If a fellow director is spending company money on personal items, the board should act as a board: secure the evidence, limit access to the bank account, put the facts to the director in writing and demand repayment. If that fails, the company may sue, or a shareholder may ask the court for leave to sue in the company’s name under section 216A of the Companies Act 1967. Serious cases may also justify a police report. Do not confront the director informally, delete anything or take money back yourself.
What should you do in the first few days?
The first week decides whether you can prove anything later. Treat it as an evidence exercise before it becomes a confrontation.
- Preserve records. Download bank statements, card statements, accounting ledger entries, invoices and approval emails. Take copies of anything stored in shared drives or accounting software before access is changed.
- Write a simple schedule. List each payment by date, amount, payee, stated purpose and who approved it. A schedule turns a general suspicion into something a director, auditor or court can test.
- Separate the facts from the feelings. Some spending will turn out to be reimbursable business expense, a bonus agreed informally or a loan the board knew about. Note that now, because it is what the director will say.
- Do not access private accounts or devices. Use only what the company properly holds. Evidence obtained by improper access can create problems of its own.
- Tell the other directors together. A single director acting alone has no authority to bind the company, so bring the matter to the board.
What rules does the director appear to have broken?
Under section 157 of the Companies Act 1967, a director must act honestly and use reasonable diligence, and officers must not misuse their position or company information to gain an advantage for themselves or cause detriment to the company. A director who breaches these duties can be liable to the company. Our guide to breach of fiduciary duty by a company director explains the court remedies, including compensation and account of profits.
Other rules may apply depending on what happened:
- Loans to directors. Section 163 of the Companies Act restricts a company from lending to its directors, and related arrangements can be caught. A payment the director calls a “loan” may itself need prior shareholder approval, so ask what approvals exist before accepting that label.
- Criminal breach of trust. The Penal Code covers dishonest misappropriation of property entrusted to a person, and the law has addressed directors specifically since amendments in 2020. Whether the facts amount to an offence is a matter for the authorities and your lawyer. Our article on criminal breach of trust and getting the money back sets out the police report process, which works similarly for insiders.
- Tax, CPF and GST. Payments that remain in the books as business costs affect the company’s returns. That is a separate correction exercise, covered in our guide to personal expenses paid by the company.
Who can decide on the company’s behalf?
The company is the one wronged, so the company decides whether to sue, and the board generally makes that decision. The difficulty is that the wrongdoer sits on the board. Practical points:
- The director with the conflict should be asked to leave the discussion and not vote on the resolution about their own conduct. Check the constitution for quorum and voting rules.
- If the remaining directors are a majority, they can resolve to demand repayment, change who may sign, instruct lawyers and give notice of a formal meeting.
- If the board is split evenly, or the director controls the majority of shares, the company may not act, and a shareholder may have to use the route described below.
- Shareholders may also be able to ratify or forgive a breach, but ratification is not a way for the controlling shareholder to excuse their own wrongdoing at the expense of others. Take advice before any shareholder vote.
How do you protect the bank account?
Banks follow the mandate they were given. Changing signatories or limits normally needs a proper board resolution and the bank’s forms, and the bank may ask for proof of the board’s authority. Common steps are to require dual signatures above a threshold, remove online banking rights from the director, cancel company cards held by the director and require supporting documents for each payment.
Be careful about removing a director’s access in a way the constitution does not allow. A director cannot be excluded from the board’s decisions at will, and a rushed move can give the director an argument that the board itself acted improperly. If the company’s money has already left and traced funds are in question, see our article on bank disclosure and tracing a company’s money.
Demand, repayment or court: which route fits?
| Route | Who acts | Best when | Main risk |
|---|---|---|---|
| Board letter of demand and repayment plan | Remaining directors for the company | The director admits the spending and can repay | A repayment promise with no security or deadline is hard to enforce |
| Set-off against fees, bonus or dividend | Board, with tax and accounting advice | The director is owed money or has declared dividends | Tax, CPF and company law consequences; needs correct paperwork |
| Company sues the director | Company, by board decision | The board has an independent majority and wants compensation | Cost, delay and the director’s counterclaim |
| Derivative action, section 216A | Shareholder, with leave of court, in the company’s name | The board will not act because it is controlled by the wrongdoer | Leave must be granted; you must meet the statutory conditions |
| Oppression claim, section 216 | Shareholder, personally | The conduct unfairly prejudices a shareholder’s interests, for example by stripping value from the business | Not for every company wrong; remedy often a buy-out |
| Police report | Company or a director | Clear dishonest taking of money | Control of the process passes to the authorities; may not recover money quickly |
When can a shareholder sue on behalf of the company?
