer or agent of the company under any
purported authority, whether express or implied, of the company) and no conveyance or transfer of property,
whether real or personal, to or by a company shall be invalid by reason only of the fact that the company was
without capacity or power to do such act or to execute or take such conveyance or transfer.
(2) Any such lack of capacity or power may be asserted or relied upon only in —
(a) proceedings against the company by any member of the company or, where the company
has issued debentures secured by a floating charge over all or any of the company’s property, by the
holder of any of those debentures or the trustee for the holders of those debentures to restrain the
doing of any act or acts or the conveyance or transfer of any property to or by the company;
(b) any proceedings by the company or by any member of the company against the present or
former officers of the company; or
(c) any application by the Minister to wind up the company.
(3) If the unauthorised act, conveyance or transfer sought to be restrained in any proceedings under
subsection (2)(a) is being or is to be performed or made pursuant to any contract to which the company is a
party, the Court may, if all the parties to the contract are parties to the proceedings and if the Court
considers it to be just and equitable, set aside and restrain the performance of the contract and may allow to
the company or to the other parties to the contract, as the case requires, compensation for the loss or
damage sustained by either of them which may result from the action of the Court in setting aside and
restraining the performance of the contract but anticipated profits to be derived from the performance of
the contract shall not be awarded by the Court as a loss or damage sustained.

So the company definitely can contract. However, the company isn’t a physical person. Usually the Board of Directors
(using their s 157A powers) would sign a contract, or even an employee might. This will then turn on the authority of
the people.

Authority
Actual authority = express or implied. Implied might be incidental to the express authority granted, or may be the
usual authority that goes with the position that the agent occupies.

Apparent authority = what the counterparty views to be the agent’s authority.

Skandinaviska v APBS – the question is whether the co. held out the agent to have authority to make the
representations which the counterparty relied on. Court found that APBS has never held the fraudulent Mr Chia out
to have such authority. Further, no self-authorising is allowed.

But the principle of First Energy – an agent with no authority, actual or apparent, may nevertheless have apparent
authority to represent that his principal has approved the transaction.

However, the co. will not be bound if the counterparty had notice of the agent’s lack of actual authority. Constructive
knowledge by your constitution behind visible to the public is not valid (s 25A)
Here the law is divided – though if there’s actual notice it is clear, being put on inquiry is still divided.

AL Underwood v Bank of Liverpool – the sole director cashed cheques for the co. into his personal account. Court
said, if banks, for fear of offending their customers will not make inquiry into unusual circumstances, they must take
with the benefit the risk of liability. Vs.
Kasikornbank v Akai – CEO executed a loan. Court said, banks can rely on apparent authority unless bank’s belief was
dishonest or irrational (turning a blind eye, or reckless)
🡺 Prefer AL Underwood.

Further, if the counterparty knows of circumstances that indicate to a reasonable person that the agent is in breach
of his duty to act in the co. interest, then the contract would also be void. – Criterion Properties v Stratford UK
Impact of constitutional limitations
Is very, very small due to statute. Eg. s 25B(2) the presumption of good faith in 3P dealing with a co + 25B(1) that
states you can take it as if everything is fine and dandy.

Power of directors to bind company

25B.—(1) In favour of a person dealing with a company in good faith, the power of the directors to bind the
company, or authorise others to do so, shall be deemed to be free of any limitation under the company’s
constitution.
(2) For the purposes of subsection (1), a person dealing with a company —
(a) is not bound to enquire as to any limitation on the powers of the directors to bind the company or
authorise others to do so; and
(b) is presumed to have acted in good faith unless the contrary is proved.
(3) The references in subsection (1) or (2) to limitations on the directors’ powers under the company’s
constitution include limitations deriving —
(a) from a resolution of the company or of any class of shareholders; or
(b) from any agreement between the members of the company or of any class of shareholders.
(4) This section shall not affect any right of a member of the company to bring proceedings to restrain the
doing of an action that is beyond the powers of the directors; but no such proceedings shall lie in respect of
an act to be done in fulfilment of a legal obligation arising from a previous act of the company.
(5) This section shall not affect any liability incurred by the directors, or any other person, by reason of the
directors exceeding their powers.
(6) This section shall have effect subject to section 25C.

But if you’re actually an insider and not a 3P, you fall under s 25C, and it would be voidable. And on top of that, you
are liable unless you can show you actually didn’t know (6).

