Key Takeaways:
Restricted transactions relating to loans / quasi-loans to directors
Loans to company / LLP connected to directors with prior approval
Allowing company to indemnify directors against potential liability
3. 3
Legends used in the Presentation
3
AGM Annual General Meeting
IMP Immovable Property
IPR Intellectual Property Rights
LLP Limited Liability Partnership
Sec Section
Sub-sec Sub-section
VCC Variable Capital Company
4. 4
Presentation Schema
Loans and quasi-loans to
directors, credit
transactions and related
arrangements
Approval of company for
loans and quasi-loans
Exception for expenditure
on defending proceedings
Exception for expenditure in
connection with regulatory
action/ investigation
4
5. Section 162- Loans and quasi-loans to
directors, credit transactions and related
arrangements
1
5
6. 6
Sec 6- Where a corporation-
a) is a holding company of another corporation
b) is a subsidiary of another corporation or
c) is a subsidiary of the holding company of another corporation
The above said corporation and any of the parties shall be deemed to be related for the purpose of this Act
Sub-sec 1 – The following shall be treated as restricted transaction for the purpose of this sec.
a) If a company makes a loan/ quasi-loans to a director-
• of a company or
• of a company deemed to be related to that company as
referred to in sec. 6
These directors are referred herein as relevant director
7. Contd.
7
b) enters into any guarantee/ provides any security for a loan or quasi-loan made to a relevant director by
any other person
c) enters into a credit transaction as creditor for the benefit of a relevant director
d) enters into any guarantee/ provides any security for a credit transaction entered into by any
person for the benefit of a relevant director
e) (i) takes part in an arrangement in which another person enters into a transaction that, if it had
been entered into by the company, would have been a restricted transaction under paragraph
(a), (b), (c), (d) or ( f) and
e) (ii) that person obtains benefit from the company or a company referred to in sec 6 pursuant to
such an arrangement.
f) arranges the assignment to the company, or assumption by the company, of any rights, obligations or
liabilities under a transaction that, if it had been entered into by the company, would have been a
restricted transaction under paragraphs (a) to ( e).
If the company-
8. Contd.
8
Sub-sec 2- Subject to sub-sec (3) and (4) and sec 163A and 163B, a company (other than an exempt
private company) shall not make a restricted transaction
Sec 163A- Exception
for expenditure on
defending
proceedings, etc.
Sec 163B- Exception
for expenditure in
connection with
regulatory action or
investigation
9. Contd.
9
Non-Applicability of Sec
Sub-sec 3- This sec shall not apply to any transaction which is made to or the benefit of the relevant
director which would otherwise be a restricted transaction subject to sub-sec (4)
a) to meet expenditure incurred or to be incurred by him for the purposes of the company or for the purpose
of enabling him to properly perform his duties as an officer of the company;
b) who is engaged in the full-time employment of the company/ a corporation that is deemed to be related
to the company, as the case may be, for the purpose of purchasing/ otherwise acquiring a home occupied/
to be occupied by the director
c) who is engaged in the full-time employment of the company/ a corporation that is deemed to be related
to that company, as the case may be, where at a GM a scheme has been approved for making such
transaction to/ for the benefit of employees of the company and the restricted transaction is in accordance
with that scheme or
d) in the ordinary course of business of a company including lending of money/ giving of guarantees in
connection with loans, quasi-loans/ credit transactions made/ entered into by other persons if the activities
of that company are regulated by any written law relating to banking, finance companies/ insurance/ are
subject to supervision by the Monetary Authority of Singapore.
Exception: not > 1 such restricted transaction may
be outstanding at any time
10. Contd.
10
Sub-sec 4- Sub-sec 3(a) or (b) shall authorise the
restricted transaction only-
•with the prior approval at GM for the purpose of expenditure
and amount or extent of restricted transaction or
•If the above approval is not given, on a condition that at or
before the next AGM, the amount or liability under restricted
transaction shall be repaid or discharged within 6 months from
the conclusion of that meeting
Sub-sec 5- If the prior approval is not given as said in sub-sec 4 (b), the directors who authorise
the restricted transaction shall be jointly and severally liable to indemnify against any loss
arising there from
11. Contd.
11
•Penal Provision:
• If a company contravenes this sec, the director who authorise the same
shall be liable for-
•Fine- <SGD 20,000 or Imprisonment - < 2 years
•This sec shall not prevent the company from recovering the amount of any
loan, quasi-loan, credit transaction or arrangement for which the company
becomes liable
•under any guarantee entered into or in respect of any security given contrary
to this sec
•Reference to a director or relevant director as said in sub-sec 1 includes
director’s-
Spouse,
Son, Adopted son, Step-son,
Daughter, Adopted daughter and Step-daughter
Sub-sec 6
Sub-sec 7
Sub-sec 8
12. 12
Contd.
