How “Small Companies” are Impacted by the Amendments to the Singapore Companies Act

In April 2015, subsequent to the enactment of the Companies (Amendment) Bill on October 2014, the Accounting and Corporate Regulatory Authority of Singapore (ACRA) announced the effective implementation of the legislative changes to the Companies Act in two phases on 1 July 2015 and 3 January 2016 respectively.

One of the most significant changes is the introduction of audit exemption for companies, which falls under the new “small company” category. Small companies are private companies which satisfy 2 out of the following 3 quantitative criteria in each of the 2 Financial Years (FYs) immediately preceding the FY in which the company seeks for audit exemption:

Total annual revenue of not more than $10 million during the FY;
Total assets of not more than $10 million as of the reporting date; or
Total number of employees of not more than 50 as of the reporting date.

If the company is part of a Group, the company must be a small company and the Group must be a “small Group” such that the Group fulfills the aforementioned quantitative thresholds on a consolidated basis.

This change signifies that private companies which would have previously been subjected to audit due to having more than 20 shareholders, at least 1 corporate shareholder, or generating revenue above $5 million can now be exempted from audit if they satisfy the above qualifying criteria.

Transitional provisions

Existing companies whose FY commences on or after 1 July 2015 can qualify as small companies in the first and/or second FY if they meet the qualifying criteria in the same FY in which they are seeking for audit exemption.

For example, the company can be audit exempted in its first FY ending 30 June 2016 (FY2016) if it satisfies the qualifying criteria for FY2016. If the company does not qualify as a small company for FY2016, it can be audit exempted in its second FY ending 30 June 2017 (FY2017) if it satisfies the qualifying criteria for FY2017. If the company qualifies as a small company in at least either FY2016 or FY2017, it will qualify as a small company in FY2018 unless it is no longer a private company in FY 2018.

In FY2019, the company will qualify as a small company unless:

The company did not meet the quantitative criteria in the last 2 consecutive years (in this illustrative example, FY2017 and FY2018); or
The company is no longer a private company in FY2019.

Once a private company is disqualified under the first disqualifying criterion, it will need to meet the quantitative criteria in the 2 consecutive FYs immediately preceding the FY in which it seeks audit exemption.

Companies that are newly incorporated on or after 1 July 2015 are subjected to the same transitional provisions above.

Please feel free to approach any of our Mazars staff to understand your company’s Singapore audit obligations.