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4 April, 2017
The Companies (Amendment) Act 2017 (“CAA 2017”) was passed on 10 March 2017 and came into operation on 31 March 2017. The CAA 2017 introduces certain amendments to the Companies Act (Chapter 50) of Singapore (the "Companies Act") that aim to (a) improve the transparency of ownership and control of companies in line with certain international norms; (b) reduce regulatory burden and improve the ease of doing business in Singapore; and (c) enhance the debt restructuring framework in Singapore. The key changes are summarised below:
A. Improving the transparency of ownership and control of companies in line with certain international norms
These amendments seek to make the ownership and control of Singapore business entities more transparent and thus reduce opportunities for the misuse of corporate entities for illicit purposes. This will help Singapore to better meet the recommendations of the Financial Action Task Force (FATF), an inter-governmental body (of which Singapore is a member jurisdiction) that sets global standards for combating money laundering, terrorist financing and other related threats to the integrity of the international financial system. Singapore is also a member of the Global Forum on Transparency and Exchange of Information for Tax Purposes (GF). The amendments are intended to also enable Singapore to better implement international standards on tax transparency.
1. Requirement for locally incorporated companies and foreign companies registered in Singapore to maintain a register of controllers
Date of implementation: 31 March 2017
With effect from 31 March 2017, companies and foreign companies (unless exempted) will be required to maintain beneficial ownership information in the form of a register of registrable controllers, and to make the information available to public agencies upon request.
Which entities does the new requirement apply to?
All companies incorporated in Singapore and foreign companies are required to maintain registers of registrable controllers, save for the following exempted entities:
(a) a public company which shares are listed on the Singapore Exchange;
(b) a Singapore/foreign company that is a Singapore financial institution;
(c) a company that is wholly owned by the Singapore government;
(d) a company that is wholly owned by a statutory body established by or under a public legislation for a public purpose;
(e) a company that is a wholly-owned subsidiary of a company mentioned in sub-paragraph (a), (b), (c) or (d) above;
(f) a foreign company that is a wholly-owned subsidiary of a foreign company that is a Singapore financial institution; and
(g) a Singapore/foreign company which shares are listed on a securities exchange in a country or territory outside Singapore and which is subject to:
(i) regulatory disclosure requirements; and
(ii) requirements relating to adequate transparency in respect of its beneficial owners (imposed through stock exchange rules, law or other enforceable means).
Definition of "controller"
A "controller" is defined as an individual or a legal entity that has a “significant interest” in or “significant control” over the company.
An individual or legal entity has "significant interest" in a company that has a share capital if that individual or legal entity, as the case may be:
(a) has an interest in more than 25% of the shares in the company; or
(b) has shares with more than 25% of the total voting power in the company.
An individual or legal entity has "significant control" over a company if that individual or legal entity, as the case may be:
(a) holds the right, directly or indirectly, to appoint or remove the directors or equivalent persons of the company, who hold a majority of the voting rights, at meetings of the directors or equivalent persons on all or substantially all matter;
(b) holds, directly or indirectly, more than 25% of the rights to vote on those matters that are to be decided upon by a vote of the members or equivalent persons of the company; or
(c) has the right to exercise, or actually exercises, significant influence or control over the company.
An individual or a legal entity has a significant interest in a company that does not have a share capital if the individual or legal entity holds, whether directly or indirectly, a right to share in more than 25% of the capital, or more than 25% of the profits, of the company.
The 25% threshold is consistent with those in the FATF’s guidance documents, the United Kingdom’s (UK) legislation on registers of people with significant control, and the European Union’s Fourth Anti-Money Laundering Directive.
Timeline for implementation
Companies incorporated on or after 31 March 2017 are required to have and maintain a register of registrable controllers within 30 days from its date of incorporation.
Companies incorporated before 31 March 2017 are required to have and maintain a register of registrable controllers within 60 days from 31 March 2017.
A company which is exempted from keeping a register of controllers but is subsequently required to do so, is required to keep the register within 60 days from the date the relevant exemption ceases to apply to the company.
How to maintain the registers of registrable controllers?
Companies are required to take “reasonable steps” to identify their controllers and obtain information on the controllers by sending notices to the relevant parties and recording their particulars, as well as sending further notices to any other parties that have been revealed as potential controllers. Notices can be sent and replies may be received, in electronic or hard copy format. The company is not liable should recipients of these notices fail to respond or provide inaccurate responses.
