Power of directors to bind company

25B.—(1) In favour of a person dealing with a company in good faith, the power of the directors to bind the company, or authorise others to do so, shall be deemed to be free of any limitation under the company’s constitution.

(2) For the purposes of subsection (1), a person dealing with a company —

(a) is not bound to enquire as to any limitation on the powers of the directors to bind the company or authorise others to do so; and

(b) is presumed to have acted in good faith unless the contrary is proved.

(3) The references in subsection (1) or (2) to limitations on the directors’ powers under the company’s constitution include limitations deriving —

(a) from a resolution of the company or of any class of shareholders; or

(b) from any agreement between the members of the company or of any class of shareholders.

(4) This section shall not affect any right of a member of the company to bring proceedings to restrain the doing of an action that is beyond the powers of the directors; but no such proceedings shall lie in respect of an act to be done in fulfilment of a legal obligation arising from a previous act of the company.

(5) This section shall not affect any liability incurred by the directors, or any other person, by reason of the directors exceeding their powers.

(6) This section shall have effect subject to section 25C.

Constitutional limitations: transactions with directors or their associates

25C.—(1) This section shall apply to a transaction if or to the extent that its validity depends on section 25B.

(2) Nothing in this section shall be construed as excluding the operation of any other written law or rule of law by virtue of which the transaction may be called in question or any liability to the company may arise.

(3) Where —

(a) a company enters into such a transaction; and

(b) the parties to the transaction include —

(i) a director of the company or of its holding company; or

(ii) a person connected with any such director,

the transaction is voidable at the instance of the company.

(4) Whether or not it is avoided, any such party to the transaction as is mentioned in subsection (3)(b)(i) or (ii), and any director of the company who authorised the transaction, is liable —

(a) to account to the company for any gain he has made directly or indirectly by the transaction; and

(b) to indemnify the company for any loss or damage resulting from the transaction.

(5) The transaction ceases to be voidable if —

(a) restitution of any money or other asset which was the subject-matter of the transaction is no longer possible;

(b) the company is indemnified for any loss or damage resulting from the transaction;

(c) rights acquired bona fide for value and without actual notice of the directors exceeding their powers by a person who is not party to the transaction would be affected by the avoidance; or

(d) the transaction is affirmed by the company.

(6) A person other than a director of the company is not liable under subsection (4) if he shows that at the time the transaction was entered into he did not know that the directors were exceeding their powers.

(7) Nothing in subsections (1) to (6) shall affect the rights of any party to the transaction not within subsection (3)(b)(i) or (ii); but the court may, on the application of the company or any such party, make an order affirming, severing or setting aside the transaction on such terms as appear to the court to be just.

(8) In this section, “transaction” includes any act.

Persons connected with director in section 25C

25D.—(1) For the purposes of section 25C, a reference to a person connected with a director means —

(a) a member of the director’s family;

(b) a body corporate with which the director is connected within the meaning of subsection (2)(b);

(c) a person acting in his capacity as trustee of a trust —

(i) the beneficiaries of which include the director or a person who by virtue of paragraph (a) or (b) is connected with him; or

(ii) the terms of which confer a power on the trustees that may be exercised for the benefit of the director or any such person,

other than a trust for the purposes of an employees’ share scheme or on a pension scheme;

(d) a person acting in his capacity as partner —

(i) of the director; or

(ii) of a person who, by virtue of paragraph (a), (b) or (c), is connected with that director;

(e) a firm that is a legal person under the law by which it is governed and in which —

(i) the director is a partner;

(ii) a partner is a person who, by virtue of paragraph (a), (b) or (c), is connected with the director; or

(iii)a partner is a firm in which the director is a partner or in which there is a partner who, by virtue of paragraph (a), (b) or (c), is connected with the director; and

(f) a reference to a person connected with a director of a company does not include a person who is himself a director of the company.

(2) For the purposes of this section —

(a) a member of a director’s family shall include his spouse, son, adopted son, step-son, daughter, adopted daughter and step-daughter;

(b) a director is connected with a body corporate if, and only if, he and the persons connected with him together —

(i) are interested in at least 20% of the share capital of that body corporate; or

(ii) are entitled to exercise or control, directly or indirectly, the exercise of more than 20% of the voting power at any general meeting of that body corporate;

(c) a reference in paragraph (b)(ii) to voting power the exercise of which is controlled by a director includes voting power whose exercise is controlled by a body corporate controlled by him;

(d) for the avoidance of circularity in the application of subsection (1) —

(i) a body corporate with which a director is connected is not treated for the purposes of this subsection as connected with him unless it is also connected with him by virtue of subsection (1)(c) or (d); and

(ii) a trustee of a trust the beneficiaries of which include (or may include) a body corporate with which a director is connected is not treated for the purposes of this subsection as connected with a director by reason only of that fact; and

(e) “body corporate” includes a body incorporated outside Singapore, but does not include —

(i) a corporation sole; or

(ii) a partnership that, whether or not a legal person, is not regarded as a body corporate under the law by which it is governed.”.