Where Board Oversight Meets Entrepreneurial Risk

By Mark Lee, Founder and Managing Director, Mark Lee Chambers Law Corporation Singapore’s reputation as a trusted business hub rests in no small part on investor confidence in its corporate governance system. Yet that confidence ultimately depends on individuals willing to serve as directors and make difficult commercial decisions in an increasingly fragmented world. As expectations of directors continue to rise, an important question arises: where should the balance be struck between accountability and entrepreneurial risk-taking? A recent spate of high-profile reports of directors in Singapore finding themselves staring down the barrel of civil suits, regulatory enforcement action and exposing themselves personally to multi-million dollar judgments and criminal penalties (even imprisonment) have once again cast the spotlight on this issue.

Accountability through sanctions

Against this backdrop, 2026 has been a significant year for Singapore’s corporate governance framework. In March 2026, the Law Reform Committee of the Singapore Academy of Law recommended consideration of enhanced clarity by setting out in detail the range of directors’ duties and the possible incorporation of civil penalties into Singapore’s regulatory framework. Parliament also substantially increased the financial penalties under section 157 of the Companies Act (from a fine not exceeding SGD$5,000 (around USD$3,900) to SGD$20,000 (around USD$15,500)). The revision was explained as an “ongoing” effort to “enhance [Singapore’s] corporate governance and regulatory framework, reinforcing our position as an efficient and trusted business hub.” Interestingly, nearly 15 years ago, proposals to decriminalise section 157 (which imposes statutory duties of honesty and diligence) were not accepted. This is unsurprising given that corporate scandals may extend beyond individual companies, affecting the wider economy and investor confidence. The imposition of criminal liability quite sensibly safeguards that wider public interest concern. Whilst Singapore has clearly taken a firm stance against director misconduct, its regulatory framework remains carefully calibrated. In comparison, Malaysia provides for significantly higher penalties: a director found in breach of duties may face a fine of up to RM3,000,000 (around USD$443,000) or imprisonment of up to 5 years, compared with Singapore’s maximum imprisonment term of 12 months. In Australia, criminal penalties for dishonest or reckless breaches potentially include imprisonment of up to 15 years and a fine of 4,500 penalty units (one penalty unit being A$330.00) or three times the benefit derived by the offending director, whichever is higher.

A broader corporate governance discourse

Yet harsher sanctions do not necessarily translate into better corporate governance performance. Governance quality depends not merely on the severity of penalties, but on a broader ecosystem comprising regulatory quality, judicial independence, board competence, enforcement credibility, transparency and investor confidence. The Asian Corporate Governance Association’s CG Watch 2023 illustrates this point. Singapore ranked third among twelve Asia-Pacific jurisdictions, ahead of Malaysia, which ranked fifth. Notably, Malaysia provides for significantly higher statutory penalties for certain breaches of directors’ duties. The imposition of directors’ duties and liabilities is therefore not merely an issue of deterrence. The more difficult question is how these obligations should be calibrated to serve the underlying public interests that the corporate governance regime seeks to foster in the first place.

Defining public interest(s)

Any conversation regarding directors’ duties and accountability will never be complete without a concurrent discourse on responsible entrepreneurship. At least two public interests are engaged: deterring irresponsible conduct by directors and encouraging entrepreneurial activity without unduly dampening risk-taking. This tension was articulated more than 17 years ago when the English High Court observed in Sunrise Radio Ltd & Ors v Dr Avtar Lit & Ors [2009] EWHC 2893 that there is a “strong public interest in encouraging entrepreneurial activity” and an “equally … strong public interest in combating abuse which limited liability too often engenders.” Similar sentiments have been echoed by Singapore’s judiciary, particularly in the context of the business judgment rule, emphasising that directors should not be “coerced into exercising defensive commercial judgment, motivated largely by anxiety over legal accountability and consequences”. Directors deciding whether to approve an acquisition, invest in emerging technologies or enter unfamiliar markets ought to be able to weigh commercial risks without constantly fearing personal exposure should those decisions later be questioned. There is also a need to guard against a chilling effect that may deter capable individuals from even accepting directorships.

Balancing board oversight and entrepreneurial risk

A corporation, although a separate legal entity, can only act through individuals whose judgments are shaped by different experiences, motivations and commercial perspectives. Sanctions and regulations must therefore possess sufficient breadth, flexibility and sensitivity to respond proportionately. This is reflected in Singapore’s Accounting and Regulatory Authority’s enforcement approach, which focuses first on education as the least intrusive measure and, where necessary, applies escalating regulatory tools including warning letters, financial penalties, disqualification, debarment orders and, finally, prosecution. Singapore’s competitiveness has never been built upon one-dimensional strict regulation. Its regulatory framework instead seeks to balance various public interests and avoid fostering a culture of defensive commercial judgment. The challenge for all stakeholders is that this balance is never static and exists on a continuously shifting scale that requires constant recalibrations factoring new domestic market realities but always also tempered by considerations of developments beyond Singapore as we are ultimately competing for the best talent, innovations and investments across the global market. Accountability and entrepreneurship should not be viewed as competing objectives; the strength of Singapore’s corporate governance framework ultimately rests with its ability to balance both and how effectively it distinguishes failure from misconduct.

About Mark Lee Chambers Law Corporation

Mark Lee Chambers Law Corporation is an independent boutique law firm based in Singapore specializing in complex multi-jurisdictional disputes, high-stakes litigation and arbitration with a particular focus in corporate governance, joint ventures, shareholder and boardroom matters. To learn more, visit https://mlclaw.com.sg/.

This press release was published as it was received from our partner, without any editing from The Business Times (BT) team.

You can publish your own paid press release on BT. Simply fill in this form, and our team will respond by the next business day.