Provisions Of The Companies (Amendment) Act Effective On 1 July 2015: Key Amendments For Directors And Officers.

The Accounting and Corporate Regulatory Authority of Singapore (“ACRA”) announced that the Companies (Amendment) Act will be partially implemented on 1 July 2015. This article highlights some of the key amendments affecting directors and officers of companies that come into force on 1 July 2015.

Section 153 – Age Limit For Directors

 

BEFORE	AFTER
Appointment / re-appointment of a person of or over the age of 70 years old as a director of a public company or of a subsidiary of a public company is subject to shareholders’ approval.	Appointment / re-appointment of a person of or over the age of 70 years old as a director of a public company or of a subsidiary of a public company will no longer be subject to shareholders’ approval since Section 153 has been repealed.

 

In making the recommendation to repeal Section 153, the Steering Committee noted that persons above 70 years of age can be capable of doing the job of a director and are often re-appointed in practice. There is also no age limit for directors in the UK, Australia, New Zealand and Hong Kong.

 

Section 155B – Debarment For Default Of Relevant Requirements Of The Companies Act

 

BEFORE	AFTER
No such debarment regime.	A new debarment regime will be in place and any director or company secretary of a company who has not lodged documents with ACRA for a continuous period of at least three months after the prescribed deadline under the Companies Act will not be allowed to take on any new appointment as a director or a company secretary.

 

The MOF indicated that these new powers are intended to allow the Registrar to weed out irresponsible company secretaries who do not discharge their duties for multiple companies, and not those who genuinely face issues getting client companies to comply with filing requirements.

 

Secton 156 – Disclosure Of Interests In Transactions, Property, Offices, Etc.

 

BEFORE	AFTER
Every director is required to disclose his interest: (i) in transactions / proposed transactions with the company; or  (ii) arising from any office held / property possessed. His interest includes interests of family members—e.g., spouse, child, adopted child, step-child.	Every director or CEO (who is not a director) is required to disclose his interest: (i) in transactions / proposed transactions with the company; or  (ii) arising from any office held / property possessed. His interest includes interests of family members—e.g., spouse, child, adopted child, step-child.
Every director who is in any way interested in a transaction shall, as soon as practicable after the relevant facts have come to his knowledge, declare the nature of his interest at a meeting of the directors of the company.	Every director or CEO (who is not a director) who is in any way interested in a transaction shall, as soon as practicable after the relevant facts have come to his knowledge, disclose his interest by: (i) a declaration at a meeting of the directors of the company; or (ii) sending a written notice to the company.

 

This change is consistent with the approach already adopted for listed companies under the Securities and Futures Act, under which similar disclosures by both directors and CEOs are already required.

 

Section 162 – Loans And Quasi-Loans To Directors, Credit Transactions And Related Arrangments

 

BEFORE

AFTER

A company (other than an exempt private company) is prohibited from: (i) making loans; or (ii) entering into guarantees or providing security in connection with loans made to: (A) its directors and their family members; (B) directors of related companies and their family members; or (C) companies connected to its directors (i.e., where the directors are interested in not less than 20 percent of shares of such companies).

The prohibition applying to a company (other than an exempt private company) on such transactions has been widened, with restricted transactions extended to: (i) quasi-loans;  (ii) credit transactions; and (iii) any related arrangements. The prohibition has also been extended to limited liability partnerships (“LLP”) connected to its directors (i.e., where the directors are interested in not less than 20-percent voting power in such LLP).

 

In recommending the widening of the prohibition, the Steering Committee noted that the UK regulatory regime currently already extends to quasi-loans, credit transactions and related arrangements and relevant definitions are in place that properly scope the provisions, thereby addressing concerns that the extension would be too broad and that too many transactions would then fall within the regulatory regime.

 

Section 163 – Approval Of Company Required For Loan And Quasi-Loans To, And Credit Transactions For The Benefit Of, Persons Connected With Directors Of Lending Company 

 

BEFORE

AFTER

A company (other than an exempt private company) is prohibited from: (i) making loans; or (ii) entering into guarantees or providing security in connection with loans made to a company connected to its directors, except when:  (A) such connected company is a related corporation of the company; or  (B) the company is a bank, finance or insurance company and such loans were made in its ordinary course of business (under Section 163(4)).

New exception to allow a company to make, provide for or enter into loans / quasi-loans, credit transactions, guarantees or security involving another company / LLP connected to its directors (i.e., where the directors are interested in not less than 20 percent of shares of such other company or the directors are interested in not less than 20-percent voting power in such LLP) if: (i) there is prior shareholders’ approval; and (ii) interested directors and their family members abstain from voting on approval. The exception under Section 163(4) remains.

 

The introduction of the new exception is consistent with the approach adopted in both the UK and Australia.

A complete list of the key amendments is set out in ACRA’s media release.

 

 

For further information, please contact:

 

Krishna Ramachandra, Partner, Duane Morris & Selvam

kramachandra@duanemorrisselvam.com