§ 163 — Approval of company required for loans and quasi‑loans to, and credit transactions for benefit of, persons connected with directors of lending company, etc.

163.—(1) Subject to this section and sections 163A and 163B, it is not lawful for a company (other than an exempt private company) —(a)

to make a loan or quasi‑loan to another company, a limited liability partnership or a VCC;

(b)

to enter into any guarantee or provide any security in connection with a loan or quasi‑loan made to another company, a limited liability partnership or a VCC by a person other than the firstmentioned company;

(c)

to enter into a credit transaction as creditor for the benefit of another company, a limited liability partnership or a VCC; or

(d)

to enter into any guarantee or provide any security in connection with a credit transaction entered into by any person for the benefit of another company, a limited liability partnership or a VCC,

if a director or directors of the firstmentioned company is or together are interested in 20% or more of the total voting power in the other company, the limited liability partnership or the VCC (as the case may be), unless there is prior approval by the company in general meeting for the making of, provision for or entering into the loan, quasi‑loan, credit transaction, guarantee or security (as the case may be) at which the interested director or directors, and his, her or their family members, abstained from voting.

[36/2014; 44/2018]

(2) Subsection (1) also applies to —(a)

a loan or quasi‑loan made by a company (other than an exempt private company) to another company or a limited liability partnership;

(b)

a credit transaction made by a company (other than an exempt private company) for the benefit of another company or to a limited liability partnership; and

(c)

a guarantee entered into or security provided by a company (other than an exempt private company) in connection with a loan or quasi‑loan made to another company or a limited liability partnership by a person other than the firstmentioned company or with a credit transaction made for the benefit of another company or a limited liability partnership entered into by a person other than the firstmentioned company,

where such other company or such limited liability partnership is incorporated or formed (as the case may be) outside Singapore, if a director or directors of the firstmentioned company have an interest in the other company or the limited liability partnership, as the case may be.

[36/2014]

(3) For the purposes of subsection (2), a director or directors of a company —(a)

have an interest in the other company if —(i)

in the case of a company with a share capital — the director or directors is or together are interested in 20% or more of the total voting power in the other company; or

(ii)

in the case of a company without a share capital — the director or directors exercises or together exercise control over the other company (whether by reason of having the power to appoint directors or otherwise); or

(b)

have an interest in a limited liability partnership if the director or directors is or together are interested in 20% or more of the total voting power in the limited liability partnership.[36/2014]

(3A) Subject to this section and sections 163A and 163B, a company (other than an exempt private company) must not —(a)

take part in an arrangement under which —(i)

another person enters into a transaction that, if it had been entered into by the company, would have required approval under this section; and

(ii)

that person, pursuant to the arrangement, obtains a benefit from the company or a related company; or

(b)

arrange the assignment to it, or assumption by it, of any rights, obligations or liabilities under a transaction that, if it had been entered into by the company, would have required such approval,

unless there is prior approval by the company in general meeting for taking part in such an arrangement or for arranging the assignment or assumption of rights, obligations or liabilities under such a transaction at which the interested director or directors, or his, her or their family members, abstained from voting.

[36/2014]

(3B) In determining for the purposes of subsection (3A) whether a transaction is one that would have required approval under this section if it had been entered into by the company, the transaction is to be treated as having been entered into on the date of the arrangement.[36/2014]

(3C) The requirement in subsections (1) and (3A) that the interested director or directors, or his, her or their family members, abstain from voting at the general meeting of the company does not apply where all the shareholders of the company have each voted to approve the arrangement.[36/2014]

(3D) For the purposes of this section —(a)

where a company makes a loan or quasi‑loan to another company or VCC, enters into a credit transaction for the benefit of another company or VCC, gives a guarantee or provides security in connection with a loan, quasi‑loan or credit transaction made to or entered into for the benefit of another company or VCC, or enters into an arrangement referred to in subsection (3A), a director or directors of the firstmentioned company are not to be taken to have an interest in shares in that other company or VCC by reason only that the firstmentioned company has an interest in shares in that other company or VCC and a director or directors have an interest in shares in the firstmentioned company;

