Singapore: director disqualification and corporate governance

A copy of the High Court decision Ong Chow Hong (alias Ong Chaw Ping) v Public Prosecutor [2011] SGHC 93, delivered earlier this month, has been published on the Singapore Law Watch website: see here. The case is noteworthy because of the interesting discussion of the purpose of the regime for the disqualification of directors, the relationship between disqualification and corporate governance standards, as well as the duties of listed company directors. It concerned the disqualification of the chairman of a listed company following a breach of Section 157(1) of the Companies Act (the chairman had approved the release of a public announcement concerning the company without reviewing its contents).

The trial judge, with reference to the disqualification regimes in the UK and Australia, concluded that in Singapore the predominant purpose of disqualification was the protection of the public (the judge below held that the purpose was predominantly punitive) and proceeded to note that this "shield of protection" had two sides (paras. [22] and [23]):

"On one hand, the public ought to be protected from an individual who has failed to discharge his obligations qua director. This side of protection may be viewed as specific protection, or what I would prefer to term as the “thin” definition of protection. To date, case law in Singapore appeared to have been largely focused on this narrower aspect of protection as being the only appropriate consideration. On the other hand, there is another side of protection that has been overlooked. This side is equally, if not even more, significant in some matters, particularly those involving listed companies. This is the need to generally protect the public from all errant directors by an uncompromising reaffirmation of the expected exemplary standards of corporate governance".

The trial judge held that the one year period of disqualification originally imposed was inadequate and doubled its length. In reaching this decision, the trial judge made these comments on directors' reliance on others (para. [34]):

Directors of listed companies in Singapore have to appreciate that our present disclosure based regime requires accurate and prompt disclosure to function effectively. It would never be sufficient or acceptable for a director to say that he expected his co-directors to do “right” by the company. Every director has to ensure that he discharges his responsibilities with due diligence in all pertinent matters. Therefore, any reliance on professionals or any reliance placed on “specialised” directors must be balanced against the responsibility that the law placed upon every individual director to bring to bear their own judgment in evaluating the advice received. Directors cannot adopt a silo approach and invariably seek shelter behind other “specialised” directors on the notion of reliance ..."

Note: the next update will be on Tuesday, May 3.