A conflict of interest typically arises when an individual’s or organisation’s private interests might benefit from actions or decisions made in their official capacity vis-à-vis another business entity. These conflicts can lead to unethical behaviour, such as favouritism or unfair treatment, which compromises the integrity and objectivity of decisions.

Three key examples of conflict of interest are:

• using company resources for personal gain;
• engaging in business activities that compete with the company; and
• making decisions that benefit related parties at the expense of the company’s interests.

Consider the case of a CEO who received personal loans and referral fees for directing investments into another company. The CEO failed to disclose and appropriately manage these conflicts of interest, thereby concealing these activities. This situation represents a conflict of interest as the CEO prioritised personal financial gain over the best interests of the company and its stakeholders, violating legal and ethical standards. This example demonstrates a breach of corporate governance principles and underscores the importance of transparency and proper conflict of interest management.

A well-crafted company conflict of interest policy serves two important purposes: risk mitigation and fostering transparency and trust. By identifying and managing conflicts early, companies mitigate the risk of biased decision-making that could undermine corporate objectives.

Transparent COI management and a robust COI policy instill confidence in stakeholders – shareholders, employees and customers – by demonstrating that the company operates with integrity and accountability.

The key components of an effective COI policy include:

• Purpose
• Scope
• General responsibilities
• Managing COI
• Monitoring COI
• Breach of policy
• Diagrammatic process flow for the COI process
• COI declaration form
• Recusal process

Implementing an effective COI policy involves proactive measures to prevent conflicts from escalating.

May Ling explains the practical steps:

“Directors should disclose any potential or perceived conflicts during board meetings. This includes business relationships or personal interests that could influence decision-making. Continuous monitoring and assessment by the Audit Committee or any other committee that oversees the ethics of the company ensure that mitigation actions are promptly taken.”

May Ling underscores the necessity of proactive COI management:

“Identifying and managing conflicts of interest prevent biased decision-making that could harm the company. It ensures that directors act in the best interests of all stakeholders, safeguarding the company’s reputation and long-term success.”

However, she makes this important distinction: “What is perceived as a conflict of interest may not necessarily constitute a conflict of interest to the company. What’s important is that the director takes the step to disclose. It’s up to the company to decide whether it does constitute a conflict of interest or not.”

By clearly defining COIs, implementing transparent disclosure processes and enforcing rigorous monitoring, companies can uphold integrity while effectively navigating complex business landscapes.

As we saw in the earlier conflict of interest example, failing to manage conflicts of interest adequately satisfactorily can lead to long-lasting repercussions that extend beyond financial penalties.

May Ling highlights the broader consequences:

“The reputation of a company is paramount. Inadequate COI management can tarnish reputation and lead to financial losses. Regulators may impose sanctions depending on the severity of the breaches. More significantly, loss of stakeholder confidence can be challenging to regain.”

The following scenarios illustrate the potential impact of conflict of interest mismanagement:

• Financial impact: A company involved in a conflict of interest scandal may face financial repercussions due to reduced investor confidence and market trust.
• Regulatory scrutiny: Depending on the severity of the breach, regulators may investigate and penalise companies for failing to disclose or manage conflicts appropriately.
• Long-term reputational damage: Stakeholder trust, once lost, can be difficult to recover.

May Ling emphasises the lasting implications. “Rebuilding trust requires consistent ethical practices and transparent governance over a prolonged period of time,” she says.

Managing conflicts of interest in corporate governance involves identifying and addressing potential conflicts before they affect decision-making. Clear policies, disclosure, recusal protocols and independent advice are essential strategies. Establishing and updating these frameworks ensures transparent and ethical governance.

To mitigate the risks, companies must implement conflict of interest policies that include:

• Clear disclosure requirements: Establish clear guidelines for directors and employees to disclose potential conflicts of interest.
• Regular training and education: Conducting regular training sessions to educate stakeholders on COI policies and ethical standards.
• Transparency and accountability: Maintaining transparency in decision-making processes and holding individuals accountable for adhering to COI policies.
• Recusal process: Directors and employees must promptly disclose any actual, potential, or perceived COIs as soon as they are aware of them. This includes conflicts arising from personal, financial, or familial relationships. The individual must recuse themselves from all discussions, deliberations, and voting on matters related to the identified conflict. They should not attempt to influence the decision in any way, either directly or indirectly.

Good corporate governance starts at the board level. “Several big companies that are listed on the Singapore Stock Exchange have been consistently recognised for their strong corporate governance practices,” says May Ling. “They have large and diverse boards, some up to 10 directors. The boards of these companies are also very accomplished.”