Constitutional limitations: transactions with directors or their associates

25C.—(1) This section shall apply to a transaction if or to the extent that its validity depends on section 25B.
(2) Nothing in this section shall be construed as excluding the operation of any other written law or rule of
law by virtue of which the transaction may be called in question or any liability to the company may arise.
(3) Where —
(a) a company enters into such a transaction; and
(b) the parties to the transaction include —
(i) a director of the company or of its holding company; or
(ii) a person connected with any such director,
the transaction is voidable at the instance of the company.
(4) Whether or not it is avoided, any such party to the transaction as is mentioned in subsection (3)(b)(i) or
(ii), and any director of the company who authorised the transaction, is liable —
(a) to account to the company for any gain he has made directly or indirectly by the transaction; and
(b) to indemnify the company for any loss or damage resulting from the transaction.
(5) The transaction ceases to be voidable if —
(a) restitution of any money or other asset which was the subject-matter of the transaction is no longer
possible;
(b) the company is indemnified for any loss or damage resulting from the transaction;
(c) rights acquired bona fide for value and without actual notice of the directors exceeding their powers
by a person who is not party to the transaction would be affected by the avoidance; or
(d) the transaction is affirmed by the company.
(6) A person other than a director of the company is not liable under subsection (4) if he shows that at the
time the transaction was entered into he did not know that the directors were exceeding their powers.
(7) Nothing in subsections (1) to (6) shall affect the rights of any party to the transaction not within
subsection (3)(b)(i) or (ii); but the court may, on the application of the company or any such party, make an
order affirming, severing or setting aside the transaction on such terms as appear to the court to be just.
(8) In this section, “transaction” includes any act.
Thus, if you’re dealing with a director, you’re pretty safe. If you’re dealing with just an employee, you still have to
show that that employee got some authority from a director or the board.

Consequences
1. If anyone didn’t have authority but the company wants to keep this contract, again they can ratify it.
2. But if you can’t get it under s 25B and the co doesn’t want this contract, then it’s void.

In such a case, you can only go after that agent who purported to enter into the contract on behalf of the principal,
and they will be personally liable for the contract on the basis that they breached a warranty of authority. (Fong
Maun Yee v Yoong Robert)

Finally, small note for contracts signed before the incorporation of the co. s 41.

41.—(1) Any contract or other transaction purporting to be entered into by a company prior to its formation
or by any person on behalf of a company prior to its formation may be ratified by the company after its
formation and thereupon the company shall become bound by and entitled to the benefit thereof as if it had
been in existence at the date of the contract or other transaction and had been a party thereto.
(2) Prior to ratification by the company the person or persons who purported to act in the name or on behalf
of the company shall in the absence of express agreement to the contrary be personally bound by the
contract or other transaction and entitled to the benefit thereof.

Partnerships
Soup Recipe
Definition of partnership
1.—(1) Partnership is the relation which subsists between persons carrying on a business in common with a
view of profit.
(2) But the relation between members of any company or association which is —
(a) registered as a company under the Companies Act [Cap. 50] or under any previous corresponding
law; or
(b) formed or incorporated by or in pursuance of any other Act of Parliament,
is not a partnership within the meaning of this Act.

Rules for determining existence of partnership

2. In determining whether a partnership does or does not exist, regard shall be had to the following rules:
(1) Joint tenancy, tenancy in common, joint property, common property, or part ownership does not of itself
create a partnership as to anything so held or owned, whether the tenants or owners do or do not share any
profits made by the use thereof.
(2) The sharing of gross returns does not of itself create a partnership, whether the persons sharing such
returns have or have not a joint or common right or interest in any property from which or from the use of
which the returns are derived.
(3) The receipt by a person of a share of the profits of a business is prima facie evidence that he is a partner
in the business, but the receipt of such a share, or of a payment contingent on or varying with the profits of a
business, does not of itself make him a partner in the business; and in particular —
(a) the receipt by a person of a debt or other liquidated amount by instalments or otherwise out
of the accruing profits of a business does not of itself make him a partner in the business or liable as
such;
(b) a contract for the remuneration of a servant or agent of a person engaged in a business by a
share of the profits of the business does not of itself make the servant or agent a partner in the
business or liable as such;
(c) a person being the widow or child of a deceased partner, and receiving by way of annuity a
portion of the profits made in the business in which the deceased person was a partner, is not by
reason only of such receipt a partner in the business or liable as such;
(d) the advance of money by way of loan to a person engaged or about to engage in any
business on a contract with that person that the lender shall receive a rate of interest varying with
the profits, or shall receive a share of the profits arising from carrying on the business, does not of
itself make the lender a partner with the person or persons carrying on the business or liable as such:
Provided that the contract is in writing, and signed by or on behalf of all the parties thereto;
 (e) a person receiving by way of annuity or otherwise a portion of the profits of a business in
consideration of the sale by him of the goodwill of the business is not by reason only of such receipt
a partner in the business or liable as such.

