Silent But Not Safe - New Sentencing Frameworks for Singapore's Nominee Directors
Imprisonment by default for nominee directors failing to exercise reasonable diligence
In PP v Zheng Jia [2025] SGHC 76, the Singapore High Court delivered a significant judgment that revised the sentencing framework for offences involving a breach of directors’ duties to act honestly and to use reasonable diligence under section 157(1) of the Companies Act 1967 (“Companies Act”), signalling a harsher stance on errant company directors, including nominee directors, amidst a growing focus on director accountability and corporate governance in Singapore.
Factual matrix
Mr Zheng Jia, a professional chartered accountant, ran a business model which was predicated on him being registered as a local resident nominee director of numerous companies incorporated for foreign clients. He had incorporated and/ or been registered as director for 384 companies, exercised no control or supervision over these companies’ affairs and was largely ignorant of their activities. Mr Zheng Jia enlisted another person, Mr Er Beng Hwa, to also act as a locally resident director under a similar "hands-off" arrangement.
In 2020, substantial sums – identified as proceeds from scams perpetrated abroad – were routed through bank accounts of two companies: Ocean Wave Shela Pte Ltd (“Ocean Wave”) (where Mr Zheng Jia was a director) and Rui Qi Trading Pte Ltd (“Rui Qi”) (where Mr Er was a director).
Mr Zheng Jia pleaded guilty to:
One charge under Section 157(1) of the Companies Act for failing to exercise reasonable diligence as a director of Ocean Wave. This involved failing to supervise Ocean Wave's affairs or transactions in its bank account.
One charge under Section 157(1) of the Companies Act read with Section 109 of the Penal Code 1871 for abetting Mr Er’s failure to exercise reasonable diligence as a director of Rui Qi. Mr Zheng Jia had explicitly told Mr Er he "need not do anything other than sign on the company registration documents and bank account opening documents".
Decision in the District Court
The District Court had initially convicted Mr Zheng Jia and imposed fines of $3,500 and $5,000 respectively, along with a five-year disqualification from acting as a director. Mr Zheng Jia’s conduct, assessed on the basis of the sentencing framework set down in Abdul Ghani bin Tahir v Public Prosecutor [2017] 4 SLR 1153 (“Abdul Ghani”), was held to be merely "negligent" and no custodial sentence was imposed.
In Abdul Ghani, the High Court had previously held that “purely negligent breaches” of the duty to exercise reasonable diligence under Section 157 of the Companies Act would only give rise to a fine, and custodial sentences would be reserved for instances where a director had breached the duty “intentionally, knowingly, or recklessly”.
The Prosecution, on appeal, sought a custodial sentence for Mr Zheng Jia, and invited the High Court to develop, or depart from, the sentencing framework in Abdul Ghani.
Revised Sentencing Framework by the High Court
The High Court drew a distinction between a situation where a director made a negligent error in discharging his duties and a situation where a director did not intend to exercise reasonable diligence from the start. In doing so, the High Court disapplied Abdul Ghani as a sentencing precedent to offences under section 157(1) of the Companies Act, and instead, set out and applied the following 3-step sentencing framework (“Revised Sentencing Framework”) for such offences:
Step 1: Identify relevant offence-specific factors, including but not limited to:
Extent of due diligence undertaken regarding the company’s activities and/ or the client;
Efforts to monitor or review transactions in the company’s bank accounts;
Extent to which the director knew or should have known that failing to exercise reasonable diligence could enable abuse of the corporate structure;
Duration of offending and whether it was a one-off breach or a wider pattern;
Whether the offending conduct was part of a business or profit-driven scheme and the extent of profits;
Whether the offender made efforts to conceal wrongdoing;
Whether there was a transnational element (e.g., involvement of cross-border criminal syndicates); and
Nature and extent of harm to the company and/ or third parties.
Step 2: Situate offence within appropriate sentencing band
· Band 1 (1–3 factors): Up to 4 months’ imprisonment
· Band 2 (4–5 factors): 5 to 8 months’ imprisonment
· Band 3 (> 6 factors): 9 to 12 months’ imprisonment
Step 3: Calibrate indicative sentence for offender-specific factors, i.e. adjusting for aggravating and mitigating factors, such as:
· Other offences taken into consideration;
· Offender’s relevant antecedents;
· Remorse (or lack thereof) of the offender;
· Whether there was a timely plea of guilt;
· The extent of voluntary restitution made by the offender; and
· Whether the offender voluntarily cooperated during the investigation.
Application of the Revised Sentencing Framework to the facts
Under the Revised Sentencing Framework, Mr Zheng Jia’s conduct was found to fall within Band 2, and he received an aggregate custodial sentence of 10 months in addition to the disqualification order made by the District Court after the High Court took into account his guilty plea. The High Court explained that conduct such as Mr Zheng Jia’s would presumptively cross the custodial threshold, and in such instances, the onus would be on the director to explain why imprisonment should not apply.
Conclusion
This judgment sends a clear message regarding the responsibilities of company directors in Singapore. Failure to exercise reasonable diligence as a director, even if there is no direct involvement in criminal activities, will be treated seriously in light of the potential harm to Singapore's corporate and financial ecosystems. All directors, including nominee directors, are expected to actively monitor company affairs and bank transactions to properly discharge their duties, or risk facing severe penalties, with custodial sentences as a real possibility.