How should a director respond to a criminal investigation?
THERE are occupational hazards serving as a non-executive director of a listed company in Singapore. One may not think about it much, but being arrested on suspicion of criminal offences can be one.
Recent cases where company directors were arrested in connection with the suspected commission of offences have thrown a spotlight on the issue of how a company director should respond to investigations by the authorities.
Investigating authorities
A director who has been called upon to assist with investigations should familiarise himself with the investigation process and seek legal advice and representation for himself, if necessary. It is sometimes important for the director concerned to consider if his legal representation should be independent of and separate from the representation obtained by other directors or the company itself.
When the authorities approach a director to assist with investigations, the director may either be a relevant witness to the commission of an offence or may himself be suspected of committing an offence. If the investigation discloses that the director has committed an offence, he may be charged in court and asked to enter a plea.
During the investigation process, the authorities have the power to arrest a person suspected of committing an offence. He may be asked to surrender his passport. He may be offered police bail after arrest and before he is charged in court. If formally charged in court, he may be released until the conclusion of the case, upon posting bail.
While the director is under investigation or even after he has been charged, the director is presumed innocent. It is a fundamental principle of criminal law that an accused person is presumed innocent until and unless convicted by the court.
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A director who has been asked to assist with investigations should cooperate fully. The director should provide truthful answers when providing a formal statement to the authorities. In particular, when responding to the investigators’ questions and requests, he should resist the temptation to whitewash inconvenient facts or withhold relevant information.
During the investigation, it is advisable for the director to keep copies of any documents provided to the authorities and keep a note of all questions asked by the investigators and the director’s answers to those questions.
Fellow directors and management of the company
A director under investigation should refrain from discussing the matter with other witnesses assisting with the investigation. He should not, under any circumstances, coordinate with other witnesses on the information to be provided to the authorities.
Generally, if the authorities request the director to produce information and documents belonging to the company (including communications between the company and its lawyers in relation to the subject matter of the investigation), the director should direct the authorities to request such information from the company.
If the director needs to obtain information or documents from the company for the purposes of responding to the authorities, the director may approach the company to retrieve the information and documents, with the prior approval of the authorities.
Other parties
A director under investigation may also hold appointments with other companies, either as an employee or director of those other companies.
If a director is under investigation by the authorities on suspicion of the commission of an offence, he should (unless told not to do so by the investigating authorities) inform any other companies in which he holds an appointment or is employed. He should comply with SGX requirements and any internal regulations of those companies relevant to the situation. Although the director is presumed innocent until and unless convicted by the court, it would be advisable for him to give a heads-up to his employer and any other companies in which he is involved, instead of leaving them to find out later through other sources such as press reports.
If the director is being investigated in relation to the affairs of a company listed on the Singapore Exchange, the board of the listed company should also consider issuing a public announcement.
The director should consider whether his involvement in the investigation would impair his ability to discharge his duties as a director of the company. This should also be considered by the nominating committee and board of the company. If he is unable to perform his duties or if his ability to do so will be impaired, he should consider stepping down from his responsibilities, or appoint an alternate director (if permitted by the company’s constitution, and subject to review by the nominating committee of the company), while the investigation is pending.
These pointers might sound like common sense, but it is all too easy to stray into error in the heat of an investigation. A misstep in the response to the investigation may itself give rise to an offence, thereby creating more serious legal problems.
This is the third of a four-part series on criminal investigations and special audits.
The writer is a member of the facilitator’s panel for courses at the Singapore Institute of Directors.
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