(b)

the expression “interest in shares”, in relation to a company, has the meaning assigned to it in section 7 and, in relation to a VCC, has the meaning assigned to it in section 7 as applied by section 2(6) of the VCC Act and read with section 2(7) of that Act;

(c)

a person who has an interest in a share of a company or a VCC is to be treated as having an interest in the voting power conferred on the holder by that share;

(d)

a reference to prior approval of the company in subsection (1) does not include any approval of the company that is given after the loan, quasi‑loan, credit transaction, guarantee or security mentioned in that subsection has been made, provided for or entered into (as the case may be); and

(e)

a reference to prior approval of the company in subsection (3A) does not include any approval of the company that is given after the arrangement referred to in that subsection has been entered into.[36/2014; 44/2018]

(4) This section does not apply —(a)

to anything done by a company where the other company (whether that company is incorporated in Singapore or otherwise) or VCC is its subsidiary or holding company or a subsidiary of its holding company; or

(b)

to a company, whose ordinary business includes the lending of money or the giving of guarantees in connection with loans made by other persons, to anything done by the company in the ordinary course of that business if the activities of that company are regulated by any written law relating to banking, finance companies or insurance or are subject to supervision by the Monetary Authority of Singapore.[44/2018]

(5) For the purposes of this section —(a)

an interest of a member of a director’s family is treated as the interest of the director; and

(b)

a reference to a member of a director’s family includes the director’s spouse, son, adopted son, stepson, daughter, adopted daughter and stepdaughter.[36/2014]

(6) Nothing in this section operates to prevent the recovery of the amount of any loan, quasi‑loan, credit transaction or arrangement or the enforcement of any guarantee or security whether made or given by the company or any other person.[36/2014]

(7) Where a company contravenes this section, any director who authorises the making of any loan or quasi‑loan, the entering into of any credit transaction, the entering into of any guarantee, the providing of any security or the entering into of any arrangement contrary to this section shall be guilty of an offence and shall be liable on conviction to a fine not exceeding $20,000 or to imprisonment for a term not exceeding 2 years.[36/2014]

—(1) Subject to this section and sections 163A and 163B, it is not lawful for a company (other than an exempt private company) —(a)

to make a loan or quasi‑loan to another company, a limited liability partnership or a VCC;

(b)

to enter into any guarantee or provide any security in connection with a loan or quasi‑loan made to another company, a limited liability partnership or a VCC by a person other than the firstmentioned company;

(c)

to enter into a credit transaction as creditor for the benefit of another company, a limited liability partnership or a VCC; or

(d)

to enter into any guarantee or provide any security in connection with a credit transaction entered into by any person for the benefit of another company, a limited liability partnership or a VCC,

if a director or directors of the firstmentioned company is or together are interested in 20% or more of the total voting power in the other company, the limited liability partnership or the VCC (as the case may be), unless there is prior approval by the company in general meeting for the making of, provision for or entering into the loan, quasi‑loan, credit transaction, guarantee or security (as the case may be) at which the interested director or directors, and his, her or their family members, abstained from voting.

[36/2014; 44/2018]

(2) Subsection (1) also applies to —(a)

a loan or quasi‑loan made by a company (other than an exempt private company) to another company or a limited liability partnership;

(b)

a credit transaction made by a company (other than an exempt private company) for the benefit of another company or to a limited liability partnership; and

(c)

a guarantee entered into or security provided by a company (other than an exempt private company) in connection with a loan or quasi‑loan made to another company or a limited liability partnership by a person other than the firstmentioned company or with a credit transaction made for the benefit of another company or a limited liability partnership entered into by a person other than the firstmentioned company,

where such other company or such limited liability partnership is incorporated or formed (as the case may be) outside Singapore, if a director or directors of the firstmentioned company have an interest in the other company or the limited liability partnership, as the case may be.

