Singapore directors face a demanding set of duties under the Companies Act 1967 (Cap. 50). They must act honestly and with reasonable diligence, avoid conflicts of interest, not misapply company property, and discharge their responsibilities with appropriate skill and care. When things go wrong — when a business decision turns out badly, when a procedural requirement is missed, or when a transaction later turns out to have been conducted without proper authorisation — directors can face personal liability for negligence, breach of duty, or breach of trust.

Yet Singapore company law acknowledges that directors are human. Honest mistakes happen. Well-intentioned decisions can produce unforeseen negative consequences. Section 391 of the Companies Act 1967 provides a statutory safety valve: a court may relieve a director — wholly or partly — from liability, provided the director can demonstrate that they acted honestly and reasonably, and that it is fair in the circumstances to excuse them.

This guide explains what Section 391 is, how the courts apply it, what directors need to prove, and when they can apply for prospective relief even before proceedings are brought against them. For a comprehensive overview of director duties generally, see our guide on director duties and personal liability in Singapore.

The Statutory Provision: What Section 391 Says

Section 391(1) of the Companies Act 1967 reads as follows:

“If in any proceedings for negligence, default, breach of duty or breach of trust against a person to whom this section applies it appears to the court before which the proceedings are taken that he is or may be liable in respect thereof but that he has acted honestly and reasonably and that, having regard to all the circumstances of the case including those connected with his appointment, he ought fairly to be excused for the negligence, default or breach the court may relieve him either wholly or partly from his liability on such terms as the court thinks fit.”

Section 391(3) defines the persons to whom the section applies:

  • Officers of a corporation (which includes directors)
  • Persons employed as auditors (whether or not they are also officers)
  • Experts within the meaning of the Act
  • Receivers, receivers and managers, and liquidators appointed or directed by the Court under the Act

The provision is deliberately broad in scope. It captures every form of director liability arising from their role — not just deliberate breaches, but also negligent oversights, honest procedural failures, and genuine misunderstandings of the legal requirements.

Prospective Relief: Section 391(2)

One of the most practically useful — and least understood — aspects of Section 391 is that it can be invoked prospectively, before any proceedings have actually been commenced against the director.

Section 391(2) provides that where any such person has reason to apprehend that any claim will or might be made against them in respect of any negligence, default, breach of duty, or breach of trust, they may apply to the court for relief. The court has the same discretion to relieve them as it would have in actual proceedings.

This is a powerful tool for directors who have discovered a mistake or breach after the fact but before a lawsuit has been filed. Rather than waiting for the company or its creditors to sue, the director can proactively seek court clearance — putting the question of their honesty and reasonableness before a judge on their own terms, with the benefit of time to prepare their case fully.

Example: A director discovers, after completing a sale of company property, that they failed to obtain the required shareholder approval under section 160 of the Companies Act. Knowing that the company’s shareholders may challenge the transaction, the director applies to court for prospective relief under s391(2) before any proceedings are commenced. The court can grant relief — including on conditions such as making good any shortfall in price — to put the matter to rest.

The Three-Part Test for Section 391 Relief

Singapore courts have consistently applied a three-part test in Section 391 applications. The director must establish all three elements:

Element 1: Honest Conduct

The first requirement is that the director acted honestly in the relevant conduct. Singapore courts have explained “honesty” in this context as the absence of moral turpitude — that is, conduct undertaken without:

  • Deceit or conscious impropriety
  • Intent to gain an improper benefit or advantage
  • Carelessness or imprudence so severe as to negate the performance of the duty in question

The inquiry is objective: what would a court conclude about the director’s state of mind, having regard to all available evidence? A director’s subjective belief that they were acting properly is relevant evidence, but it is not determinative. A director who sincerely believed they were doing the right thing but whose conduct objectively indicates bad faith or recklessness may still fail the honesty limb.

In Long Say Ting Daniel v Merukh Nunik Elizabeth [2012] SGHC 250, the Singapore High Court found that the director who had sold company properties without following the required approval process had nonetheless acted honestly. He was not motivated by improper personal gain, he did not act deceptively, and he genuinely believed he was acting for the benefit of the company. The honesty element was satisfied.

Element 2: Reasonable Conduct

The second requirement is that the director acted reasonably. This is a more demanding test than honesty alone — it asks whether the director’s conduct measured up to an objective standard of care.

The court in Long Say Ting Daniel explained the standard as follows: “In determining whether or not the director has acted reasonably, one consideration is whether the director acted in the affairs of the company as he would have done in relation to his own affairs … The experience and qualifications of the person in question are relevant.”

