Generally, a director can be remunerated in two ways, director’s fees and salary.

Director’s fees
Director’s fees are paid to the director for directorial services rendered to the company. It is not required for a company to pay its directors any director’s fees but if it does, this payment has to be approved in a general meeting by a resolution. The general meeting must be for the sole purpose of approving the director’s fees.
The director’s fees received by the director can be in the form of cash or otherwise like company paid travel and lodging expenses and company cars.
There is no provision stating that director’s fees must be disclosed. However, it is common practice for companies to disclose director’s fees in their annual reports to shareholders. As director’s fees are not considered salaries, CPF contributions do not have to be made on them. Directors’ fees are however taxable but they are generally taxed in the country where the company is a tax resident.
Here is section 169 of The Companies Act which provides for this.
169.—(1)  A company shall not at any meeting or otherwise provide emoluments or improve emoluments for a director of a company in respect of his office as such unless the provision is approved by a resolution that is not related to other matters and any resolution passed in breach of this section shall be void.
(2)  In this section, “emoluments” in relation to a director includes fees and percentages, any sums paid by way of expenses allowance in so far as those sums are charged to income tax in Singapore, any contribution paid in respect of a director under any pension scheme and any benefits received by him otherwise than in cash in respect of his services as director.

A director is an employee of the company and the company may offer him or her a salary as part of a contract for service. A director’s salary is approved by the board of directors.
A director’s salary must be disclosed and treated as an expense in the company’s annual report. The company will also have to make the relevant CPF contributions on the director’s salary. Director’s salaries are taxable and must be declared in income tax submissions to the Inland Revenue Authority of Singapore (IRAS).

Severance payment
The Companies Act states that it is not allowed for a director to be compensated for leaving his post as director of a company unless the proposed payment is disclosed to the shareholders and approved in a general meeting. If such a payment is made unlawfully, the director received the money in trust and must return it to the company.
Here is section 168 of The Companies Act which provides for this.
168.—(1)  It shall not be lawful —
(a) for a company to make to any director any payment by way of compensation for loss of office as an officer of the company or of a subsidiary of the company or as consideration for or in connection with his retirement from any such office; or
(b) for any payment to be made to any director of a company in connection with the transfer of the whole or any part of the undertaking or property of the company,

In the event of a company winding up
In the event that a company is wound up and the liquidators or creditors identify payments during the 2 years before the commencement of the winding up proceedings that were unlawfully or unjustly remunerated to the company’s directors, they can apply to the court to compel the director to replay the monies to the company. The repayment can be with or without interest. Unlawful remuneration refers to instances whereby the remuneration was not done in accordance with the Companies Act or the company’s constitution. Unjustful remuneration refers to instances whereby a director failed to discharge his director’s duties appropriately.

When in doubt, seek legal advice or consult an experienced ACRA Filing Agent.

Yours Sincerely,
The editorial team at Singapore Secretary Services

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