In a recent case highlighting the importance of due diligence in corporate governance, Li Baozhu, the sole director of Corp Nergy Pte Ltd, has been fined $6,500 by the State Court for failing to exercise reasonable diligence in her duties under the Companies Act. This ruling, issued on April 1, 2024, follows earlier action taken by the Accounting and Corporate Regulatory Authority (ACRA) in October 2023, when both Li’s registration as a Registered Qualified Individual (RQI) and Corp Nergy’s status as a Registered Filing Agent (RFA) were revoked.
The case centres around Li’s incorporation of three local companies, where she falsely declared to ACRA that a resident had consented to serve as a director. This action violates a key requirement of the Companies Act, which mandates that all Singapore-registered companies must have at least one resident director.
Investigations revealed that Li had not personally obtained consent from the individual in question, instead relying on a third party to do so. Crucially, Li failed to verify the prescribed consent form or take any steps to confirm the individual’s agreement before proceeding with the incorporations.
This incident underscores the critical role that corporate service providers (CSPs) play in maintaining the integrity of Singapore’s business environment. CSPs, such as RQIs and RFAs, are entrusted with essential tasks including company incorporation, annual return filings, and ensuring compliance with various statutory obligations.
ACRA has emphasized its firm stance against the misuse of identities in director appointments. The authority warns that CSPs who breach their obligations, whether through negligence or intentional misconduct, may face severe regulatory sanctions, including the cancellation of their registrations. Moreover, directors of CSPs may be subject to prosecution for failing to exercise reasonable diligence, with potential penalties including fines up to $5,000 or imprisonment for up to 12 months.
This case serves as a stark reminder to all corporate service providers and company directors of the importance of thorough verification processes and personal accountability in corporate governance. It highlights the need for stringent checks and balances to prevent identity misuse and maintain the integrity of Singapore’s corporate landscape.
As the business community reflects on this incident, it’s clear that upholding high standards of corporate governance is not just a legal requirement, but a fundamental aspect of building trust and credibility in the corporate world. Companies and service providers alike must remain vigilant and committed to ethical practices to ensure the continued strength and reputation of Singapore’s business environment.
Source: ACRA