Second, the board of directors is not required to appoint the nominee if it is able to demonstrate that the nominee would clearly not be fit for the position or that his or her appointment would be manifestly detrimental to the company. The shareholder who orders does not have the task of positively determining the suitability of his nominee. Instead, the onus falls on the board of directors to prove its incapacity. The board of directors must provide clear evidence to demonstrate the shortcomings of the appointment, for example. B if the nominee was placed in a position of conflict of interest or breach of fiduciary duty. Such a case may occur, for example, when the nominee operates a business in competition with the business for which he or she is appointed director. Second, I do not think that Section 202(2) would prohibit a clause typical of a shareholders` agreement giving certain shareholders the right to appoint and remove directors. Such a clause can always be effective. However, I believe that Article 202(2) would remain alongside a provision of the shareholders` agreement. This is due to the interpretation of Article 31(2) (for a statutory undertaking) and Article 31(3) (for an undertaking without a statute). In essence, the company, each director and each member have the rights, powers, duties and duties set forth in the law, unless they are authorized to be amended in accordance with the law and amended by the Constitution. § 202, paragraph 2, is not subject to the Constitution and therefore has this right for shareholders. Counsel for the minority shareholder argued that this right was a total and unlimited right to appoint the candidate of his choice as director.
This appointment took effect immediately and the candidate would immediately be a de facto director. In the end, it was found that the power to appoint directors, in accordance with the company`s articles of association, remained with the board of directors. However, that power should be exercised in accordance with the wishes of the shareholders in accordance with the provision of the shareholders` agreement. The limited choice of the board of directors not to nominate a candidate if it was manifestly inappropriate for the function or detrimental to the company struck a balance between the freedom of shareholders to appoint directors and the interest of the board of directors in appointing duly qualified persons for the management and monitoring of the company. Competing arguments have been put forward as to the legal nature of this right of appointment under the shareholders` agreement. The website of the Supreme Court of Singapore has a useful case summary. I would like to consider the legal issues before the Singapore Court of Appeal. The crucial point was that, in this case, the minority shareholder had the right to appoint a director, in accordance with the shareholders` agreement. The Singapore Court of Appeal had to establish the legal nature of this right of appointment. If the appointment is refused, can the Court order a specific benefit and order the measures necessary for the appointment of the Director? This service agreement for directors provides a comprehensive legal and practical framework for the employment of any Executive Director, whether ongoing or fixed-term contract. This is an employment contract for senior managers that also defines the relationship between the director and the organization. The provision of common remuneration and services is included, as well as strong protection of company information.
The Singapore Court of Appeal found that the arguments were too broad or too narrow. Instead, the correct interpretation was that the shareholder had the contractual right to appoint a person as director of the company and with a corresponding obligation on the part of the board of directors to appoint the nominee. This has been subject to two important reservations. First, the designation of a person who is legally disqualified by law or who does not agree to act as a director would in itself be erroneous. There is therefore no obligation for the board of directors to appoint this person. . . .