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2 May, 2017
The first phase of the latest amendments to the Companies Act (Cap 50) (“CA”) took effect on 31 March 2017. At the Second Reading of the Companies (Amendment) Bill on 10 March 2017, the Senior Minister of State for Law and Finance, Ms Indranee Rajah, made clear the key objectives of the amendments, namely:
(a) improving the transparency of ownership and control of companies in line with international norms;
(b) reducing the regulatory burden and improving the ease of doing business; and
(c) enhancing Singapore’s debt restructuring framework.
This article sets out the key legislative amendments that have either come into operation on 31 March 2017 or will be implemented in early 2018.
1. Annual General Meetings (“AGMs”) & Financial Statements (targeted to take effect from early 2018)
To reduce compliance costs and administrative burden for companies, private companies need not hold AGMs subject to specified safeguards, and the requirements for holding AGMs and the filing of annual returns
have also been simplified.
With the amendments, which are targeted to take effect in early 2018, the deadline for holding AGMs will now be with reference to the Company’s financial year end (“FYE”), instead of the previous AGM:
(a) For listed companies, within 4 months of the FYE; and
(b) For any other company, within 6 months of the FYE.
For listed companies, the amendment to section 175 of the CA aligns with the deadline for listed companies under Rule 707 of the applicable listing rules of the Singapore Exchange.
Dispensing with AGM
Currently, private companies are allowed to dispense with the holding of an AGM if all the members pass a resolution at a general meeting to dispense with the holding of an AGM. When the amendments take effect in 2018, private companies will have greater flexibility and may dispense with the holding of an AGM if, among others, they have sent
to all persons entitled to receive notice of general meetings the financial statements within 5 months from the FYE.
Notwithstanding the foregoing, private companies will still need to: (a) hold an AGM upon request by a member who gave notice not later than 14 days before the date by which an AGM is required to be held; and (b) hold a general meeting to lay financial statements, if any shareholder or auditor requests it not later than 14 days after the company sends out its financial statements.
Filing of Annual Returns
With the amendments to the AGM deadline, the deadline for the filing of Annual Returns will be amended to take reference from the Company’s FYE, as follows:
(a) For listed companies, 5 months after the FYE; and
(b) For any other company, within 7 months from the FYE
2. Change of Financial Year-End (targeted to take effect from early 2018)
The amendments introduce a new section 198 relating to the financial year of a company. For new companies, the company’s first financial year starts on the company’s date of incorporation and ends on the last day of the first financial year as furnished by the company to ACRA. The company’s first financial year cannot be longer than 18 months unless ACRA otherwise approves. For existing companies, the date of its FYE would be such date as was previously provided to ACRA (or in the case of companies who have not informed ACRA, the anniversary of the date
of incorporation).
A company wishing to change its FYE must lodge a notice with ACRA specifying the new day to apply to its previous or current financial year.
ACRA’s approval is required if: (a) the change would result in a financial year being longer than 18 months; or (b) the FYE was changed within the last 5 years.
3. Adoption of Common Seal (took effect from 31 March 2017)
With effect from 31 March 2017, the requirement for a company to have a common seal has been made optional. The amendments allow a company to execute a document described or expressed as a deed by signature as an alternative to the use of a common seal.
The document or deed may be executed on behalf of the company by affixing the signature of:
(a) a director of the company and a secretary of the company;
(b) at least 2 directors of the company; or
(c) a director of the company in the presence of a witness who attests the signature.
The removal of the requirement for a common seal is intended to provide companies with greater flexibility to enter into contracts and execute deeds.
4. Register of Beneficial Ownership (took effect from 31 March 2017)
Under the new Part XIA of the CA, all companies (including foreign companies registered under the CA) have to maintain a register of controllers and a register of nominee directors, with the exception of listed and exempted companies under the 14 th and 15 the Schedules to the CA.
The deadline for maintaining a register of controllers is:
(a) in the case of a new company, 30 days from the date of the company’s incorporation; and
(b) in the case of existing companies, 60 days from 31 March 2017.
Company’s duty to not disclose registers or make available for inspection Subject to an obligation to produce the register for inspection by the ACRA, companies are not allowed to disclose, or make available for inspection, the register of nominee directors, register of controllers, or any particulars contained therein to any member of the public.
Company’s duty to investigate and obtain information Companies must take reasonable steps to find out and identify the registrable controllers of the company. The company must give notice to any person whom:
(a) it knows or has reasonable grounds to believe is a registrable controller of the company; or
(b) it knows or has reasonable grounds to believe knows, the identity of a person who is a registrable controller of the Company.
Company’s duty to keep information up-to-date and correct wrong information
After obtaining the information, companies are under a continuing obligation to keep the information up-to-date and to correct any errors.
In complying with these obligations, if a company knows or has reasonable grounds to believe that a there has been a change in the status as a registrable controller or his particulars as a registrable controller, it must give notice to the registrable controller to confirm if the change has occurred and to amend the register accordingly. If a company knows or has reasonable grounds to believe that any of the particulars of a registrable controller that are stated in the register is incorrect, they must give notice to the registrable controller to verify the accuracy of the particulars.
Duty to provide information
Generally, an individual who knows or ought reasonably to know that he is a registrable controller must notify the company. In addition, if he knows or ought reasonably to know that he has ceased to be a registrable controller or that there has been a change in the person’s contact details, notify the company of such change.
In addition, a nominee director must, within 30 days from the date of appointment or incorporation, inform the company of his nominee status and provide the particulars of the person for whom he is a nominee for.
Consequence of non-compliance
A company or an officer of the company who fails to comply with section 86AF of the CA would be liable for a fine up to $5,000.
Who is a registrable controller?
A controller (whether an individual or a company incorporated in Singapore or elsewhere) is one who has a significant interest, or control over, the company. For the purposes of the CA, “significant interest” means a controller who has more than 25% of the shares in the company; or if the controller has one or more voting shares with 25% or more of the total voting power in the company.
Additionally, “significant control” means a controller who:
(a) holds the right, directly or indirectly, to appoint or remove the directors of a company who in turn hold a majority of the voting rights at meetings of the directors on all or substantially all matters;
(b) holds, directly or indirectly, more than 25% of the right to vote on matters that are to be decided at a vote of members; or
(c) has the right to exercise, or actually exercises, significant influence or control over the company.
Who must be registered?
Generally, the company (X) must register all controllers unless the following 3 conditions are satisfied:
(a) A controller’s (“P1”) significant control or interest in the company is only through another controller (“P2”); and
(b) P1 is a controller of P2; and
(c) P2 is either required to maintain a register of controllers or is otherwise exempted (e.g. listed company).
Therefore, with reference to the diagram above, P1 need not be registered even though it has significant control or interest in X.
The effect of this is to reduce duplicative reporting and companies can stop tracing its controllers once it reaches a company which maintains its own register, or an entity which is exempted from maintaining a register.
Conclusion
The proposed amendments reflect Singapore’s ongoing commitment towards aligning with international norms, enhancing its reputation as a trusted and clean financial hub, whilst balancing the need to remain competitive in terms of administrative convenience and flexibility.
For further information, please contact:
Ch’ng Li-Ling, Partner, RHTLaw TaylorWessing
