Directors Who Fail to Oversee Firms Set Up for Clients Will Likely Be Jailed: High Court

Sentencing guideline issued in case involving man who was initially fined

- Selina Lum

Professional company directors who lend their names to help foreign clients set up companies in Singapore but fail to exercise oversight over these companies will likely be sentenced to jail terms.

The High Court said the custodial threshold would be presumptively crossed for such directors when they are sentenced for failing to exercise reasonable diligence in carrying out their duties.

The onus will be on the offenders to explain why a jail term should not be imposed on them, said a three-judge panel.

The sentencing guideline was issued in a case involving chartered accountant Zheng Jia, who was fined $8,500 by a district judge in April 2024.

Zheng, then 41 and a Singapore permanent resident, was also disqualified from acting as a company director for five years.

On Feb 19, the prosecution appealed to the High Court against the fine.

The High Court panel, led by Chief Justice Sundaresh Menon, allowed the appeal and sentenced Zheng to 10 months' jail instead.

On April 24, the court issued written grounds for the decision.

It said that Zheng operated a business of incorporating companies in Singapore, primarily at the behest of foreign clients.

As Singapore companies are required to have at least one director who is a local resident, Zheng registered himself as a local resident director of these firms and helped in the opening of bank accounts.