Key factors courts have considered in assessing reasonableness include:

  • Whether the director sought proper legal or professional advice before acting
  • Whether the director’s level of experience was commensurate with the role they took on
  • Whether the director acted promptly to correct any discovered mistakes
  • Whether industry practice or standard procedures support the approach taken
  • The complexity of the situation and whether it was within the director’s reasonable competence

A director with extensive corporate experience who fails to obtain board approval for a major transaction is likely to face a harder time satisfying the reasonableness test than a first-time director of a small company who relied on incorrect informal advice. The standard is not fixed — it is calibrated to the director’s background and the circumstances of the particular role.

Element 3: Fair to Excuse

Even if both honesty and reasonableness are established, the court still exercises a discretion as to whether it is “fair” to grant relief “having regard to all the circumstances of the case including those connected with the director’s appointment.” This gives the court a residual safeguard against granting relief in cases where, despite honesty and reasonable conduct, other factors make relief inappropriate.

Relevant considerations include:

  • The severity of the consequences of the breach (was the company or third parties materially harmed?)
  • The extent to which the director contributed to the loss versus the loss being attributable to other causes
  • Whether there were red flags the director should have noticed but ignored
  • Whether the director proactively disclosed the breach or sought to remedy it
  • The overall conduct of the director in the company, not just the specific breach in question

Burden of Proof

The burden of proof under Section 391 lies squarely on the director seeking relief. It is not for the company or the plaintiff to disprove that the director acted honestly and reasonably — the director must affirmatively establish both limbs.

In practice, this means that a director applying under Section 391 should be prepared to produce:

  • A full and frank account of the facts surrounding the breach
  • Evidence of what steps they took before acting (advice sought, information obtained, consultations made)
  • Evidence of their experience, qualifications, and the nature of their role at the time
  • Evidence that they did not benefit personally from the breach or act with improper motive
  • Evidence of any steps taken to remedy the breach after discovery

Limitations on Section 391 Relief

Not Available for Third-Party Claims

A critical limitation of Section 391 is that it is only available for claims brought by the company or on the company’s behalf (e.g. a liquidator or a derivative action plaintiff). Section 391 does not apply to claims brought by third parties directly against the director — such as claims by creditors, employees, or other external parties.

This distinction matters in insolvency contexts. Where a liquidator brings a claim against a director for wrongful trading or breach of fiduciary duty on behalf of the company’s creditors, Section 391 is potentially available. Where an individual creditor sues the director directly for fraudulent misrepresentation, Section 391 offers no protection.

CALA 2025 and Increased Penalties

Directors should note that the Corporate and Accounting Laws Amendment Act 2025 (CALA 2025), which commenced on 6 May 2026, significantly increased the maximum penalties for certain director duty breaches — raising fines to S$20,000 and introducing custodial sentences of up to 12 months for serious breaches. While Section 391 provides discretionary relief from civil liability, it does not shield directors from criminal prosecution. A director facing criminal charges under the Companies Act cannot use Section 391 to avoid criminal liability.

Not a Substitute for Indemnity Clauses or D&O Insurance

Section 391 is a court-ordered remedy that requires litigation to invoke. It is not equivalent to advance contractual protection. Directors who want guaranteed protection against personal liability for honest mistakes should ensure that:

  • The company’s constitution or articles include appropriate indemnity clauses in favour of directors (noting that Companies Act section 172 limits indemnities against certain types of breach)
  • The company maintains adequate Directors and Officers (D&O) liability insurance, which pays defence costs and (if within policy limits) any damages or settlements

Section 391 provides a safety net when these pre-arranged protections are insufficient — but it is better understood as a last resort than a first line of defence.

Key Singapore Case Law on Section 391

Long Say Ting Daniel v Merukh Nunik Elizabeth [2012] SGHC 250

This is the leading Singapore High Court decision on Section 391. The applicant director had sold three company properties without obtaining the required shareholder approval under s160 of the Companies Act. The estate of the deceased sole shareholder threatened to sue.

The High Court granted prospective relief under s391(2). Key findings:

  • The director had acted honestly: there was no improper personal gain, no deceit, and he genuinely believed the sales were in the company’s best interests
  • The director had acted reasonably: he was a director acting alone in a challenging situation following the sole shareholder’s death, and the sale prices achieved were close to — or above — the minimum prices set by the shareholder’s family
  • The breach was not egregious: the consequences were limited and the family had not suffered significant loss

The court’s observation that “the breach was not flagrant or deceitful” and that granting relief would not be “a disservice to the administration of company law” illustrates the balancing exercise the court performs under the fairness limb.

