Updates to the Singapore Companies Act
The Singapore Companies Act was enacted in 1967 and currently applies to all companies – public and private incorporated in Singapore and branches of foreign companies set up in Singapore.
The last review of the Act was conducted in 1999 and in October 2007, The Ministry of Finance appointed a Steering Committee “SC” to review the Companies Act and following it, the Steering Committee made 217 recommendations: 192 were accepted, 17 were modified and 8 were not accepted by the Ministry of Finance.
The changes are broadly classified into 7 categories:
- Shareholders’ rights and meetings
- Shares, debentures, capital maintenance, schemes, compulsory acquisitions and amalgamations
- Accounts and audit
- General company administration
- Registration of charges
- New issues issued
The changes are expected to take place in the 2nd quarter of 2015 and ACRA Singapore will update the public on the implementation date.
The changes will impact companies in the set-up structure, operational and compliance levels.
We have identified the following changes to be of interest to an investor considering Singapore.
Corporate Directorships are still not allowed in Singapore as it is difficult to determine the person within the corporate director who controls the company.
It is noted that persons above 70 years old can be capable of doing the job of a Director. Therefore, it will be left to the shareholders to approve the appointment of a director.
Imposition of liability on other officers
Under the current Companies Act, Directors have a general duty to disclose their interests, whether direct or indirect, in transactions, property, offices which the Company is interested in.
Under the new Companies Act, the requirements for disclosure shall be extended to the Chief Executive Officer (CEO) or a person known by other title which implies the same powers as that of the CEO who is at the apex of the management. In addition, the duty to act honestly and use reasonable diligence will likewise be extended to the CEO.
Electronic transmission of notices and documents
The rules for the use of electronic methods for transmission of notices and documents by companies should be amended to be less restrictive and prescriptive even for transmission of notices of special resolution to alter the objects of a company.
The definition of “Subsidiary”
A company will be recognised as the Holding Company of a subsidiary if it holds the majority of the voting rights.
The previous concept of the majority of the issued share capital will be abolished.
Audit exemption for small companies
Small private companies which fulfill 2 of the following criteria,
- Has total annual revenue of SGD10 million or less OR:
- Total gross assets of SGD10 million or less OR:
- 50 or lesser employees
are exempted from audit requirements.
A parent company which prepares consolidated accounts can also qualify as a “small company” if the above requirements are met on a consolidated basis. However, a subsidiary which is a member of a group of companies may be exempt from audit as a “small company” only if the entire group qualifies as a “small company” on a consolidated basis.
Previously, private companies with corporate shareholders or annual revenue more than SGD 5 million will need to be audited.
Dormant companies will be exempted from financial reporting requirements
Dormant non-listed companies are currently required to prepare and file their accounts although they need not be audited. With the latest update, this requirement shall be removed provided that :
- The directors of the dormant company make an Annual Declaration of dormancy
- The company must be dormant throughout the financial year
- Shareholders and ACRA will be empowered to direct a dormant company to prepare the accounts and to lodge them unless exempted under any other exemption
Overall, the changes will enable Singapore to maintain the ease of which business is conducted whilst maintaining the needed balance with corporate governance and transparency. It has also improved the relevancy with the move away from paper-based to the electronic administration.