Where the board will not act, section 216A of the Companies Act 1967 lets a complainant, such as a shareholder, apply for leave to bring an action in the company’s name. The court grants leave only if it is satisfied of conditions that include 14 days’ written notice to the directors, that the applicant is acting in good faith, and that the action appears prima facie to be in the company’s interest. Our guides on bringing a derivative action and the good faith and company interest tests go through the conditions. Any recovery goes to the company, not to the shareholder personally.
If the misuse also unfairly prejudices a shareholder’s own interests, a section 216 oppression claim may be available. The two routes are different and are sometimes pleaded together.
What about people who received the money?
If the director passed company money to a relative, a friend’s company or an intermediary, those recipients may face claims too. Our article on dishonest assistance and knowing receipt covers claims against third parties. Time limits apply to civil claims and can differ depending on the claim, so do not wait.
Which documents should the board assemble?
- Bank and card statements covering the full period.
- General ledger and expense claim records, with receipts where available.
- Board minutes and resolutions showing what was approved and by whom.
- The constitution, any shareholders’ agreement and the director’s service agreement.
- Emails and messages showing the director’s explanations.
- Any loan agreement, director’s loan account and shareholder approval for it.
- Your payment schedule and a short chronology of events.
Example: a joint director with a company card
Example (hypothetical): A trading company has three directors, two of whom each hold 30 per cent of the shares and one who holds 40 per cent. The 40 per cent director holds the company card. Over a year, the others notice holiday bookings and a car service on the statements. They agree among themselves, take the card statements to the full board and ask the third director to explain. He says some items were business trips but admits others were personal. The two directors pass a resolution requiring dual approval for payments, request a schedule of the personal items and demand repayment within 30 days with a signed acknowledgment. They do not alter the books until their accountant advises on correcting the tax treatment. If he refuses to repay, and as he controls the largest single block, the two minority shareholders consider whether a derivative claim or a different remedy fits, while asking a lawyer whether a police report is appropriate.
Frequently asked questions
Can the other directors just remove the director?
Removal depends on the constitution and the Companies Act, and it does not by itself recover the money. Our article on how to remove a director from a private company explains the section 152 route and the ACRA filing. Deal with repayment and evidence in parallel.
Is it enough that the director says he will repay?
Not without writing. Record the amount, a deadline and consequences, and have the board accept it by resolution. A vague promise made in a meeting is hard to prove later.
Do we have to report to the police?
There is no general rule that you must, and the decision depends on the facts and your lawyer’s advice. A police report is more likely where the taking was plainly dishonest and large. Once reported, the company does not control the pace of the investigation.
What if all the shareholders were happy for years and now one objects?
Past informal acceptance can complicate the claim, because the director may say it was agreed. Written approvals, minutes and the way the spending was recorded in the accounts become important evidence.
Can a single shareholder sue without the others?
A shareholder can apply for leave under section 216A to bring the action in the company’s name, subject to the conditions, but they cannot simply sue as if the loss were their own. Loss to the company is generally the company’s claim.
Need help with a director using company money?
If your company, or you as a director or shareholder, is dealing with a director using company money for personal purposes, contact the Raffles Corporate Services team at [email protected] or on WhatsApp at +65 8501 7133 or +65 9018 0072. We will help you understand the documents and deadlines. Where your matter needs a lawyer, we will refer you to a firm on our panel of Singapore law firms that regularly handles director and shareholder disputes. Raffles Corporate Services is a corporate services provider, not a law firm, and this article is general information, not legal advice.
The Raffles Corporate Services Editorial Team, Raffles Corporate Services