Strong, diverse boards ensure robust corporate governance through a variety of key principles and practices, including:

Good corporate governance can also help public-listed companies score well on the Singapore Governance and Transparency Index (SGTI), a valuable benchmark for assessing corporate governance practices in Singapore. The SGTI assessment framework includes a broad range of assessment criteria, including aspects of the board such as its competencies and independence, the directors’ remuneration and how they are selected, and board responsibilities.

Beyond shareholders, corporate governance is also important to stakeholders, so the company’s relationship with other parties is also assessed under the framework.

Transparency and disclosure are also key metrics. This includes clear and comprehensive reporting of financial performance, corporate policies, governance structures and risk management practices.

The board of directors is pivotal in setting the company’s strategic direction and ensuring that management aligns the company’s strategies with its objectives and values. This involves evaluating business plans, approving major investments, and monitoring performance against strategic goals.

The board also oversees the company’s risk management framework, ensuring that risks are identified, assessed, and appropriately managed. This includes monitoring financial, operational, legal, and reputational risks, as well as ensuring compliance with regulatory requirements and ethical standards.

Financial oversight is one such critical aspect. The financial reporting process should be supervised to uphold accuracy, transparency and compliance with accounting standards and regulations. This is often facilitated through board committees such as the audit committee.

The board is also responsible for appointing and overseeing management, ensuring they possess the necessary skills, experience and integrity to lead the company effectively.

Succession planning is another board responsibility in corporate governance. This requires the board to collaborate with the nominating committee to ensure a continuous pipeline of talented leaders for future key roles.

The board also ensures the company’s adherence to legal, regulatory and ethical standards by establishing codes of conduct and ethical guidelines for employees. The guidelines often include provisions for whistleblowing protection to safeguard the identities of whistleblowers.

These actions collectively reflect good board practices in corporate governance and underscore the importance of the board of directors in corporate governance initiatives.

In Singapore, boards of directors are expected to uphold high standards of corporate governance to protect shareholder interests, promote transparency and accountability, and contribute to the long-term success and sustainability of companies.

Compliance plays a pivotal role in corporate governance within a company, acting as a foundational element that ensures the organisation operates within legal and ethical boundaries. This includes overseeing the development of risk management frameworks that identify, assess and manage risks effectively with a focus on compliance-related risks like know your customer (KYC), anti-money laundering (AML) and conflicts of interest (COI).

The key governance practices essential for compliance in order to maintain effective corporate governance within an organisation include:

• Establishing guidelines for regularly reviewing and updating customer verification processes to prevent identity fraud, ensure financial integrity, and uphold the company’s reputation.
• Defining AML policies and ensuring robust systems are in place for the monitoring of financial transactions to detect and prevent illegal activities like money laundering.
• Setting policies for identifying, disclosing and managing conflicts of interest to ensure all decisions are made in the company’s best interest and uphold the highest ethical standards.

The role of a company secretary is instrumental in establishing and maintaining good corporate governance practices.

Company secretaries undertake the following responsibilities to foster corporate governance:

Employees also play a role in ensuring good corporate governance including KYC, AML and COI policies.

May Ling says employees are expected to adhere to high ethical standards. “This will contribute to a culture of integrity and trust within the organisation, which is fundamental to good corporate governance.”

At a minimum, employees can be expected to comply with policies and procedures. They should be encouraged to contribute to good corporate governance by conducting themselves ethically, supporting compliance efforts with audits and participating in compliance initiatives and programs.

Employees will need training to understand their roles and responsibilities in upholding regulatory compliance and ethical standards, including recognising potential risks and knowing how to address them. They should be encouraged to report any suspicious activities or potential conflicts of interest to the appropriate channels in the organisation, which contributes to a culture of transparency and accountability.

Filing annual returns is a regulatory requirement in Singapore. It is also a critical practice in maintaining the integrity of Singapore’s corporate environment. These filings allow ACRA’s database to remain updated, providing stakeholders with the transparency they need and getting hold of accurate information about a company’s operational status.

For companies, staying compliant with annual return filings can help them avoid late lodgement penalties and reinforce stakeholder confidence in their corporate governance standards.

All entities registered in Singapore are mandated to file annual returns with ACRA, which include the following:

• Private and public companies
• Foreign companies
• Limited Liability Partnerships (LLPs)

This wide-ranging requirement enables the government to provide a transparent and accountable corporate environment across all types of business entities.

