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18 July, 2016
On 8 October 2014, Parliament passed the Companies (Amendment) Bill 2014 to the Companies Act (the “Act”). The changes introduce wide ranging changes to the Act to reduce regulatory burden and ease compliance, while retaining an efficient and transparent corporate regulatory framework that supports Singapore’s growth as a global hub for both businesses and investors. The changes were effected in two phases, and were fully implemented as of 3 January 2016.
Key Changes for Companies listed on the Singapore Exchange
In relation to SGX-listed issuers (“Issuers”) which are Singapore companies, notable amendments include:
- Multiple Proxies Regime to encourage indirect/ CPF investors’ participation
- Removing maximum age limit for directors of public companies
- Use of Share Capital to pay for expenses incurred for the Issue/ Re-Purchase of Shares
- Extending disclosure obligations to CEOs (e.g. disclosure of interests)
- Merging the memorandum and articles of association of a company into a single document known as the
- “Constitution”
- Electronic Despatch of Notices and Documents
Observations
While Issuers have generally welcomed and embraced the changes, it is interesting to note that the following are pending further review and clarification:
1. Dual Class Shares
Previously, each equity share issued by a Singapore public company confers the right at a poll to one vote, and to one vote only. This differs from other major jurisdictions like the UK, New Zealand and Australia. The Act has now been amended to allow Singapore public companies to issue shares with differing voting rights (i.e. possible dual class shares), though it bears mention that the Listing Rules have yet to permit this. A multiple or dual class capital structure is pending further review, and it remains to be seen where the balance will be struck between allowing Issuers the flexibility to manage their capital structures, and risks perceived to follow where control is entrenched in the hands of a select few.
2. Consent for Electronic Despatch
Electronic communications can now be used as a formal means of communicating with shareholders, provided that the consent of shareholders are obtained. Consent can be express, implied or deemed. In the case of deemed consent, shareholders are given an opportunity to elect whether to receive electronic or physical copies of communications. In the case of implied consent, shareholders will not have the right to elect to receive physical copies of communications. Concerns have thus been raised on whether an implied consent regime may be seen to be “forcing” the regime on shareholders, particularly in the case of shareholders who have yet to embrace newer technologies.
3. Selective Off-Market Share buybacks
One other interesting aspect relates to share buybacks. Previously, Issuers were not permitted to conduct selective off-market share buybacks; this was only then available to non-listed Singapore companies. The Act now permits the conduct of selective off-market share buybacks, as it was observed that this could potentially reduce
administrative costs for Issuers who intend to conduct such buybacks from odd-lot shareholders. These odd-lot shareholders may be discouraged from disposing of their small holdings due to relatively high transaction or brokerage costs. Following the introduction of the minimum trading price as a continuing listing obligation which precipitated a wave of share consolidation exercises, this mode of share buybacks, upon implementation, is likely to provide some welcomed relief to investors.
