​In the realm of corporate governance in Singapore, director’s remuneration holds immense significance. It constitutes the compensation provided to directors for their valuable services and plays a pivotal role in enticing and retaining skilled individuals to join company boards. In this article, we will explore the various types of directors’ remuneration, the regulatory framework governing it, and the implications of overpayment during company liquidation.

Regulation of Directors’ Remuneration

The remuneration of directors in Singapore is regulated by various laws and guidelines, ensuring transparency, fairness, and compliance. Key regulations include:

1. The Companies Act: Section 169 of the Companies Act mandates that any director’s fees paid to directors must be approved in a general meeting through a resolution unrelated to other matters. This ensures that the decision to remunerate directors is transparent and independent.
2. The Model Constitution: Companies using the Model Constitution without modification may include provisions relating to the payment of directors’ fees. For example, Regulation 74 of the Model Constitution may allow reimbursement of certain expenses incurred by directors while attending meetings related to the company’s business.
3. SGX Listing Rules: Companies listed on the Singapore Exchange (SGX) must adhere to specific disclosure rules concerning the remuneration of their directors, particularly independent directors.

Types of Directors’ Remuneration

Director’s Fees: Director’s fees refer to the compensation paid to directors for their services in their capacity as company directors. In general, directors do not have an automatic right to be remunerated for their directorial services. However, if a company wishes to pay director’s fees to its directors, it must follow the guidelines set out in section 169 of the Companies Act. According to this section, any payment of director’s fees must first be approved in a general meeting through a resolution that is unrelated to other matters. Failure to comply with this requirement will render the resolutions void and without legal effect.

Director’s Salaries: Directors can also serve in executive roles within the company and receive salaries as employees. Unlike director’s fees, which require approval in a general meeting, director’s salaries do not need such approval. However, the amount of salary must still be approved by the board of directors beforehand.

Disclosure in Company Reports

When it comes to disclosing director’s remuneration in company reports, salaries are considered as company expenses and should be disclosed as part of the company’s expenses in its annual report. On the other hand, while there is no law mandating the disclosure of director’s fees, companies are encouraged to disclose the amount of director’s fees paid to each director in their annual reports.

CPF Contributions

Regarding CPF contributions, companies are only required to make CPF contributions in respect of the salaries paid to directors who are considered employees engaged under a contract of service. CPF contributions are not required for director’s fees.

Tax Implications

In terms of tax on director’s remuneration, director’s salaries are taxable since they are considered income derived from the director’s employment. Director’s fees are generally taxable as well, but this only applies if the director has rendered the requisite services for the relevant accounting year. If the director’s fees were decided in advance for the next upcoming year, they would not be taxable for the current accounting year but only in the next upcoming year. It is important to note that if the company does not have a presence in Singapore, director’s fees will not be taxable in Singapore. In such cases, the fees would generally be taxable in the country where the company is resident.

What Happens to Overpayment During Liquidation?

During the liquidation process of a company, issues related to overpayment of directors may arise. If the liquidators or creditors suspect that directors have been unjustly or unfairly remunerated, they can apply to the court under Section 341 of the Companies Act. This application aims to compel the directors to repay the excess money to the company, with or without interest.

Overpayment may occur if it can be proven that directors breached their duties or failed to account for company monies or property during their tenure. This provision ensures that any unjust enrichment of directors is addressed during the winding-up process.

Seek Expert Guidance from Singapore Corporate Services

Directors’ remuneration is a critical element in corporate governance, attracting skilled professionals to lead companies effectively. Understanding the types of directors’ remuneration, along with the regulatory framework governing it, is essential for companies and directors to ensure compliance and transparency.

If you need professional guidance and assistance with directors’ remuneration matters, don’t hesitate to reach out to Singapore Corporate Services. Contact us today to ensure your company’s compliance and success in managing directors’ remuneration responsibly.  Our team of experts is well-versed in Singapore’s corporate regulations and can provide tailored solutions to meet your specific needs.

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