In May 2026, the Corporate and Accounting Laws (Amendment) Act 2025 (CALA 2025) formally commenced, raising the stakes for company directors across Singapore. The maximum fine for breaching core director duties has quadrupled from S$5,000 to S$20,000, and courts can now impose up to 12 months’ imprisonment for serious breaches. For founders who wear multiple hats — visionary, operator, and company director — understanding what the law actually requires of you has never been more important.

This guide explains the legal duties every Singapore director must fulfil, the practical mistakes that create personal liability, and what you should be doing in 2026 to stay on the right side of the Companies Act.

What the Companies Act Requires of Every Director

Section 157 of the Companies Act (Cap. 50) imposes two core statutory duties on every director of a Singapore-incorporated company.

Section 157(1): Act Honestly and with Reasonable Diligence

Every director must at all times act honestly and use reasonable diligence in the discharge of the duties of his office. These are not aspirational standards — they carry criminal penalties for breach.

The duty of honesty (sometimes called the duty to act in good faith) requires directors to act in the interests of the company as a whole, not in their own personal interests or the interests of any particular shareholder. When you make a decision as a director, you must be able to show that you genuinely believed it was in the company’s best interests.

The duty to exercise reasonable diligence requires you to be informed and engaged. Courts apply a hybrid subjective-objective standard: they consider both the general expectations of someone performing your role and your actual expertise. A chartered accountant appointed as director is held to a higher standard of financial diligence than a first-time founder without financial training — but every director must be actively engaged with the company’s affairs, not a passive name on a letterhead.

Section 157(2): No Improper Use of Position or Information

Directors must not use their position, or information obtained by virtue of their position, to gain an advantage for themselves or any other person, or to cause detriment to the company. This is essentially a statutory prohibition on self-dealing, insider trading, and misuse of confidential information.

Fiduciary Duties: The Common Law Layer

Beyond the statutory duties in s.157, Singapore directors are also subject to fiduciary duties under common law. These include:

  • Duty to act within powers: A director must exercise powers only for the purposes for which they were granted. Issuing new shares to dilute a troublesome shareholder, for example, would typically be an improper use of the power to allot shares.
  • Duty to avoid conflicts of interest: Directors must not place themselves in a position where their personal interests conflict with those of the company, unless the conflict has been properly disclosed and approved.
  • Duty to disclose conflicts: Under Section 156 of the Companies Act, directors who have a material personal interest in a contract or proposed contract with the company must declare that interest at a directors’ meeting.
  • Duty not to accept benefits from third parties: Directors must not accept benefits from third parties that arise from their position as director, unless the company has authorised this.

These fiduciary duties are owed to the company — not to individual shareholders, employees, or creditors (except in limited circumstances when the company is approaching insolvency).

Post-CALA 2025: What Has Changed

The CALA 2025, which commenced on 6 May 2026, made several significant changes that every founder-director must understand:

Quadrupled maximum fine. The maximum fine for breaching s.157 has increased from S$5,000 to S$20,000. Combined with an imprisonment option of up to 12 months, the message from ACRA is clear: passive directorship is not acceptable.

Named auditor requirement. Listed companies and larger non-listed companies must now disclose the name and qualifications of the audit engagement partner on the company’s audited financial statements. This increases audit accountability but also puts more emphasis on directors who sign off on financial statements to understand what they are approving.

Expanded beneficial ownership registers. Companies must now maintain three categories of beneficial ownership information and ensure accuracy. Directors are responsible for ensuring these registers are properly kept and updated.

Nominee director accountability. Courts have made clear that nominee director arrangements do not shield directors from liability. The Singapore High Court case of PP v Zheng Jia [2025] SGHC 76 signalled that directors who lend their name without genuine oversight face meaningful personal consequences, particularly when the company is used as a vehicle for fraud or non-compliance.

For a technical breakdown of all CALA 2025 changes, see our CALA 2025 director compliance guide.

