Most Singapore private company directors have never heard the phrase “key management personnel compensation disclosure”, yet almost every set of statutory financial statements they sign contains a note built around it. It sits within the related party disclosures, and it is one of the more commonly mishandled notes in SME accounts: omitted altogether, understated because non-cash perks are forgotten, or confused with a narrower Companies Act mechanism that most private companies never actually trigger.
This article sets out what Financial Reporting Standard 24, Related Party Disclosures, requires a private company to disclose about the people who run it: who counts as key management personnel (KMP), what compensation categories must be shown, how this interacts with SFRS for Small Entities, and where SMEs most often go wrong. It also clarifies why “directors’ remuneration bands” is a listed-company concept rather than a standing Companies Act filing requirement for private companies.
We cover related party transactions more broadly, including loans, management fees and outstanding balances, in our separate guide to related party transactions and FRS 24 disclosure. This article focuses on the compensation note for the entity’s own KMP.
Who Counts as Key Management Personnel Under FRS 24
FRS 24 defines key management personnel as those having authority and responsibility for planning, directing and controlling the activities of the entity, directly or indirectly, including any director, whether executive or otherwise. The test is functional, not titular. A controlling shareholder who is not formally a director but makes every material decision, or a general manager with full authority over operations and finance, can fall within KMP without holding a director title. A nominee or purely ceremonial director with no real authority sits less comfortably within the definition, though most SMEs treat all appointed directors as KMP by default, which is the safer and simpler position.
KMP is also not limited to individuals employed directly by the reporting entity. Where a holding company’s finance director also directs a Singapore subsidiary’s activities without drawing separate pay from it, that person can still be KMP of the subsidiary.
Why Disclosure Matters Even for a Small Private Company
It is tempting to treat KMP disclosure as a listed-company formality, but it applies regardless of size. Financial statement users, banks assessing a facility, a landlord assessing a lease guarantee, or a buyer conducting due diligence, use the note to gauge how much of the cost base represents payment to the people who control the company, rather than arm’s length employment cost. Auditors specifically test completeness here, since understated or omitted related party compensation is a recognised indicator of a wider disclosure failure, and related party dealings with controlling individuals are exactly the kind of arrangement that draws IRAS or ACRA scrutiny in a tax review or an insolvency investigation.
What FRS 24 Requires You to Disclose
Where a company applies full Singapore Financial Reporting Standards, FRS 24 requires disclosure of key management personnel compensation in total, broken down by category. The categories are drawn from FRS 19, Employee Benefits.
Short-term employee benefits covers salary, director’s fees, cash bonuses, CPF contributions made by the company, and non-monetary benefits such as medical insurance, a company car, housing, or subsidised goods, provided while the KMP is actively rendering service. This is the category SMEs most often get half right: the cash salary flows correctly from payroll, but the non-cash extras are frequently missed because they never pass through payroll at all.
Post-employment benefits covers pension or retirement arrangements payable after the KMP leaves service, most relevantly any company-funded provision on top of statutory CPF (ordinary CPF contributions during employment sit more naturally under short-term benefits, since they are paid concurrently with service). Our guide to CPF voluntary contributions for employers and directors explains how voluntary top-ups above the compulsory ceiling are treated.
Other long-term benefits covers rewards vesting or paid more than twelve months after the related service, such as long-service awards or deferred cash incentives that do not qualify as post-employment or termination benefits.
Termination benefits covers payments made because the company terminates a KMP’s employment before normal retirement, or the KMP accepts voluntary redundancy for those benefits. A payment for loss of office falls here, and separately triggers its own approval requirements under the Companies Act, distinct from this accounting disclosure.
Share-based payment covers the expense recognised where a KMP receives shares, options or other equity instruments as compensation, measured under FRS 102, Share-based Payment. Many SMEs have no employee share scheme, in which case this line is nil, but a founder-director granted options under an ESOP must still have that value reflected here even though no cash changes hands in the year. See our guide on Employee Share Option Plans for Singapore companies.
The total is disclosed by category, not against each named individual, which is precisely what distinguishes this accounting note from the individual, named remuneration disclosures listed companies give under separate governance rules.
The Companies Act Angle: What Actually Applies to Private Companies
Readers researching this topic often encounter claims that the Companies Act 1967 separately compels disclosure of individual directors’ remuneration in bands, in a schedule to the Act or its regulations. We checked this directly against the current text on Singapore Statutes Online before writing this article, and the position for an ordinary private company is more limited than that claim suggests.
The banded, per-director remuneration regime often quoted is a Singapore Exchange listing and corporate governance requirement for listed issuers, not a Companies Act obligation that automatically applies to a private company’s statutory accounts. Private companies do not file that kind of note as a matter of course.