When Relief Was Refused: The Stricter Cases

Courts have refused Section 391 relief in cases where:

  • The director actively concealed the breach from shareholders or fellow directors
  • The director acted in circumstances where any reasonable person would have sought professional advice but did not
  • The breach involved a systematic failure over an extended period rather than a one-time oversight
  • The director personally benefited, even indirectly, from the breach
  • The company or its creditors suffered substantial, unrecoverable loss as a result of the breach

Directors facing complex governance situations — particularly in the approach to insolvency — should note that courts are significantly less sympathetic when the breach occurs in circumstances where the director knew or should have known the company was in financial difficulty. As our guide on winding up a Singapore company in 2026 explains, the CALA 2025 amendments strengthened director obligations in the context of insolvency.

How to Apply for Section 391 Relief: Court Procedure

Application in Existing Proceedings

If a director is already a defendant in civil proceedings brought by the company (or on its behalf), they may apply for Section 391 relief as part of those proceedings. This is typically done by way of a counterclaim, a third-party notice, or — in some cases — as a defence pleaded in the defence itself, inviting the court to exercise its s391 discretion if it finds liability established.

Prospective Application: Originating Application

For prospective relief under s391(2), where no proceedings have yet been commenced, the director applies to the Singapore High Court (General Division) by way of an Originating Application. The application should be supported by an affidavit setting out:

  • The nature of the duty or obligation allegedly breached
  • The director’s account of the circumstances of the breach
  • Why the director acted honestly and reasonably
  • Why it would be fair to grant relief
  • The relief sought (whole or partial relief)

Costs

As a guide, S391 applications in Singapore typically involve the following cost components:

Stage Estimated Cost Range (SGD)
Legal advice and preliminary assessment S$3,000 – S$8,000
Preparation of Originating Application and supporting affidavit S$8,000 – S$20,000
Hearing fees (High Court) S$400 – S$1,500
Total (uncontested prospective application) S$12,000 – S$30,000
Total (contested, with responding party) S$30,000 – S$80,000+

Costs vary widely depending on the complexity of the facts, whether the application is contested, and the seniority of counsel engaged. These estimates are indicative only.

Practical Guidance for Directors

If You Discover a Past Breach: Act Quickly and Get Advice

The moment a director becomes aware of a potential breach — a transaction completed without proper authority, a filing missed, a statutory requirement overlooked — they should seek legal advice immediately. A prompt, candid response to a discovered breach supports the honesty and reasonableness limbs of Section 391. Delay, concealment, or attempts to paper over the breach retrospectively will severely undermine any subsequent Section 391 application.

Document Your Decision-Making Process

Section 391 applications succeed or fail on the evidence of what the director knew, what advice they sought, and what they did. Directors who maintain proper board minutes, keep records of professional advice received, and document the reasoning behind significant decisions are far better placed to invoke Section 391 if something goes wrong. A bare assertion that you “believed it was the right thing to do” without supporting evidence is unlikely to persuade a court.

Consider D&O Insurance and Constitutional Indemnities

Rather than relying on Section 391 as a post-breach remedy, prudent directors should ensure that appropriate D&O insurance and indemnity clauses are in place before any issue arises. These provide first-line protection against personal liability without requiring court proceedings. Your company secretary can advise on ensuring your company’s constitution contains appropriate indemnity provisions and can help coordinate the board’s annual D&O insurance review.

If you need legal advice on a potential director liability issue or a Section 391 application, we can point you in the right direction. Acting early — ideally before proceedings are commenced — significantly improves both the prospects of success and the cost-efficiency of the process.

You can read the full text of Section 391 on Singapore Statutes Online.

For the latest Singapore business and regulatory updates relevant to directors and business owners, there are useful resources available online.

Beyond corporate compliance, sound personal financial planning and investment decisions are equally important for company directors managing both corporate and personal risk.

Conclusion: Section 391 Is a Safety Net, Not a Blank Cheque

Section 391 of the Companies Act reflects a mature and balanced approach to director liability. Singapore company law is exacting — the duties it imposes are genuinely demanding, and the consequences of breach can be severe. But the law also recognises that directors who act honestly and reasonably, and who make mistakes without improper motive, should not necessarily bear personal financial ruin as a result.

The key takeaway for Singapore directors is this: Section 391 will help you if you acted in good faith and made a reasonable mistake. It will not help you if you cut corners, ignored red flags, sought personal advantage, or were reckless in the discharge of your duties. The line between an honest mistake and a culpable breach is one that Singapore courts draw carefully — and the burden of proof sits firmly on the director seeking relief.

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