There are a number of documents and information required for the filing annual returns; they include, but are not limited to:

• Company Information: This should include your company’s name, Unique Entity Number (UEN) number, and registered address.
• Principal activities of Company: You will need to confirm whether there are any changes to your company’s primary and secondary business activities.
• Details of Company Officers: These include the full names, identification numbers (for Singapore residents), and nationality (for non-Singapore residents) of your company’s directors and secretary.
• Shareholder Details & Share Capital: This section should detail your company’s shareholders and outline the share capital structure.
• Financial statements required: Annual returns must be filed together with financial statements in XBRL format (unless exempted), and companies must ensure these documents are prepared accurately and in compliance with the Singapore Financial Reporting Standards (SFRS):
  • Statement of Financial Position (Balance Sheet)
  • Statement of Comprehensive Income (Profit & Loss)
  • Statement of Cash Flows
  • Statement of Changes in Equity

You are required to appoint an auditor to have your Financial Statements audited if your company meets any TWO of the following conditions:

• Has 50 or more employees
• Has total assets that exceeds S$10 million
• Has total annual revenue that exceeds S$10 million

The filing of Annual Returns must be done through BizFile+, the official online filing and information retrieval system managed by the ACRA. Basically, BizFile+ is a central hub for all corporate regulatory transactions and the filing of business documents in Singapore.

Access to BizFile+ requires you to possess a Singpass or CorpPass, which acts as a secure digital identity for businesses and individuals to conduct online transactions with government agencies.

To ensure a streamlined and efficient filing process of annual returns, here are the steps you can follow:

1. Start by visiting BizFile+ and log in using your Singpass or CorpPass credentials.
2. Once logged in, proceed to your company’s profile by either searching for your company by name or registration number.
3. Within your company’s BizFile+ dashboard, locate and select the option to file an annual return.
4. Certain sections of your annual return may already be filled based on previous filings. Review this information carefully and update it if necessary.
5. Depending on your company’s type, size and financial reporting requirements, you may need to upload additional documents, such as audited financial statements.
6. Once all information has been reviewed and the necessary documents uploaded, submit your annual return.

There are several key considerations that you should be mindful of, to ensure a smooth process of filing annual returns.

In Singapore’s financial sector, KYC practices are paramount, especially in activities such as banking and equity financing, to safeguard the financial interests of businesses, investment firms, and investors.

Regulations-mandated KYC processes include the thorough verification of customer identification before financial services can be offered. These practices help mitigate the risks of money laundering, especially in transactions of high monetary value.

With financial crime becoming more intricate, the MAS regularly updates its KYC regulations, urging companies to stay informed and compliant to avoid penalties and protect their reputation.

Non-compliance with KYC poses significant operational and financial risks, including the potential for a company’s operational suspension, license revocation and hefty penalties that can impact a company’s bottom line and investor confidence.

KYC compliance is vital for businesses for a range of reasons, with the most significant including:

• Risk management: Verifying customer identities and transaction details helps prevent money laundering and terrorism financing.
• Regulatory compliance: Following KYC regulations is mandatory in Singapore and is crucial for preserving a company’s reputation and integrity.
• Trust and integrity: Strong KYC practices demonstrate a commitment to ethical standards to stakeholders, thereby helping to safeguard a company’s reputation.

Experienced corporate services providers who are well-versed in administrative corporate secretarial work and corporate governance advisory services can ensure that companies meet all the above compliance requirements.

Such advisory services include:

• Gap analysis of the company’s corporate governance framework
• Crafting and reviewing policies on interested person transactions
• Sustainability practices
• Code of business conduct and ethics

The regulatory landscape is dynamic, requiring companies to stay informed and adapt their compliance strategies accordingly. Challenges in maintaining compliance with KYC and AML include increasingly sophisticated illegal activities, and the need for specialised knowledge to monitor sudden changes in a client’s business activities and frequent changes in directorship within a short period of time.

Kevin Cho, Director of Corporate Secretarial for BoardRoom, explains more. “Lack of talent knowledge on AML measures can be a challenge, but this can be overcome through regular updates from the professionals, lawyers, and authorities, or through education and training. We can also utilise digital KYC platforms to trace the beneficiary owners hidden behind multiple layers of entities,” says Kevin.

Digital KYC platforms are increasingly gaining traction as businesses recognise the importance of streamlined identity verification processes. These platforms harness cutting-edge technologies such as artificial intelligence, biometrics and machine learning to remotely and securely verify customer identities in real time. In this aspect, KYC digital platforms help address talent shortages by optimising existing resources, automating repetitive tasks, enabling remote work, and facilitating faster onboarding and training processes.

As part of AML regulations, companies must actively monitor transactions of large values. However, few companies are equipped with the proper tracking mechanisms or are across on the latest regulatory changes.

