Director Service Agreement: s.157 Companies Act

A director's service agreement is a contract of employment made between a Singapore company and one of its directors who also works in the business, most often as an executive director, managing director or CEO. It differs from a plain appointment letter, which records the fact of appointment and the consent to act required under section 145, and from an ordinary staff employment contract, because the counterparty owes the company statutory and fiduciary duties that no rank-and-file employee carries. The agreement fixes the commercial terms of the engagement: salary, bonus, benefits, notice, restrictive covenants and the interaction between the person's role as an officer and their role as an employee.

The distinction matters in practice. A non-executive director who only attends board meetings is usually engaged under a short letter of appointment, not a full service agreement, because there is no employment relationship to document. An executive director who runs a function or the whole company needs the fuller instrument. Getting this wrong creates real problems later, since an executive removed as a director may still have live employment claims, and a company that never documented the remuneration finds itself arguing about what was promised. If you are also setting up the company's internal governance, the service agreement should be read together with your constitution and shareholders' arrangements so the powers granted to the director match what those documents allow. Our Singapore shareholders' agreement template is the natural companion where the director is also a shareholder.

The governing statute is the Companies Act 1967 (Cap. 50), administered by the Accounting and Corporate Regulatory Authority (ACRA). A director's core obligations are anchored in section 157, which requires a director to act honestly and use reasonable diligence in discharging the duties of the office, and which bars any improper use of information or position acquired as an officer of the company. These duties are not merely aspirational: a breach of section 157 is a criminal offence under section 157(3), carrying a fine and possible imprisonment, alongside a separate civil claim by the company for any loss suffered. A well-drafted service agreement does not override these duties; it restates and reinforces them so the executive cannot later claim ignorance.

Several neighbouring provisions shape the document. Section 157A vests the management of the company in the board, which is why a service agreement carefully delimits the authority actually delegated to the individual director. Section 156 obliges a director to disclose any interest in a transaction the company is entering into, so a conflicts clause and a disclosure protocol belong in the contract. The recent Corporate and Accounting Laws (Amendment) Act 2025, passed on 5 November 2025, raised the maximum fine for a breach of director duties from S$5,000 to S$20,000, with its first tranche of provisions in force from 6 May 2026, a change that sharpens the case for a contract that spells duties out precisely. Where the director is also an employee under the Employment Act 1968, statutory floors on notice, salary and leave apply and the agreement must not undercut them. For the full statutory text and the current provisions on directors, the authoritative reference is the Singapore Statutes Online publication of the Companies Act 1967. The document is signed under Singapore's ordinary common law of contract, with the Electronic Transactions Act 2010 validating electronic execution for an agreement of this kind.

The most common trigger is the appointment of an executive director who will draw a salary and run part or all of the business. A verbal understanding between founders works until the money is real; once a director is being paid, the company needs a written record of the remuneration, the role and the exit terms, and this is where our Singapore founders' agreement hands over to a proper service agreement. The second frequent scenario is a funding round or new investor coming in, when investors insist that key executives are locked in on documented terms with restrictive covenants, so that talent and intellectual property do not walk out of the door.

A change of role also calls for the document. When a senior employee is elevated to the board, their existing staff contract no longer captures the reality, because they now carry duties under section 157 that an ordinary employee never had. Bringing in an outside CEO produces the same need from the opposite direction. There are edge cases worth flagging. A director who is also a controlling shareholder should have the service agreement drafted in step with the shareholders' arrangements, or the two documents will contradict each other on reserved matters and removal. A nominee or non-executive director should generally not sign a full service agreement at all, since there is no employment to document and doing so can accidentally create obligations and liabilities the parties never intended. Getting the classification right at the outset saves an expensive unwinding later.

