What are the key rights, responsibilities, and procedures outlined for various company stakeholders?

The key rights, responsibilities, and procedures for various company stakeholders are as follows:

Shareholders:

• Rights:
  • Shareholders have rights and liabilities vis-à-vis the company and each other.
  • They have a right to have the company run in accordance with its constitution.
  • Shareholders are entitled to be kept informed of the company’s workings.
  • They have a right to participate in a qualified sense in the company’s affairs.
  • Shareholders are entitled to expect that the company’s affairs are conducted without unduly prejudicing them.
  • Members holding voting shares have the right to attend and vote at general meetings. Voting rights are fundamental to exert influence over the company’s affairs.
  • Shareholders dictate the content of the company’s constitution and control the constitution of the board of directors.
  • Certain powers are expressly reserved to shareholders by the Companies Act (e.g., power to issue shares) or by the company’s constitution. This suggests ultimate control.
  • Shareholders have the power to cast their votes at a general meeting to promote their and the company’s interests.
  • Minority shareholders have the right to be fully briefed on the company’s activities and to question management at the Annual General Meeting (AGM).
  • Shareholders can appoint proxies to attend and vote at general meetings on their behalf.
  • They have the right to bring a personal action to enforce the company’s constitution.
  • Shareholders have rights of action to protect their own interests or the company’s interests.
  • In specific situations of a significant shift in company control, shareholders have a mechanism to dispose of their shares at a fair price through a mandatory bid.
  • Shareholders can specify in the constitution actions that cannot be undertaken without their approval.
  • They are entitled to fair treatment.
  • They have a right to recourse against delinquent managers and remedies against the majority for oppressive conduct.
  • Shareholders have a right to a return on their investment and access to information.
  • Shareholders can apply to wind up the company.
  • Listed companies may require members to disclose if they hold voting shares as beneficial owners or trustees, and if the latter, who the beneficiaries are.
  • Shareholders in a small company have a legitimate expectation of being treated fairly and in accordance with any understanding upon which they agreed to become a member.
• Responsibilities:
  • Shareholders are bound by mutual covenants vis-à-vis each other through their shareholding.
  • They may be liable to pay calls on partly paid-up shares and to contribute to the company’s assets in the event of winding up.
• Procedures:
  • Shareholders exercise their influence and rights through participation and voting at general meetings.
  • Major corporate changes impacting shareholder equity or ownership rights should be submitted to a shareholder vote, with sufficient time and information provided.
  • The AGM is a primary opportunity for shareholders to be briefed and ask questions.
  • Shareholders can appoint proxies to vote on their behalf.
  • Shareholders can utilise statutory derivative actions to bring proceedings in the company’s name against errant directors under strict access rules.

Directors:

• Rights:
  • The board of directors holds the power of management of the company. Shareholders cannot interfere with this.
  • Directors have a right to air the views of the management to guide shareholders in decision-making.
  • The power to issue circular statements to influence votes is permissible if exercised bona fide in the interest of the company as a whole and not for a collateral purpose.
  • Directors are generally appointed and removed by shareholders.
• Responsibilities:
  • Directors have a fiduciary nature of responsibilities with the interest of the company as the underlying paradigm.
  • Their responsibilities include proposals to change the core business, approval of offeror’s price in mergers, settlement of inter-company loans, and terms of profit guarantees.
  • Directors must have regard to the rights and interests of the members and creditors of the company when the court determines orders related to financial assistance.
  • They must ensure the company discloses all material matters relating to proposed financial assistance to members before court approval.
  • Directors are expected to inquire and understand the circumstances.
  • They have a duty to guide shareholders in the decision-making process.
  • Directors are responsible for the stewardship of the company, including adopting corporate strategy, appointing and monitoring senior management, and maintaining integrity of corporate control and information systems.
  • They must collectively discuss and set the company’s strategic aims and are collectively responsible for promoting the company’s success by directing and supervising its affairs.
  • Directors bear individual and collective accountability and must take time to understand issues.
  • They have a duty to act honestly and in the best interest of the company.
  • Directors must act for proper purposes.
  • They have a duty to act without conflict of interest.
  • Directors may have duties to creditors in limited instances.
  • They must ensure sufficient transparency.
  • Directors must avoid conflicts of interest and comply with all statutory obligations.
  • They are responsible for ensuring the company has value and retains or grows its value, maintaining proper oversight and governance, robust financial results, and internal control systems.
  • Directors must ensure the protection of shareholders’, particularly minority shareholders’, interests and compliance with applicable laws and regulations.
  • They owe their duties to the company as a whole.
  • Directors have a statutory duty to draw shareholders’ attention to any misleading aspects in the accounts or any material and unusual events affecting the company’s results.
  • They must ensure that the statutory meeting for public companies is properly held.
  • Directors have a duty to act collectively to manage the company.
  • They are considered fiduciaries and must act in good faith, not make a profit from their position, avoid conflicts, and not act for their own or a third party’s benefit without informed consent.
• Procedures:
  • Directors make decisions collectively, often through board meetings. Board meetings are usually governed by the company’s constitution.
  • They are responsible for presenting proposals to shareholders with clarity, potentially using slides, photos, or leaflets, and summarising the contents.
  • Directors should participate in addressing shareholders’ concerns and feedback.
  • The board should establish procedures to ensure shareholders’ input in director elections, protection of minority rights, and fair treatment of all shareholders.
  • Directors interested in a transaction should not vote as a shareholder on that transaction.

Creditors:

• Rights:
  • Creditors have rights and liabilities vis-à-vis the company.
  • They have access to relevant information about the company.
  • Creditors have recourse against delinquent managers and the right to the preservation of assets against unauthorised dissipation.
  • Creditors are important stakeholders, and their interests need protection as they extend financing.
  • In cases of insolvency, creditors become prospectively entitled to displace the power of shareholders and directors to deal with the company’s assets.
  • Secured creditors have the right to appoint receivers and managers when the company defaults on repayment.
  • Creditors have input required when the company is insolvent or near insolvency.
  • They have the entitlement to object to certain activities.
  • Creditors have a claim to assets in insolvency ahead of shareholders.
  • Other creditors have claims amongst themselves on a pari-passu basis.
• Responsibilities:
  • Creditors extend financing to the company.
• Procedures:
  • Financiers may want to be kept informed of the company’s performance and intervene if their interests are threatened. They may ask for the right to appoint a nominee director.
  • Secured creditors can appoint receivers and managers upon default.

Employees:

• Rights:
  • Employees have rights and liabilities vis-à-vis the company.
  • They have representation as a corporate interest group.
  • Employees have protection against fraud and socially irresponsible behaviour.
  • On the company’s insolvency, employees have preferred creditor status for their salary.
• Responsibilities:
  • Employees, along with management, are interested in the well-being of the company.
• Procedures:
  • Employee interests can be taken into consideration by directors as part of a long-term or enlightened shareholder interest, particularly in takeover situations.
  • In a business sell-off, the company will have to deal with employee compensation issues.

Company Secretary:

• Responsibilities:
  • The company secretary is part of management and assists in implementing corporate strategies.
  • They provide administrative support to the board and board committees and act as a resource person.
  • The company secretary ensures compliance with legislative and regulatory requirements.
  • They are responsible for keeping adequate returns of movements of substantial shareholders, directors, and members.
  • Ensuring the safe keeping and usage of the statutory seal.
  • Keeping track of all meetings and minutes.
  • Implementing authorised changes in share and loan capital structure.
  • Devising, implementing, and administering directors’ and employees’ share participation schemes.
  • An increasingly important duty is corporate governance.
  • The company secretary should assist in ensuring the entity meets compliance requirements.
  • They arrange for shareholder and director meetings, including notices, agendas, proxies, and minutes.
  • Lodge and file necessary documents with ACRA.
  • For listed companies, liaise with the stock exchange and ensure compliance with disclosure requirements.
  • Arrange for the allotment, issue, transfer, and transmission of shares.
  • They can advise the board and spot misfeasance.
  • If knowledgeable in accounts and finance, can play an oversight role.