The Business Judgment Rule: Your Shield

Not every decision that turns out badly will create director liability. Singapore courts apply the business judgment rule, which protects directors from liability for commercial decisions made in good faith provided certain conditions are met:

  1. The decision was made in good faith for a proper purpose.
  2. The director did not have a material personal interest in the matter.
  3. The director was informed about the matter to the extent reasonably believed to be appropriate.
  4. The director rationally believed the decision was in the best interests of the company.

The business judgment rule means that directors are not guarantors of commercial success. If you make a properly considered decision that subsequently turns out to be wrong, you will not automatically be liable. What the rule does not protect is wilful misconduct, dishonesty, or decisions made without any genuine consideration of the company’s interests.

Common Founder Mistakes That Create Director Liability

Founders often inadvertently expose themselves to director liability through the following behaviours:

1. Commingling Personal and Company Funds

Using the company bank account to pay personal expenses — or using personal funds interchangeably with company money — is one of the most common and dangerous mistakes. It undermines the separate legal personality of the company and creates audit complications. It can also be used as evidence of dishonest conduct under s.157(1).

2. Failing to Maintain Proper Records

Every Singapore private limited company must keep proper accounting records and financial statements. Founders who rely on memory or informal records risk breaching the books-and-records requirements under Section 199 of the Companies Act. In any dispute or investigation, the absence of proper records will be held against you.

3. Ignoring Conflict of Interest Disclosures

When you as a founder contract with your own company — for example, renting your property to the company or selling services to it through another entity you own — you must formally disclose this to the board under Section 156. Failing to do so is a separate statutory breach, regardless of whether the transaction itself was fair.

4. Continuing to Trade While Insolvent

Founders have a duty, particularly when the company is approaching financial difficulty, to consider the interests of creditors and not to incur new debts when there is no reasonable prospect of repaying them. Trading while insolvent can expose directors to personal liability under the Insolvency, Restructuring and Dissolution Act (IRDA).

5. Treating the Directorship as Administrative

Appointing yourself or another person as director simply to satisfy a regulatory requirement — without any genuine engagement in the company’s governance — exposes both the operator and the nominal director to serious risk, particularly post-CALA 2025. See our guide on nominee director legal requirements and risks.

What Should a Director Do in the First 30 Days?

If you have recently been appointed as a director of a Singapore company, here is a practical checklist:

  • Read and understand the company’s Constitution.
  • Obtain and review the last three years of financial statements (or the full financial history if the company is newer).
  • Understand the company’s current liabilities and cash position.
  • Ask the company secretary to brief you on outstanding statutory filings and any regulatory issues.
  • Check that you are listed on the ACRA register and that your particulars are correct.
  • Confirm the company has a valid registered office address and an appointed company secretary.
  • Familiarise yourself with the company’s existing contracts and any significant commercial commitments.
  • Understand any existing shareholder agreements and your obligations under them.

For more on board resolutions and director decision-making, and on the role of the company secretary in keeping the board compliant, see our related guides.

When to Seek Independent Legal Advice

Director duty situations that typically require legal advice include:

  • Transactions where you have a personal interest (related-party transactions)
  • Disputes with co-directors or significant shareholders
  • Signs that the company may be approaching insolvency
  • Receipt of a letter of demand from a creditor
  • ACRA investigations or queries
  • Any situation where your obligations to the company conflict with instructions from a shareholder

If you need legal advice on director duties and personal liability, it is better to seek it early rather than after a dispute has escalated. For ongoing governance and compliance, your company secretary plays a key role in keeping you informed and your company on track. See the Companies Act on the Singapore Statutes Online for the full legislative text.

Beyond corporate compliance, sound financial planning and investment decisions are equally important for founders managing both personal and business wealth.

For the latest Singapore business news and regulatory updates, there are useful resources for directors and business owners keeping track of changes to the corporate governance landscape.

To speak with the team at Raffles Corporate Services, you can email [email protected] or call, SMS, or WhatsApp +65 8501 7133. We are happy to assist with any queries.

— The Editorial Team, Raffles Corporate Services