CLG Directors' Fees in Singapore
- Roger Pay
- 13 hours ago
- 6 min read
CLG Directors' Fees in Singapore
In Singapore, paying directors' fees in a Company Limited by Guarantee (CLG) requires balancing standard corporate law under the Companies Act with strict non-profit governance. Since CLGs are typically set up for charitable, non-profit, or public-interest purposes, the way these fees are structured, approved, and taxed involves a few unique considerations.
1. Corporate Governance & Approvals
Under the Singapore Companies Act, the core mechanics for approving directors' fees in a CLG mirror those of a normal private company, but with heightened sensitivity regarding its non-profit nature:
Ordinary Resolution Needed: Directors' fees cannot simply be decided or paid out by the board itself. They must be formally proposed by the board and voted on/approved by the members via an ordinary resolution, typically at the Annual General Meeting (AGM).
Approved in Arrears vs. Advance:
In Arrears: The most common route. Fees are approved at the AGM after the financial year has ended and the services have been fully rendered.
In Advance: To facilitate smoother cash flow, members can vote to approve a set pool or structure of fees for the upcoming year before the services are fully rendered.
Mandatory Disclosure: All approved directors' fees must be clearly and transparently disclosed as separate line items in the CLG’s audited or compiled financial statements.
2. The "Charity Status" Catch
While a basic CLG is allowed to pay reasonable fees to its governing board, the rules change drastically if the CLG holds or plans to apply for Registered Charity Status or Institution of a Public Character (IPC) status under the Commissioner of Charities:
Strict Charity Guidelines: Generally, charity board members and trustees serve voluntarily and should not receive directors' fees or remuneration for their role on the board.
If a charity wishes to remunerate a director, it must strictly comply with its own Constitution (which often explicitly prohibits or limits board remuneration) and the Code of Governance for Charities and IPCs. Any exception usually requires:
A compelling business case demonstrating that the payment is in the best interest of the charity.
Approval by an independent sub-committee or the general membership, where the interested director abstains completely from voting and discussion.
Clear disclosure in the annual report, often requiring exact branding of remuneration bands.
3. Tax & CPF Treatment (IRAS Rules)
When a CLG does pay directors' fees, the Inland Revenue Authority of Singapore (IRAS) applies specific rules based on tax residency and timing:
Feature, | Treatment for Tax & Compliance |
Taxable Year | Fees are taxed in the Year of Assessment (YA) matching the year the director becomes legally entitled to them. For fees approved in arrears, this is the exact date of the AGM where members voted approval. |
CPF Contributions | Not applicable. Central Provident Fund (CPF) contributions are not required on pure directors' fees, as they are not legally classified as employment salary. |
Withholding Tax | If the CLG appoints a non-resident director, any directors' fees paid to them are subject to a flat withholding tax rate of 24% (as of current tax frameworks). The CLG must withhold this amount and remit it directly to IRAS. |
Executive Directors vs. Non-Executive Directors
It is important to maintain a clear statutory distinction if a director also functions as an employee:
Pure Directors' Fees: Paid for governance/board duties. Approved at AGM. No CPF. Taxed on an entitlement basis.
Salaries/Bonuses: Paid if the director has an employment contract running the day-to-day operations (Executive Director). This is considered employment income, requires standard CPF contributions for residents, and is taxed on an accrual basis.
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