Singapore: Custodial sentencing for professional directors' breach of statutory duty of reasonable diligence

The High Court introduced a three-stage sentencing framework for breaches of section 157(1) of the Companies Act, which requires company directors to act honestly and use reasonable diligence at all times in fulfilling their duties, and confirms imprisonment as an appropriate penalty for intentionally negligent breaches
12 Jun 2025    1 minute read
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In brief

The recent decision in Public Prosecutor v Zheng Jia [2025] SGHC 76 (Zheng Jia) has extended the grounds for which the court will sentence a professional director to prison for breaching their statutory duty to exercise reasonable diligence.

Previous case law held that the starting point for penalising purely negligent breaches of the duty to exercise reasonable diligence was a fine, reserving custodial sentencing for intentional or reckless breaches by the director. Zheng Jia introduces a new sentencing framework for negligent breaches, particularly where the director is a professional "nominee" director whose business model is predicated on being registered as a locally resident nominee director who would exercise no control or supervision over the affairs of the company to which they are appointed.

Contents

This new sentencing framework has important repercussions on all corporate service providers (CSPs) that adopt a similar business model when proposing themselves or others as nominee directors to fulfil the resident director requirements under section 145(1) of the Companies Act 1967 (CA).

This development in criminal liability should also be read in tandem with the new CSP responsibilities and compliance obligations set out in the Corporate Service Providers Act 2024 (CSPA) and the Corporate Service Providers Regulations 2025 (CSPR), which came into force on 9 June 2025.

In this alert, we provide further background on the criminalisation of breaches of directors' duties, further explain the decision in Zheng Jia and summarise the relevant new CSPA and CSPR responsibilities.

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Lathika Pillay, Senior Manager, Corporate Services, and Pardeep Grewal, Manager, Corporate Services, have contributed to this legal update. 

Click here to read the full alert.

 

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Andrew Martin
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Min-tze Lean
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