CA s 17(3) No company, association or partnership consisting of more than 20 persons shall be formed for the
purpose of carrying on any business that has for its object the acquisition of gain by the company, association or
partnership, or by the individual members thereof, unless it is registered as a company under this Act, or is formed in
pursuance of some other written law in Singapore or letters patent.

Uncertainty over whether a salaried partner is a partner or an employee.

Liability of the Firm to 3P

Depends on 1. The capacity in which the contractor acted it (whether as a partner, or as alone) and 2. If as a partner,
the authority of the contracting partner to bind the whole partnership.

Partners generally have the power to bind the whole firm. s 5 of the Partnership Act.

Power of partner to bind firm

5. Every partner is an agent of the firm and his other partners for the purpose of the business of the
partnership; and the acts of every partner who does any act for carrying on in the usual way business of the
kind carried on by the firm of which he is a member bind the firm and his partners, unless the partner so
acting has in fact no authority to act for the firm in the particular matter, and the person with whom he is
dealing either knows that he has no authority, or does not know or believe him to be a partner.
Partners bound by acts on behalf of firm
6. An act or instrument relating to the business of the firm and done or executed in the firm-name, or in any
other manner showing an intention to bind the firm, by any person thereto authorised whether a partner or
not, is binding on the firm and all the partners:
Provided that this section shall not affect any general rule of law relating to the execution of deeds or
negotiable instruments.
Partner using credit of firm for private purposes
7. Where one partner pledges the credit of the firm for a purpose apparently not connected with the firm’s
ordinary course of business, the firm is not bound, unless he is in fact specially authorised by the other
partners; but this section does not affect any personal liability incurred by an individual partner.

As with the second part of s 5, if the counterparty knows that the partner contracting with them has limits placed on
them, the ctt would not be binding. s 8 PA.

Effect of notice that firm will not be bound by acts of partner

8. If it has been agreed between the partners that any restriction shall be placed on the power of any one or
more of them to bind the firm, no act done in contravention of the agreement is binding on the firm with
respect to persons having notice of the agreement.

(Vicarious) Liability of firm for wrongs

10. Where, by any wrongful act or omission of any partner acting in the ordinary course of the business of the firm,
or with the authority of his co-partners, loss or injury is caused to any person not being a partner in the firm, or any
penalty is incurred, the firm is liable therefor to the same extent as the partner so acting or omitting to act.

Dubai Aluminium – what is in the “ordinary course of business of the firm” is a question of fact. But there’s
uncertainty around this, because in that case, the fraudulent solicitor Amhurst’s actions could be characterised as he
being “on a frolic of his own”, unlike what the court found to be him doing a solicitor’s work.

The test to be used for then attributing liability is the “close connection test” of Skandinaviska – Sufficient
relationship between the wrongful act and the conduct authorised. VL would be found when there is a significant
connection between creation or enhancement of a risk of a wrong being committed.
Liability of individual partners
Liability of partners
9. Every partner in a firm is liable jointly with the other partners for all debts and obligations of the firm
incurred while he is a partner; and after his death his estate is also severally liable in a due course of
administration for such debts and obligations, so far as they remain unsatisfied, but subject to the prior
payment of his separate debts.
Liability for wrongs joint and several
12. Every partner is liable jointly with his co-partners and also severally for everything for which the firm
while he is a partner therein becomes liable under section 10 or 11.
Persons liable by “holding out”
14. Every one who by words spoken or written or by conduct represents himself, or who knowingly suffers
himself to be represented, as a partner in a particular firm, is liable as a partner to any one who has on the
faith of any such representation given credit to the firm, whether the representation has or has not been
made or communicated to the person so giving credit by or with the knowledge of the apparent partner
making the representation or suffering it to be made:
Provided that where after a partner’s death the partnership business is continued in the old firm-name, the
continued use of that name, or of the deceased partner’s name as part thereof shall not of itself make his
executors or administrators, estate or effects liable for any partnership debts contracted after his death.