•For transaction as said in sub-sec 1(e) the
determination of restricted transaction shall
commence from the date of entering into the
arrangement
Sub-sec 9
•The prior approval required under this sec shall
not include any approval given after the
restricted transaction is made, provided or
entered into
Sub-sec 10
13. Contd.
13
Sub-sec 11- Definitions
Conditional Sale
Agreement
• Means an agreement for the sale of goods under
which the purchase price or part of it is payable by
instalments, and
• the property in the goods is to remain in the owner
(notwithstanding that hirer is to be in possession of
the goods) until such conditions as to payment of
instalments or otherwise as may be specified in that
agreement are fulfilled
14. Contd.
14
a) Supplies any goods or
disposes of any IMP under hire
purchase agreement or a
conditional sale agreement
b) Leases or hires any IMP or
goods in return for periodic
payments or
c) Otherwise disposes of IMP or
supplies goods or services on the
understanding that payment
(whether in a lump sum/
instalments / periodic payments
/ otherwise) is to be deferred
Credit transaction – means a
transaction under which a
creditor
15. Contd.
15
Quasi-loans
Means a
transaction under
which a creditor
agrees to pay or
pays to a borrower
by an agreement
or
agrees to
reimburse or
reimburses the
expenditure
incurred by the
borrower by an
agreement
a) On terms that the
borrower (or a person
on his behalf) will
reimburse the creditor
or
b) In circumstances
giving rise to a liability
on the borrower to
reimburse the creditor
Services
Means anything other than goods or IMP
16. Contd.
16
•a) A reference
to person to
whom a
quasi-loan is
made is a
reference to
the borrower
•b) The
liabilities of
the borrower
under a quasi-
loan include
the liabilities
of any person
who has
agreed to
reimburse the
creditor on
behalf of the
borrower
•c) A reference to the
person for whose
benefit a credit
transaction is entered
is a reference to the
person to whom
goods, IMP or
services are supplied,
sold, lease, hired or
otherwise disposed
of under the
transaction and
d) A reference to
the supply of
services means
the supply of
anything other
than goods or
IMP and includes
the transfer or
disposal of things
in action or of IPR
Sub-sec 12- For the purpose pf sub-sec 11
17. Section 163- Approval of company required for loans and
quasi-loans to, and credit transactions for benefit of, persons
connected with directors of lending company etc.
17
18. Contd.
18
Sub-sec 1- It shall be unlawful for a company to make following transactions, subject to this sec
and Sec 163A and 163B
a) To make loan or
quasi-loan to another
company, LLP or VCC
c) To enter into a credit
transaction as a
creditor for the benefit
of another company,
LLP or VCC or
b) To enter into any
guarantee or provide
security for a loan or
quasi-loan made to
another company, LLP
or VCC by a person
other than the first
mentioned company
d) To enter into any
guarantee or provide
security for a credit
transaction entered
into by a person for the
benefit of another
company, LLP or VCC,
• if a director or directors of the
first mentioned company is or
together are interested in 20%
or more of the total voting
power in other company, LLP or
VCC,
• a prior approval for making of,
provision for or entering into
the loan quasi-loan, credit
transaction, guarantee or
security has to be obtained in
GM
• in which interested directors or
directors and his or their family
members shall abstain from
voting
19. Contd.
19
Sub-sec 2- It shall be unlawful for a company to make following transactions (other than an exempt
private company)
Where such company or LLP is
incorporated or formed outside
Singapore, if a director or
directors of the first mentioned
company have interest in the
other company or LLP
a) A loan or quasi-loan made
by a company to another
company or LLP
b) A credit transaction made
by a company for the benefit
of another company or to a
LLP and c) A guarantee entered into
or security provided by a
company to a loan or quasi-
loan or a credit transaction
made for the benefit of
another company or LLP by a
person other than the first
mentioned company,
20. Contd.
20
Sub-sec 3 – For the purpose of sub-sec 2, a director or directors of a company-
a) Have an interest in other company if-
b) Have an interest in LLP, if a director or directors is or together are
interested in 20% or more of the total voting power in a LLP
(i) In case of a company with share capital, the director or
directors is or together are interested in 20% or more of
voting power in the other company or
(ii) In case of a company without share capital, the director or
directors exercises or together exercises control over the
company (power to appoint director or otherwise) or
21. Contd.
21
Sub-sec 3A- subject to this section, sec 163A and 163B- A company (other than an exempt private
company) shall not involve in the following transactions unless a prior approval is obtained in the GM
for such transaction and the directors and their family members shall abstain from voting