Board of Directors (as a collective and through Committees):

• Responsibilities:
  • The board is held to be transparent, responsible, and accountable toward their decision-making.
  • They must justify their remuneration.
  • The board must explain litigation suits against the company.
  • They have the opportunity to restore the confidence of shareholders.
  • The board is collectively responsible for ensuring the day-to-day running of the company.
  • Their main responsibilities are to protect shareholders’ interests and steer the company towards achieving maximum economic value.
  • They play a crucial role in the oversight of management.
  • The board should establish procedures to ensure shareholder input in director elections, protect minority shareholder rights, and ensure fair treatment.
  • They should have a policy and practice of making presentations to interested shareholders.
  • The board is responsible for ensuring sound internal control mechanisms.
  • They may implement internal audit committees and hire external auditors.
  • The board plays a key role in ensuring the company has and retains/grows value, maintains oversight and governance, robust financial results, and internal controls.
  • They are responsible for adopting corporate strategy, appointing and monitoring senior management, and maintaining the integrity of corporate control and information systems.
  • The board collectively discusses and sets strategic aims.
  • They are collectively responsible for promoting the company’s success by directing and supervising affairs and providing entrepreneurial leadership within a framework of prudent controls.
• Audit Committee:
  • Ensures executive directors and management act in the interest of shareholders as a whole.
  • Should have processes to identify important business risks and monitor them.
  • Reviews the overall level of sophistication of financial systems.
  • Obtains updates from management on key enterprise and other risks and management processes.
  • Clearly defines the committee’s oversight responsibility.
  • Interacts with management and external/internal auditors, including meetings without management present.
  • Reviews and approves the executive remuneration policy.
  • Considers seeking shareholder approval of the executive remuneration policy.
• Remuneration Committee (RC):
  • Develops a compensation philosophy for directors and executive management.
  • Identifies key strategic, financial, and operating objectives to incentivise directors and executives.
  • Considers ways to encourage executive stock ownership to align interests with shareholders.
  • Should ensure clear disclosure of remuneration policy in the annual report.

Auditors:

• Responsibilities:
  • External auditors are hired to ensure accurate financial reporting and the sufficiency of disclosures.
  • They contribute to corporate governance.
  • Interact closely with the audit committee.

Chief Executive Officer (CEO):

• Disclosure Requirements:
  • A company must keep a register showing particulars of the CEO’s shares, debentures, and rights or options in respect of shares in the company or a related corporation.

Nominee Directors:

• Responsibilities:
  • Appointed to represent particular sectional interests, such as major creditors or substantial shareholders.
  • Expected to contribute to board performance.
  • May disclose information obtained as a director to their appointer under specific conditions outlined in Section 158 of the Companies Act.

Management (beyond Directors):

• Responsibilities:
  • Responsible for the day-to-day running of the company.
  • Managers have a role in ensuring the probity of the business and contributing to sustainable wealth creation.
  • They are responsible for much of the company’s operations and may face liability for non-compliance with certain provisions of the Companies Act.
  • Senior non-director executives act as agents of the company and are specifically authorised to decide individually on operational matters.

This overview highlights the intricate web of rights, responsibilities, and procedures that govern the relationships and actions of various stakeholders within a company as outlined in the provided sources. The balance between these elements is crucial for effective corporate governance and the sustainable operation of the company.

If you have any queries with regards to corporate compliance, you can email the corporate secretarial team at Raffles Corporate Services at [email protected].

Yours sincerely,

The editorial team at Raffles Corporate Services