Liabilities of incoming and outgoing partners

17.—(1) A person who is admitted as a partner into an existing firm does not thereby become liable to the
creditors of the firm for anything done before he became a partner.
(2) A partner who retires from a firm does not thereby cease to be liable for partnership debts or obligations
incurred before his retirement.
(3) A retiring partner may be discharged from any existing liabilities, by an agreement to that effect between
himself and the members of the firm as newly constituted and the creditors, and this agreement may be
either express or inferred as a fact from the course of dealing between the creditors and the firm as newly
constituted.

Rights of persons dealing with firm against apparent members of firm

36.—(1) Where a person deals with a firm after a change in its constitution, he is entitled to treat all
apparent members of the old firm as still being members of the firm until he has notice of the change.
(2) An advertisement in the Gazette shall be notice as to persons who had no dealings with the firm before
the date of the dissolution or change so advertised.
(3) The estate of a partner who dies, or who becomes bankrupt, or of a partner who, not having been known
to the person dealing with the firm to be a partner, retires from the firm, is not liable for partnership debts
contracted after the date of the death, bankruptcy or retirement, respectively.

Note that for s 36, Orix Capital directs that s 36(1) liability is limited to liability arising under contracts that were
made pre-retirement, though liability arises after. This is because to them, after retirement, there is termination of
authority of the other partners to conclude agreements binding on the retiree. Next, s36(1) notice would be actual
notice, rendering s 36(2) not very useful.

Additionally, new creditors are not entitled to notice at all, since they’re treated as having never know the retired
partner.

Partnership property

Partnership property
20.—(1) All property and rights and interests in property originally brought into the partnership stock or
acquired, whether by purchase or otherwise, on account of the firm, or for the purposes and in the course of
the partnership business, are called in this Act partnership property, and must be held and applied by the
partners exclusively for the purposes of the partnership and in accordance with the partnership agreement:
Provided that the legal estate or interest in any land which belongs to the partnership shall devolve according
to the nature and tenure thereof, and the general rules of law thereto applicable, but in trust, so far as
necessary, for the persons beneficially interested in the land under this section.
 (2) Where co-owners of an estate or interest in any land, not being itself partnership property, are partners
as to profits made by the use of that land or estate, and purchase other land or estate out of the profits to be
used in like manner, the land or estate so purchased belongs to them, in the absence of an agreement to the
contrary, not as partners, but as co-owners for the same respective estates and interests as are held by them
in the land or estate first mentioned at the date of the purchase.

Property bought with partnership money

21. Unless the contrary intention appears, property bought with money belonging to the firm is deemed to
have been bought on account of the firm.

Dissolution
Retirement from partnership at will
26.—(1) Where no fixed term has been agreed upon for the duration of the partnership, any partner may
determine the partnership at any time on giving notice of his intention to do so to all the other partners.
(2) Where the partnership has originally been constituted by deed, a notice in writing, signed by the partner
giving it, shall be sufficient for this purpose.

Where partnership for term is continued over, continuance on old terms presumed
27.—(1) Where a partnership entered into for a fixed term is continued after the term has expired, and
without any express new agreement, the rights and duties of the partners remain the same as they were at
the expiration of the term, so far as is consistent with the incidents of a partnership at will.
(2) A continuance of the business by the partners or such of them as habitually acted therein during the
term, without any settlement or liquidation of the partnership affairs, is presumed to be a continuance of the
partnership.
Dissolution by expiration or notice
32.—(1) Subject to any agreement between the partners, a partnership is dissolved —
(a) if entered into for a fixed term, by the expiration of that term;
(b) if entered into for a single adventure or undertaking, by the termination of that adventure or
undertaking;
(c) if entered into for an undefined time, by any partner giving notice to the other or others of his
intention to dissolve the partnership.
(2) In the case mentioned in subsection (1)(c), the partnership is dissolved as from the date mentioned in the
notice as the date of dissolution, or, if no date is so mentioned, as from the date of the communication of the
notice.