What the Act does provide is narrower and works differently. Section 164A gives members holding at least 10% of the total number of members, or members holding at least 5% of total issued shares, the right to serve notice requiring an audited statement of total emoluments and other benefits paid to each director (including a director of a subsidiary) for the preceding financial year. Once validly requisitioned, the company has 14 days to prepare and audit that statement, a further 14 days to circulate it, and must lay it before the next general meeting; default is an offence carrying a fine of up to S$10,000 for the company and every director. This is a shareholder-triggered right, not a standing annual disclosure duty, and is separate from the FRS 24 compensation note, which applies every year regardless of whether any member ever invokes section 164A.
Separately, section 169 requires director’s fees, as opposed to salary under a service contract, to be approved by the company in general meeting before payment, a governance control rather than a reporting disclosure. We cover that distinction in our guide to directors’ fees versus salary in Singapore. If you have seen a specific schedule or regulation number cited elsewhere for a standing banded disclosure duty on private companies, verify it directly against the current Companies Act 1967 text on Singapore Statutes Online or current ACRA guidance, since that is what the primary legislation currently supports.
Does This Still Apply Under SFRS for Small Entities?
Many Singapore SMEs prepare accounts under SFRS for Small Entities rather than full SFRS. A common assumption is that the simplified framework strips out KMP compensation disclosure along with other reduced-disclosure concessions. It does not. SFRS for Small Entities is based on the IFRS for SMEs Standard, and its related party section carries forward the requirement to disclose total key management personnel compensation. Unlike some overseas small-company regimes that carve out a specific KMP exemption, the Singapore standard as issued by the Accounting Standards Council does not provide a general exemption for companies applying SFRS for Small Entities. A small company with no share scheme and no post-employment arrangement beyond CPF will typically only have figures under short-term benefits, but the analysis should still be made rather than assumed away, and confirmed against the Council’s published standard or ACRA guidance for borderline cases.
Where SMEs Commonly Get This Wrong
The most frequent gap is not the cash salary line, which almost always flows correctly from payroll. It is everything outside payroll: a company car, an interest-free or below-market loan, free accommodation, or medical and insurance benefits paid directly by the company, all form part of short-term KMP compensation and are frequently missed because no one pulled them from the general ledger or fixed asset register when drafting the note.
A second common gap concerns family members. Where a controlling shareholder-director’s spouse or adult child draws a salary, the question is not whether that person holds a director title, but whether they have authority over the entity’s activities, or whether their role is simply an extension of the controlling individual’s own arrangements. Many SMEs correctly capture the director’s own pay but overlook a family member who either meets the KMP test in their own right or whose arrangement should at minimum be flagged as a related party disclosure. This is a judgement call worth making deliberately, and documenting.
A third gap is treating the note as static. Where a company introduces a new benefit, tops up CPF voluntarily, or makes a one-off termination payment to a departing director, the note must reflect that change in the relevant year, not simply repeat the prior year’s categories with the salary line updated.
A Worked Example: Building the Compensation Note
Consider a Singapore trading company with two director-shareholders, one of whom has the use of a company car, and a finance manager who does not sit on the board but has full authority over the company’s financial and operating decisions in practice, and who therefore also meets the KMP test.
| Category | Basis | S$ |
|---|---|---|
| Short-term employee benefits | Salary, director’s fees, CPF contributions, and the taxable benefit of company car use | 412,000 |
| Post-employment benefits | Voluntary CPF top-ups above the compulsory contribution ceiling | 18,000 |
| Other long-term benefits | None in the current year | – |
| Termination benefits | None in the current year | – |
| Share-based payment | None; the company has no share option scheme | – |
| Total key management personnel compensation | 430,000 |
An accompanying sentence would typically identify who is treated as KMP for this purpose, for example “key management personnel comprise the directors and the finance manager of the company”, so a reader understands the population the total relates to, without needing individual names or amounts attached.
Frequently Asked Questions
Does a dormant or very small company still need a KMP compensation note?
If directors receive any compensation, including a modest fee or CPF-only arrangement, a KMP note is still required, even under SFRS for Small Entities. A genuinely dormant company with directors receiving nothing would have nothing to disclose in substance, but the position should be confirmed rather than assumed.
Do we have to name each director and state what they individually earn?
No. FRS 24 requires KMP compensation to be disclosed in total, broken down by category, not against each named individual. Individual, named remuneration disclosure is a listed-company governance concept, not the standing accounting note private companies prepare.
Is a director’s CPF contribution part of the KMP compensation figure?
Yes, the compulsory CPF contribution on a director’s salary is normally included within short-term employee benefits, since it is paid concurrently with service. Voluntary top-ups funding retirement provision above the compulsory ceiling are more naturally a post-employment benefit.
Our finance manager is not a director. Do we still include them?
If that person has authority and responsibility for planning, directing and controlling the company’s activities in practice, whether or not they hold a director title, they meet the FRS 24 definition of key management personnel and their compensation should be included in the total.
Where do we find the exact current Companies Act position on director remuneration disclosure?
Check the current text of the Companies Act 1967 directly on Singapore Statutes Online, and consult current guidance on ACRA’s website, rather than relying on a schedule number quoted in a secondary source, since disclosure regimes for listed and unlisted companies are frequently conflated in informal guides.