Singapore Director Duties: Boris Johnson told every in the UK on 3 March 2020 on the BBC that
“I want to stress that for the vast majority of the people of this country, we should be going about our business as usual.”
However, arising from his UK policy, there was a report from Oxford in March 2020 that up to 50% of the UK may be infected with Covid-19.
Singapore faces an unprecedented threat from Covid-19 and Singapore companies are not immune from the economic impact and slowdown that arises from the Corona Virus. This article highlights 8 Legal Pitfalls that a Singapore Director of any Singapore business can avoid when navigating through these unprecedented tough times.
- Force Majure arising from Covid-19
A force majure clause typically arises in supply contracts. For example in a contract between a supplier and a customer. In such a scenario, such a clause if effective would excuse the failure of the supplier to supply the goods or services if an event (usually outside the control of the parties) occurs. There have been many articles written on this topic online and depending on the type of force majure clause, the clause may or may not cover Covid-19. A Singapore director should therefore seek appropriate legal advice if such a clause is triggered.
2. Negotiation of credit terms for trade creditors
In a situation like Covid-19, a Singapore Director of a Singapore company would want start to pro-actively conserve cash and negotiate with key suppliers to extend trade terms from 30 days to maybe 90 days.
Do note that as part of your Singapore Director Duties you need to ensure that the Company is not engaged in “Fraudulent Trading” i.e. incurring liabilities with no reasonable intention to repay such debts as the directors can be personally liable for such debts.
3. Slowdown in entering into longer term contracts like leases
The Singapore Director of the Singapore company would also delay entering into contracts which carry with it binding payment obligations and conserve cash in this period. You may also consider entering into co-working space lease arrangements instead of signing longer term leases to reduce capital and cash outlay in this period.
4. Analysing Grace periods under loan agreements/financing facilities
Most loan and financing facilities have repayment provisions and other loan covenants. A Singapore director should spend some time finding out how long are the grace periods so that you can see if you can stretch your repayment obligations negotiate other technical loan covenant breaches with your creditors. Many people are organizing Skype and Zoom online meetings now to avoid unnecessary meetings.
5. Holding of directors meetings in Singapore
If you have not done so, a Singapore director of a Singapore company should aim to amend its constitution to allow for: (i) attendance of director meetings by teleconference facilities or other digital means; and (ii) signing of board resolutions in writing. This would allow you to avoid having your directors attending unnecessary physical meetings. Many people are organizing Skype and Zoom online meetings now to avoid unnecessary meetings.
6. Holding of shareholders meetings
If you have not done so, a Singapore director of a Singapore company should aim to amend its constitution to allow for: (i) attendance of shareholders meetings by teleconference facilities or other digital means; and (ii) signing of shareholders resolutions in writing. This would allow you to avoid having your shareholders attending unnecessary physical meetings. Many people are organizing Skype and Zoom online meetings now to avoid unnecessary meetings.
7. Impact on SHM/quarantine notices on contracts of independent contractors
If a person is served with a leave of absence (LOA) or Stay at home (SHN) notice, the person has to mandatorily stay at home. If an independent contractor (a consultant arrangement as compared to an employment situation) enters into a contract with a third party for the provision of services and it is intended that such contract is of a personal nature (i.e. no one else can be expected to provide such service), then the contract may be affected by such LOA or SHN. You may wish to seeks legal advice on potential breaches of such service agreements if you are affected by an LOA or SHN.
Singapore Director Duties mandate that you need to do what is best for the Company but this has to be in compliance with Singapore law. Do speak to us if you need more help on this.
8. POFMA and Sharing of Covid-19 Information
Many Singapore directors, SME owners and people in Singapore are very worried about Covid-19 but it is important to note that we should fact check everything we share on Whatsapp/Wechat/Facebook/Instagram with Gov.sg, otherwise can we can potentially be issued a takedown notice by the Singapore government.
Stay safe and report the facts and not fake news.
Finally, we leave you with a parting quote about the Pandemic.
“And the people stayed home. And read books, and listened, and rested, and exercised, and made art, and played games, and learned new ways of being, and were still. And listened more deeply. Some meditated, some prayed, some danced. Some met their shadows. And the people began to think differently.
And the people healed. And, in the absence of people living in ignorant, dangerous, mindless, and heartless ways, the earth began to heal.
And when the danger passed, and the people joined together again, they grieved their losses, and made new choices, and dreamed new images, and created new ways to live and heal the earth fully, as they had been healed.”
Kitty O’Meara, In The Time of Pandemic, The Daily Round, 16 March 2020”
About Raffles CPA
Raffles CPA is a niche professional firm headquartered in Singapore with a relentless dedication to help global and local clients in solving their complex business problems in areas of corporate services, accounting, capital market, legal and compliance.