• The appointment and term clause records the office held, the commencement date and whether the engagement runs for a fixed term or continues until terminated, and it cross-refers to the consent to act and the ACRA lodgement so the corporate and contractual appointments line up.
• The duties and powers clause defines the scope of the executive's authority within the limits section 157A allows the board to delegate, and it makes clear that the director must devote proper time and attention to the role rather than treating it as a title.
• The remuneration clause sets out salary, any performance bonus, benefits and the mechanism for review, and it distinguishes director's fees approved by the members from employment salary, a distinction that matters for both tax and company law.
• The fiduciary and statutory duties clause restates the section 157 obligation to act honestly and with reasonable diligence and the section 156 duty to disclose conflicts, converting statutory duties into express contractual promises the company can enforce directly.
• The confidentiality and intellectual property clause protects trade secrets and assigns work product to the company, an assignment that dovetails with your broader confidentiality documents such as the Singapore NDA template used with third parties.
• The restrictive covenants clause addresses non-competition and non-solicitation on departure, drafted narrowly because Singapore courts enforce restraints of trade only where they protect a legitimate proprietary interest and go no further than reasonably necessary.

Singapore is a single unified jurisdiction, so unlike a multi-state contract the service agreement does not vary by province or state. What does vary is the type of director and the type of company, and the agreement must be tuned to both.

Executive directors carry the full weight of an employment relationship layered on top of their office, so their agreements engage the Employment Act 1968 where the individual falls within its coverage, together with all the section 157 fiduciary duties. The contract here is the fullest version, with remuneration, notice, leave and restrictive covenants all documented. Non-executive and nominee directors sit at the other end. They are generally engaged under a short letter of appointment rather than a service agreement, because there is no salary or day-to-day management to govern, and a nominee director in particular must preserve independent judgment despite the wishes of an appointor.

Company type shifts the emphasis too. In a Pte Ltd with a tight shareholder base, the service agreement is usually read alongside the constitution and the members' arrangements, and the reserved-matters list in those documents constrains what the director may decide alone. The company must maintain at least one director ordinarily resident in Singapore under section 145(1), a requirement the appointment should never inadvertently breach, and it must have appointed a company secretary within six months of incorporation. Companies limited by guarantee and larger groups add further governance layers, but the drafting principle holds throughout: the director's contractual powers must match the authority the constitution actually confers. Where the wider incorporation paperwork still needs assembling, our Singapore Pte Ltd incorporation pack covers the founding filings that precede any service agreement.

You start by identifying the company and the director, entering the company's name and Unique Entity Number and the individual's particulars as they appear on the consent to act. From there the template asks whether the engagement is executive or non-executive, and it adjusts the remuneration and duties sections accordingly, since a non-executive appointment needs a far lighter instrument. You then set the commencement date and choose between a fixed term and an open-ended engagement terminable on notice, with the notice periods filled in to sit above any Employment Act floor that applies.

The remuneration section takes your salary figure, any bonus mechanism and the benefits on offer, keeping director's fees separate from employment salary so the two are approved through the right channels. Next you calibrate the restrictive covenants, choosing the duration and geographic reach with the reminder that Singapore courts read these narrowly. The confidentiality and intellectual property terms are largely standard but can be tightened where the role touches sensitive material. A final review lets you check that the powers granted match your constitution before you download the finished agreement in Word and PDF, ready for signature and for the corresponding board resolution recorded through our Singapore directors' and shareholders' resolution template.

The error I see most often is treating the service agreement as interchangeable with the appointment. Signing a consent to act and lodging the appointment with ACRA puts someone on the board, but it says nothing about pay, duties or exit, and companies that stop there end up arguing over terms that were never written down. The mirror-image mistake is giving a non-executive or nominee director a full executive service agreement, which manufactures an employment relationship nobody wanted and exposes the company to claims on departure. Classification should be settled before any drafting begins.

A further trap is drafting the director's powers without checking the constitution, so the contract purports to grant authority the constitution reserves to the board or the members, leaving the executive acting ultra vires. Overreaching restrictive covenants cause their own damage, since a Singapore court will strike down a restraint that is wider than the legitimate interest it protects, and a covenant struck down protects nothing at all. Finally, companies forget that the section 157 and section 156 duties are live from day one and now carry a heavier maximum fine since 6 May 2026, so a contract that stays silent on conflicts and disclosure leaves the director exposed and the company without a contractual remedy it could easily have secured.