[36/2014]

(3) For the purposes of subsection (2), a director or directors of a company —(a)

have an interest in the other company if —(i)

in the case of a company with a share capital — the director or directors is or together are interested in 20% or more of the total voting power in the other company; or

(ii)

in the case of a company without a share capital — the director or directors exercises or together exercise control over the other company (whether by reason of having the power to appoint directors or otherwise); or

(b)

have an interest in a limited liability partnership if the director or directors is or together are interested in 20% or more of the total voting power in the limited liability partnership.[36/2014]

(3A) Subject to this section and sections 163A and 163B, a company (other than an exempt private company) must not —(a)

take part in an arrangement under which —(i)

another person enters into a transaction that, if it had been entered into by the company, would have required approval under this section; and

(ii)

that person, pursuant to the arrangement, obtains a benefit from the company or a related company; or

(b)

arrange the assignment to it, or assumption by it, of any rights, obligations or liabilities under a transaction that, if it had been entered into by the company, would have required such approval,

unless there is prior approval by the company in general meeting for taking part in such an arrangement or for arranging the assignment or assumption of rights, obligations or liabilities under such a transaction at which the interested director or directors, or his, her or their family members, abstained from voting.

[36/2014]

(3B) In determining for the purposes of subsection (3A) whether a transaction is one that would have required approval under this section if it had been entered into by the company, the transaction is to be treated as having been entered into on the date of the arrangement.[36/2014]

(3C) The requirement in subsections (1) and (3A) that the interested director or directors, or his, her or their family members, abstain from voting at the general meeting of the company does not apply where all the shareholders of the company have each voted to approve the arrangement.[36/2014]

(3D) For the purposes of this section —(a)

where a company makes a loan or quasi‑loan to another company or VCC, enters into a credit transaction for the benefit of another company or VCC, gives a guarantee or provides security in connection with a loan, quasi‑loan or credit transaction made to or entered into for the benefit of another company or VCC, or enters into an arrangement referred to in subsection (3A), a director or directors of the firstmentioned company are not to be taken to have an interest in shares in that other company or VCC by reason only that the firstmentioned company has an interest in shares in that other company or VCC and a director or directors have an interest in shares in the firstmentioned company;

(b)

the expression “interest in shares”, in relation to a company, has the meaning assigned to it in section 7 and, in relation to a VCC, has the meaning assigned to it in section 7 as applied by section 2(6) of the VCC Act and read with section 2(7) of that Act;

(c)

a person who has an interest in a share of a company or a VCC is to be treated as having an interest in the voting power conferred on the holder by that share;

(d)

a reference to prior approval of the company in subsection (1) does not include any approval of the company that is given after the loan, quasi‑loan, credit transaction, guarantee or security mentioned in that subsection has been made, provided for or entered into (as the case may be); and

(e)

a reference to prior approval of the company in subsection (3A) does not include any approval of the company that is given after the arrangement referred to in that subsection has been entered into.[36/2014; 44/2018]

(4) This section does not apply —(a)

to anything done by a company where the other company (whether that company is incorporated in Singapore or otherwise) or VCC is its subsidiary or holding company or a subsidiary of its holding company; or

(b)

to a company, whose ordinary business includes the lending of money or the giving of guarantees in connection with loans made by other persons, to anything done by the company in the ordinary course of that business if the activities of that company are regulated by any written law relating to banking, finance companies or insurance or are subject to supervision by the Monetary Authority of Singapore.[44/2018]

(5) For the purposes of this section —(a)

an interest of a member of a director’s family is treated as the interest of the director; and

(b)

a reference to a member of a director’s family includes the director’s spouse, son, adopted son, stepson, daughter, adopted daughter and stepdaughter.[36/2014]

(6) Nothing in this section operates to prevent the recovery of the amount of any loan, quasi‑loan, credit transaction or arrangement or the enforcement of any guarantee or security whether made or given by the company or any other person.[36/2014]

(7) Where a company contravenes this section, any director who authorises the making of any loan or quasi‑loan, the entering into of any credit transaction, the entering into of any guarantee, the providing of any security or the entering into of any arrangement contrary to this section shall be guilty of an offence and shall be liable on conviction to a fine not exceeding $20,000 or to imprisonment for a term not exceeding 2 years.[36/2014]