SINGAPORE Law and Practice Contributed by: Benjamin Gaw and Joel Tan, Drew & Napier LLC
8. Duties of Directors 8.1 Principal Directors’ Duties
in place to enable it to monitor the conduct so that each director may fulfil their responsibilities under the Takeover Code. 8.3 Business Judgement Rule The Singapore courts are generally slow to interfere in commercial decisions taken by directors and generally acknowledge that they should not, with the advantage of hindsight, substitute those decisions with their own, where those decisions were made by directors in the honest and reasonable belief that they were taken in the company’s best interests. 8.4 Independent Outside Advice Legal, financial and tax advisers are typically engaged to advise on the transaction structure and valuation, and more generally to manage the transaction. In the case of M&A transactions to which the Takeover Code applies, the target company’s board must obtain competent independent advice on all offers, except partial offers that could not result in the bidder and persons acting in concert with it holding shares car - rying 30% or more of the voting rights of the target company. The substance of the advice must be made known to its shareholders and this is typically done as part of the target company’s board’s circular to shareholders indicating its recommendation for or against accept - ance of the offer. Where the offer is a management buy-out or similar transaction, or is being made by or with the co-operation of the existing controlling share - holder or group of shareholders, the target company’s board should appoint an independent adviser as soon as possible after it becomes aware that an offer may be made. Where the offer being made is a reverse takeover and the bidder is incorporated in Singapore, or when the board faces a material conflict of interests, it must obtain competent independent advice on the offer. The substance of the advice must also be made
Directors have certain duties both at common law and under Companies Act 1967, Section 157. These duties are generally owed to the company, and not to its shareholders or other stakeholders. The duties of directors include the fiduciary duties to act in a bona fide manner in the best interests of the company, to avoid a conflict of interest, to act for proper purposes and to act with care, skill and diligence. In the case of M&A transactions to which the Takeover Code applies, the board has certain responsibilities under the Takeover Code, including: • giving shareholders sufficient information, advice and time to enable them to reach an informed deci - sion on an offer, and not to withhold any relevant information from them; • not taking any action that could frustrate a bona fide offer or deny its shareholders an opportunity to decide on its merits; • ensuring that proper arrangements are in place to enable the board (as a whole) to monitor the day- to-day conduct of an offer so that each director may fulfil their responsibilities under the Takeover Code; and • obtaining competent advice on any offer and mak - ing such advice known to its shareholders. For companies listed on the SGX, the constitution of the company would provide that directors may not vote on matters in which they have a personal mate - rial interest. 8.2 Special or Ad Hoc Committees It is increasingly common, especially in the case of management buyouts, for boards of directors to establish special or ad-hoc committees of independ - ent directors so as to address issues of potential con - flicts of interests and to ensure that the interests of shareholders are addressed fairly. Whilst the board of directors may delegate the day- to-day conduct of an offer to a committee of directors or individual directors, the board as a whole remains responsible for ensuring that proper arrangements are
known to its shareholders. 8.5 Conflicts of Interest
There are reported cases in recent years involving conflicts of interests in the context of takeovers and
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