Fix loopholes in corporate regulatory framework to protect local staff: Forum

The report “Jobless woman stuck with company directorships she cannot legally quit” (June 26) highlights a severe systemic loophole in Singapore’s corporate regulatory framework.

Under the Companies Act, a company must maintain at least one locally resident director.

While designed to ensure accountability, this requirement structurally entraps proxy employees, often junior staff at corporate service providers (CSPs), when foreign owners vanish.

As a result, these individuals bear unlimited personal, legal and financial liability for abandoned entities, with no legal avenue to resign via BizFile if they are the sole remaining local director.

Punishing the proxy for the disappearance of the principal is a fundamental misallocation of risk.

It leaves vulnerable workers facing severe consequences, including the five-year disqualification penalty, for situations entirely beyond their operational control.

To rectify this, the Accounting and Corporate Regulatory Authority and policymakers can consider the following structural reforms:

• Allow sole resident directors to lodge a unilateral resignation after a designated period of client non-contact. This action should automatically trigger a “suspended” status for the entity, freezing its bank accounts and corporate operations immediately.

• Amend the law to allow licensed, well-capitalised CSPs to act as the institutional resident director, rather than mandating a human individual. This shifts risk away from low-leverage employees to the corporations profiting from these services.

• Require foreign business owners to deposit a statutory compliance bond at incorporation. If the owner goes missing, these funds can be used to cover regulatory fines and the costs of winding down the company.

Regulatory enforcement should target actual wrongdoers, not the administrative proxies trapped by rigid legal frameworks.

Corporate laws must evolve to protect local workers from becoming collateral damage in cross-border business failures.

Goh Hock Leng

Source: The Straits Times © SPH Media Limited. Permission required for reproduction.

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