Dissolution by bankruptcy, death or charge

33.—(1) Subject to any agreement between the partners, every partnership is dissolved as regards all the
partners by the death or bankruptcy of any partner.
(2) A partnership may, at the option of the other partners, be dissolved if any partner suffers his share of the
partnership property to be charged under this Act for his separate debt.

Dissolution by illegality of partnership

34. A partnership is in every case dissolved by the happening of any event which makes it unlawful for the
business of the firm to be carried on or for the members of the firm to carry it on in partnership.
Dissolution by court
35. On application by a partner, the court may decree a dissolution of the partnership in any of the following
cases:
(a) when a partner, other than the partner suing, becomes in any way permanently incapable of
performing his part of the partnership contract;
(b) when a partner, other than the partner suing, has been guilty of such conduct as, in the opinion of
the court, regard being had to the nature of the business, is calculated to prejudicially affect the carrying on
of the business;
(c) when a partner, other than the partner suing, wilfully or persistently commits a breach of the
partnership agreement, or otherwise so conducts himself in matters relating to the partnership business that
 it is not reasonably practicable for the other partner or partners to carry on the business in partnership with
him;
(d) when the business of the partnership can only be carried on at a loss;
(e) whenever in any case circumstances have arisen, which, in the opinion of the court, render it just and
equitable that the partnership be dissolved.

Continuing authority of partners for purposes of winding up

38. After the dissolution of a partnership, the authority of each partner to bind the firm, and the other rights
and obligations of the partners, continue notwithstanding the dissolution so far as may be necessary to wind
up the affairs of the partnership, and to complete transactions begun but unfinished at the time of the
dissolution, but not otherwise:
Provided that the firm is in no case bound by the acts of a partner who has become bankrupt; but this
proviso does not affect the liability of any person who has after the bankruptcy represented himself or
knowingly suffered himself to be represented as a partner of the bankrupt.

Rights of partners as to application of partnership property

39. On the dissolution of a partnership, every partner is entitled, as against the other partners in the firm,
and all persons claiming through them in respect of their interests as partners, to have the property of the
partnership applied in payment of the debts and liabilities of the firm, and to have the surplus assets after
such payment applied in payment of what may be due to the partners, respectively, after deducting what
may be due from them as partners to the firm; and for that purpose any partner or his representatives may,
on the termination of the partnership, apply to the court to wind up the business and affairs of the firm.

Right of outgoing partner in certain cases to share profits made after dissolution
42. Where any member of a firm has died or otherwise ceased to be a partner, and the surviving or
continuing partners carry on the business of the firm with its capital or assets without any final settlement of
accounts as between the firm and the outgoing partner or his estate, then, in the absence of any agreement
to the contrary, the outgoing partner or his estate is entitled at the option of himself or his representatives to
such share of the profits made since the dissolution as the court may find to be attributable to the use of his
share of the partnership assets, or to interest at the rate of 5% per annum on the amount of his share of the
partnership assets:
Provided that where by the partnership contract an option is given to surviving or continuing partners to
purchase the interest of a deceased or outgoing partner, and that option is duly exercised, the estate of the
deceased partner, or the outgoing partner or his estate, as the case may be, is not entitled to any further or
other share of profits; but if any partner assuming to act in exercise of the option does not in all material
respects comply with the terms thereof, he is liable to account under this section.

Retiring or deceased partner’s share to be a debt

43. Subject to any agreement between the partners, the amount due from surviving or continuing partners
to an outgoing partner or the representatives of a deceased partner in respect of the outgoing or deceased
partner’s share is a debt accruing at the date of the dissolution or death.
Rule for distribution of assets on final settlement of accounts
44. In settling accounts between the partners after a dissolution of partnership, the following rules shall,
subject to any agreement, be observed:
(a) losses, including losses and deficiencies of capital, shall be paid first out of profits, next out of capital,
and lastly, if necessary, by the partners individually in the proportion in which they were entitled to share
profits; and
(b) the assets of the firm, including the sums, if any, contributed by the partners to make up losses or
deficiencies of capital, shall be applied in the following manner and order:
(i) in paying the debts and liabilities of the firm to persons who are not partners therein;
(ii) in paying to each partner rateably what is due from the firm to him for advances as distinguished
from capital;
(iii) in paying to each partner rateably what is due from the firm to him in respect of capital;
(iv) the ultimate residue, if any, shall be divided among the partners in the proportion in which profits
are divisible.