a) Take part in an arrangement under which-
b) arrange the assignment to it, or assumption by it, of any rights,
obligations or liabilities under a transaction that, if it had been entered
by the company would require approval
(i) another person enters into a transaction, if it had been
entered into by the company, would have required approval
under Section 163 and
(ii) that person, because of that arrangement, obtains a benefit
from the company or related company or
22. Contd.
22
Sub-sec 3B- For the purpose of sub-sec 3A where a transaction
requires approval if it had been entered into by the company,
the transaction shall commence from the date of entering into
the arrangement
Sub-sec 3C- Directors or their family members shall abstain
from voting at GM as per sub-sec 1 and 3A is not applicable if
all the shareholders of the company have voted to approve the
arrangement
23. Contd.
23
Sub-sec 3D – For the purpose of this sec-
a) Where a company makes a loan or quasi-loan to another company or VCC,
• enters into credit transaction for the benefit of another company or VCC,
• gives a guarantee or provides security to a loan, quasi-loan or credit transaction
made to or entered for the benefit of another company or VCC, or
• enters into an arrangement as said in sub-sec 3A, a director or directors of the first
said company shall not be treated as having interest in the shares of the other
company or VCC
• by reason only that the first mentioned company has an interest in the shares of
other company or VCC and director or directors have an interest in shares in the
first mentioned company
b) The expression ‘interest in shares’, in relation to a company, has the meaning
assigned to it in sec 7 and, in relation to a VCC, has meaning assigned to it in sec 7 as
applied by sec 2 (6) of the VCC Act read with sec 2(7) of that ACT
24. Contd.
24
c) A person who has an interest in a share of a company or a VCC is treated as having an
interest in the voting power on the holder by that share
d) Prior approval required under sub-sec 1 shall not include any approval given after the loan,
quasi-loan, credit transaction, guarantee or security is made, provided for or entered into by
the company
e) Prior approval required under sub-sec 3A shall not include any approval given after the
arrangement is entered into by the company
25. Contd.
25
Sub-sec 4- Non-Applicability of the sec
a) To anything done by a company where the other company (whether
incorporated in Singapore or not) or VCC is its subsidiary or holding or
subsidiary of its holding company or
b) To a company, whose ordinary business includes-
• the lending of money or giving of guarantees in connection with loans
made by another persons,
• to anything done by the company in the ordinary course of that
business,
• if the activities of that company are regulated by any written law
• relating to banking, finance companies or insurance or are subject to
supervision by the Monetary Authority of Singapore
26. Contd.
26
• a) an interest of a member of a director’s family shall be treated as the
interest of director and
• b) reference to director’s family includes
Spouse,
Son, adopted son, step-son,
Daughter, adopted daughter and step-daughter
• This sec shall not prevent the company from recovering the amount of any
loan, quasi-loan, credit transaction or arrangement or the enforcement of
any guarantee or security made or given by the company or any other person
• Penal Provision:
If a company contravenes this sec, the director who authorise the same shall
be liable for-
Fine- <SGD 20,000 or Imprisonment - < 2 years
Sub-sec 5
Sub-sec 6
Sub-sec 7
28. Contd.
28
Sub-sec 1-
Sec 162- Loans and quasi loans to directors
Sec 163- Approval of company for such loans and quasi loans shall not apply
to anything done by a company on terms provided in sub-sec 2 -
a) to provide any loan to a director of the company to meet expenditure
incurred or to be incurred by him -
(i) in defending any criminal or civil proceedings in connection with any alleged
negligence, default, breach of duty or breach of trust by him in relation to the
company or
(ii) In connection with an application for relief or
b) to enable any such director to avoid incurring such expenditure
29. Contd.
29
Sub-sec 2- The terms referred in sub-sec 1 are:
-the director being convicted in the
proceedings
-judgement given against the director
in the proceedings or
-the court refusing to grant relief to
the director on an application and
-the date when the conviction
becomes final
-the date when the judgement
becomes final or
-the date when refusal of relief
becomes final
a) The loan has to be
repaid or any liability
incurred has to be
discharged, in the
event of-
b) it has to be repaid
or discharged not
later than 14 days
after-
30. Contd.
30
(i) If it is not appealed against, at the end of the period for bringing an appeal or
(ii) If it is appealed against, when the appeal(or any further appeal) is disposed of
a) a conviction, judgement
or refusal of relief becomes
final-
(i) If it is determined and there is no right of further appeal, or there is right to
further appeal but, the period for bringing any further appeal has ended
(ii) If it is abandoned or otherwise ceases to have effect andb) An appeal or further
appeal is disposed of-
A reference to the repayment of a loan includes the payment of any interest
which is chargeable under the terms of loan givenc)
Sub-sec 3- For the purpose of this sec
31. Contd.
31
Sub-sec 4-
The application of relief under this sec is an application of relief
under:
Sec 76A (13)- Extension of relief
Sec 391- Power to grant relief
32. Section 163 B- Exception for expenditure in connection
with regulatory action or investigation
32
33. Contd.
33
Sec 162- Loans and quasi loans to directors
Sec 163- Approval of company for such loans and quasi loans
Sec 172- Provisions protecting officers from liability shall not apply to
anything done by the company-
a) to provide any loan to a director of the company to meet expenditure
incurred or to be incurred by him in defending himself-
(i) in an investigation by a regulatory authority or
(ii) against any action proposed to be taken by a regulatory authority
in connection with any alleged negligence, default, breach of duty or breach of trust by him in
relation to the company
b) to enable any such director to avoid incurring such expenditure