Angelin Loh, Senior Manager, Corporate Secretarial at BoardRoom, adds, “Our team keeps up to date with regulatory changes from authorities such as MAS, Commercial Affairs Department (CAD), and the Singapore Police Force (SPF), reviewing guidelines and notices issued by these authorities to ensure compliance, which we then disseminate to our clients.”

The MAS requires financial institutions to comply with specific controls, including customer and beneficial owner identification, regular account reviews and monitoring and reporting suspicious transactions. This impacts not just companies but also directors. Directors are accountable for ensuring that their companies comply with these regulations, and failure to do so could have legal or regulatory repercussions for them as individuals.

Penalties for non-compliance include the following:

• Directors and individuals involved in money laundering offences can face:
  • fines up to SGD 500,000; and
  • up to 10 years in prison.
• Financial institutions failing to adhere to AML policies set by the MAS may incur:
  • fines up to SGD 1 million per offence; and
  • for chronic offences, an additional SGD $100,000 per day.
• Companies not complying with KYC regulations set by ACRA face significant repercussions, including:
  • cancellation of ACRA registration;
  • denial of access to business services; and
  • financial penalties.

A comprehensive KYC program not only ensures regulatory compliance, there are other advantages of KYC including safeguarding the company’s reputation and financial integrity.

Here is a simplified KYC checklist outlining the essential components companies should incorporate:

A robust KYC framework can help companies navigate the complexities of financial regulations, upholding their reputation and ensuring the stability of their financial transactions.

“This systematic approach ensures companies are not just compliant but actively managing potential risks,” says Kevin.

Robust KYC and AML processes are central to comprehensive corporate governance, protecting businesses from legal, reputational and financial risks.

The complexity of corporate obligations necessitates the support of a trusted corporate secretarial service. A competent company secretary in Singapore ensures your business remains compliant with changing regulations, safeguarding your company’s integrity.

With more than 50 years of experience, BoardRoom offers comprehensive corporate secretarial and governance advisory services across Singapore and the Asia-Pacific. Our team, equipped with local, regional and global expertise, can help your company navigate compliance complexities, boosting stakeholder confidence and securing long-term success.

Our services include:

• An independent assessment of your KYC obligations to ensure that your incorporated company adheres to KYC procedures and AML checks.
• Maintenance of proper statutory registers, such as the registrable controller, to ensure transparency and compliance within your company’s corporate governance framework.
• Gap analysis of your company’s corporate governance framework.
• Annual evaluation of board activities and individual directors.

Get in touch with us today to enhance your corporate governance standards.

The government has proactively encouraged an environment of innovation and supports this in a range of ways. For example, the Economic Development Board provides resources and assistance to support overseas companies and individuals starting businesses in Singapore. The government has also invested in the Startup SG program, providing various services and grants to Singapore’s startups. Some sectors offering an array of opportunities that startups could consider include:

While Singapore has created a welcoming environment for new businesses, there are many compliance factors that startups and entrepreneurs must consider when incorporating a business in Singapore.

Eunice Hooi, Head of Corporate Secretarial, BoardRoom Singapore, says it is important to seek advice from an experienced, professional advisor when launching a business. “They will guide business owners through every stage of the incorporation process. They will also provide specialty advice on the different types of business structures available, and which one is best suited to the business needs. They will also take into consideration the legal and the tax implications of business ownership.”

Eunice says business owners need to consider the answers to several questions. What is the nature of your business? Are you establishing a branch i.e. an extension of your head office in another country? Or do you want to test the market by registering a representative office before you set up a permanent structure in the foreign country? A professional advisor can help you answer these questions and provide advice on the types of company structures in Singapore. They will also help you fulfil your obligations and avoid the pitfalls of inadequate planning.

Three critical aspects when establishing a business in Singapore are tax, corporate secretarial and payroll.

There are several ways to structure a business in Singapore. These include:

• sole proprietorships;
• partnerships;
• private limited companies (PLC);
• limited liability partnerships (LLP); and
• variable capital companies (VCC).

Each entails a set of conditions that family offices must meet to qualify.

 The company incorporation process for family offices in Singapore can be complex, but the outcome can provide considerable benefits for HNW families.

“First of all, you need to consider your objective for setting up this family office – whether it is for investment or philanthropy purposes,” says Kevin Cho, Director of Corporate Secretarial for BoardRoom Singapore. “You need to consider what funds will be set aside for philanthropy or charitable purposes.”

Defining the goal you want to achieve will help guide the structure and operations of your family office and indicate the legal and tax implications you will need to navigate. Potentially, you may realise that a different investment vehicle (e.g., a company limited by guarantee, trust, or VCC) or even a different location will be more suitable.