Only through institutional arrangements can the assumption that “local resident directors are not involved in company operations” be transformed into a legally binding reality.
Author: Calvin, Project Manager, AlgoCandy
Chinese version published in Lianhe Zaobao on 24 July 2025
On 14 July 2025, Singapore’s Ministry of Finance and the Accounting and Corporate Regulatory Authority (ACRA) jointly launched a public consultation on the Companies and Accountants (Amendment) Bill. According to official documents, the proposed amendments aim to achieve four key objectives: preventing the misuse of companies for illicit purposes, reducing regulatory burdens for companies, protecting shareholders’ rights, and strengthening the regulatory regime for public accountants.
To ease regulatory burdens, the draft bill proposes several initiatives, such as allowing a sole director to concurrently serve as company secretary, removing the obligation to file certain financial statements and prospectus replacement declarations, exempting public companies with share capital from holding statutory meetings and preparing statutory reports, and abolishing the requirement for registered offices to be open to the public for three hours daily. These moves clearly reflect the government’s intention to streamline corporate compliance and improve registration efficiency.
However, notably absent from this round of reforms is any direct response to the issue of local resident directors, a widespread and practical arrangement. Under Section 145 of the Companies Act, every company must have at least one local resident director in Singapore. As a result, many foreign-owned companies rely on corporate service providers (CSPs) to appoint nominee directors to fulfill this legal requirement.
Since 2017, ACRA has mandated that companies maintain a register of nominee directors. Starting from June 2025, this information must be submitted to a central register accessible to the public, making it clear whether a director is acting as a nominee. However, current laws and regulations still fail to explicitly define the role and responsibilities of nominee directors in day-to-day corporate governance.
More critically, although it is commonly accepted in the industry that nominee directors perform only formal duties and do not participate in actual operations or decision-making, judicial precedent—such as in the Zheng Jia case—does not grant any special exemption for such “nominee” roles. Courts treat nominee directors as legally equivalent to regular directors and impose the same duties and liabilities upon them. This judicial stance leaves nominee directors with no legal ground to claim immunity through contractual terms. Even if nominee directors sign agreements with the beneficial owners stating they have no authority to participate in company management, courts typically disregard such agreements and hold the nominee director accountable as a full-fledged board member. This enforcement norm exposes nominee directors and their service providers to substantial legal risk without institutional protection.
Meanwhile, since the implementation of the new regulatory framework for CSPs in 2024, only registered CSPs are allowed to arrange nominee directorships and must perform due diligence and qualification checks. However, these regulations primarily focus on the compliance of the service provider rather than clearly defining the governance duties of the nominee directors themselves. As a result, critical questions remain unanswered: Can the nominee director make decisions? Sign contracts? Fulfill legal obligations as a director? The lack of clarity leaves room for confusion and inconsistency.
If the amendment bill is ultimately passed without addressing the definition of local resident directors, it could lead to broader systemic issues. First, if a resident director is held liable for corporate misconduct, their assumed role of “non-involvement” can abruptly transform into full legal responsibility, greatly amplifying the associated risks—risks which CSPs cannot effectively mitigate. Second, foreign shareholders and investors may view this legal ambiguity as an additional business risk in Singapore, potentially pushing them toward more complex and costly compliance paths. Third, the disconnect between court rulings and regulatory policy could result in judicial decisions that run counter to ACRA’s deregulatory intentions.
As a practitioner in the corporate services industry, I strongly urge ACRA to include a “Code of Conduct for Local Resident Directors” in this round of legislative reform. This code should provide a standardized definition and guidance for this unique role and achieve the following objectives:
- Differentiate between “Local Resident Director” and “Nominee Director”
The definition of “local resident director” should be explicitly limited to one who does not participate in company operations, decisions, or management, and whose duties are confined to statutory obligations—such as document access, annual return filings, and receiving official correspondence. Only employees of licensed CSPs should be eligible for this role. This definition should include explicit exemption clauses that legally delineate their responsibilities and avoid misinterpretation. - Establish a Standardized Service Agreement Template
ACRA should publish a model contract for local resident director services, including clauses on scope of responsibility, liability exemption, exit mechanisms, and risk disclosure. This would provide CSPs with a unified legal document and reduce the risk of contractual disputes and litigation. - Integrate Due Diligence Protocols with CSP Registration Requirements
CSPs should be required to conduct qualification checks each time a local director is appointed, and to submit an annual declaration stating the director’s role as a non-controlling statutory position. - Align the Code with Judicial Practice
ACRA should incorporate the code into its policy documents as a reference for courts. This alignment would help minimize legal disputes about the duties of resident directors and make the code a core standard for evaluating their conduct.
Only through the above institutional arrangements can the common assumption that “local resident directors are not involved in company operations” be converted into a legally enforceable standard. This would not only reduce risks for CSPs and resident directors but also significantly lower the cost of compliance, enhancing the competitiveness of Singapore-based CSPs in the Asia-Pacific region.
