The Singapore High Court in Public Prosecutor v Zheng Jia [2025] SGHC 76 revised the sentencing framework for directors breaching their duty to act with reasonable diligence under s157(1) of the Companies Act (s157(1)), shifting the needle towards the imposition of custodial sentences even for breaches which are not intentional or reckless

Brief Facts of the Case

Zheng Jia (Mr. Zheng) offered accounting and corporate secretarial services in Singapore.  He would help foreign clients incorporate in Singapore, register himself as the local resident director of their company, and open bank accounts on their behalf. Mr. Zheng hired Er Beng Hwa (Mr. Er) to support his growing business, promising Mr. Er that he need not do anything other than sign company registration documents and bank registration documents.

Mr. Zheng was a director of Ocean Wave Shela Pte Ltd (OWS) and Mr. Er was a director of Rui Qi Trading Pte Ltd (RQ).  Proceeds of an international scam operation were moved through the bank accounts of OWS (US$64,630) and RQ (US$2,183,936 and S$237,120). Ultimately, Mr. Zheng was charged with (i) failing to exercise reasonable diligence in his duties with respect to OWS (1^stCharge) and (ii) abetting Mr. Er in failing to exercise reasonable diligence in Mr. Er’s duties with respect to RQ (2^nd Charge), both under s157(1).

Mr. Zheng was initially sentenced to pay a total fine of S$8,500 based on the sentencing framework in Abdul Ghanibin Tahir v Public Prosecutor [2017] 4 SLR 1153 (Abdul Ghani) (also involving a chartered accountant providing corporate secretarial services). The prosecution appealed and argued for thecourt to apply a custodial sentence, departing from the Abdul Ghani approach.

Impetus for a New Sentencing Framework for s157(1)

The High Court noted that the sentence for a breach of s157(1) must fit the facts and seriousness of the offence – imprisonment is not appropriate for an isolated negligent breach. However, custodial sentences should not only apply where a director acts intentionally, knowingly or recklessly. This is because directors who take office with the intention of abdicating their duty under s157(1) present serious risks to their companies and Singapore’s corporate and financial ecosystem.

In this case, Mr. Zheng’s business involved registering as a local resident nominee director of numerous companies incorporated for foreign clients, without exercising any oversight.  Mr. Zheng could not therefore be seen as merely negligent; he intentionally abdicated his duty.

Revised Sentencing Framework fors157(1) vis-à-vis Nominee Director Services

The High Court set out a revised sentencing framework, highlighting that the factual context should be confined to cases of professional directors whose business models involve no or inadequate oversight their companies.

The framework consists of 3 steps:

1. Identify all the relevant offence-specific factors, including:

               a. the nature and extent of the harm caused;

               b. the extent of the director’s due diligence into the client or company;

               c. the director’s efforts to monitor the company’s bank account transactions;

               d. the extent of director’s knowledge that their omissions could enable abuse of the corporate structure;

               e. the duration of the offence and whether it was one-off or recurring;

               f. if the offence was part of a profit-driven scheme and the extent of profits made;

               g. if the director concealed their wrongdoing; and

               h. if the offence has a transnational element (e.g., involvement of cross-border criminal syndicates).

     2. Map the offence against the sentencing bands to obtain the indicative sentence:

               a. Band 1 (1-3 offence-specific factors): up to 4 months’ imprisonment.

               b. Band 2 (4-5 offence-specific factors): 5- 8 months’ imprisonment.                

               c. Band 3 (>6 offence-specific factors): 9-12 months’ imprisonment.

    3. Calibrate the indicative sentence for offender-specific factors, including:

               a. the offender’s relevant antecedents or other offences;

               b. the offender’s remorse (or lack thereof) and timely guilty plea;

               c. voluntary cooperation with investigations; and

               d. voluntary restitution by the offender.

The same framework applies to sentencing accessories/abettors of a breach of s157(1) (e.g., such as the 2^nd Charge).

Application of Sentencing Framework

The 1^st Charge fell in Band 2 with an indicative sentence of 5 months’ imprisonment.  The court considered the following factors, among others:

• Mr. Zheng was a chartered accountant and was familiar with his duties as a director.
• This breach was part of a broader, profit-making business of providing corporate secretarial services, and Mr. Zheng was registered as director of 384 companies.
• Mr. Zheng knew that the companies incorporated could and likely would be used for illicit purposes by persons outside Singapore.

The 2^nd Charge fell in Band 3, with an indicative sentence of10 months’ imprisonment, due to the following factors:

• Mr. Zheng recruited Mr. Er, who wasentirely unaware of a director’s duties, and gave him unequivocal instructionsto adopt a hands-off approach as RQ’s director. This was profit-driven exploitation of Mr. Er’s ignorance. The courthighlighted that this significantly aggravated Mr. Zheng’s culpability.
• Significant harm was caused, ascriminal proceeds of over US$2 million were transacted through RQ’s bankaccounts.

The court reduced the sentences to 3 months’ and 7 months’ imprisonment, respectively, as Mr. Zheng had pleaded guilty, among other reasons.  The sentences would run consecutively, resulting in a total of 10 months’ imprisonment.  

Conclusion

This judgment affirms the court’s readiness to impose custodial sentences for breaches of s157(1) by corporate secretarial or nominee director service providers.  It reinforces that nominee directors must exercise reasonable diligence and service providers maybe liable for abetting breaches by their employees providing nominee director services.  Therefore, providers offering nominee director services should review their processes to ensure they can adequately discharge their legal duties.

For More Information

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Disclaimer: This article is for general information only and does not constitute legal advice.