ACRA will be issuing further guidance to companies in relation to the maintenance of the register of controllers. This includes samples of the notice that companies can use to send to their shareholders, directors, and any other relevant persons to assist them in obtaining the information required for their register of controllers.
The company must enter the information into its register of registrable controllers within two days of receipt of a reply to a notice. The registers of registrable controllers is to be maintained at prescribed places, e.g. the company’s registered office or the registered office of the registered filing agent. The registers can be maintained in paper or electronic format.
To avoid duplicative reporting, companies can stop the tracing of the controllers once the tracing reaches a locally incorporated/registered company that will also be maintaining registers in their registered offices.
The registers must be made available to Accounting and Corporate Regulatory Authority of Singapore ("ACRA") and other public agencies for inspection upon request.
Similar requirements in respect of limited liability partnerships in Singapore will also be introduced by the Limited Liability Partnerships (Amendment) Bill 2017.
The penalty for failing to maintain a register of registrable controllers is S$5,000.
Please refer to our bulletin titled "Register of controllers: changes to the Singapore Companies Act, and the Limited Liability Partnerships Act, to be implemented on 31 March 2017" for our earlier comments on this issue.
2. Foreign companies registered in Singapore are required to maintain public registers of their members
The CAA 2017 will require foreign companies registered in Singapore to maintain public registers of their members and lodge a notice with ACRA specifying the address at which the register of members is kept. This brings the position of foreign companies into alignment with the current requirement applicable to locally incorporated public companies.
Foreign companies registered on or after 31 March 2017 are required to keep a register of members within 30 days from its date of registration.
Foreign companies registered before 31 March 2017 are required to keep a register of members within 60 days from 31 March 2017.
3. Singapore incorporated companies are required to maintain a register of nominee directors
A nominee director is a director that is accustomed or under an obligation whether formal or informal to act in accordance with the directions, instructions or wishes of any other person. For example, a director is a nominee of a person with a shareholding in a company if he is appointed by that person to the board of directors of the company and he acts in accordance with the directions, instructions or wishes of that person. The CAA 2017 will require locally incorporated companies to maintain a register of nominee directors. Nominee directors will be required to disclose their nominee status and the particulars of their nominators to their companies, within a stipulated timeline. This mitigates the risks of money laundering and terrorist financing being done through nominees.
4. Requirement for records of wound up companies to be retained for five years instead of two years
The CAA 2017 will require a liquidator to retain the records of a wound up company for at least five years, instead of the current two years.
In addition, currently, records of wound up companies can be destroyed before the end of the two-year retention period if directed by: (a) the Court for winding up by the Court; (b) members or partners for voluntary winding up; or (c) creditors of the company. The CAA 2017 has removed limbs (b) and (c) so that companies wound up by its members or creditors will also be required to retain its records for at least five years. This is to prevent companies that conduct illicit transactions from destroying documents before the end of the required retention period.
Currently, struck off companies are not required to keep records. The CAA 2017 will require the former officers of a struck off company to ensure that all books and papers of the company are retained for at least five years, including its accounting records and registers of controllers.
The five-year retention period is in line with other jurisdictions such as Australia, Hong Kong and the UK, as well as is international standards set by the FATF and GF.
B. Reducing the regulatory burden and improving the ease of doing business in Singapore
These amendments seek to reduce the compliance costs and administrative burden of companies in Singapore.
1. Removal of legal requirement for companies to use common seals
Date of implementation: 31 March 2017
Currently, companies are required to use their common seal when documents need to be executed as a deed (or certain documents such as share certificates) and the affixation of the common seal is usually in the presence of two persons connected with the company (i.e. a director and company secretary). Jurisdictions such as Australia, Canada, Hong Kong, New Zealand and the UK no longer require the use of common seals, when executing documents as a deed.
The CAA 2017 will remove the requirement for companies to use a common seal to execute documents that need to be executed as deeds. Instead, companies can execute documents by having them signed by authorised persons.
Authorised persons of companies are limited to:
(a) A director and the secretary of a company;
(b) Two directors of a company; or
(c) A director of a company in the presence of a witness who attests the signature.
Companies can still choose to retain the use of common seals based on business needs, if they should wish to do so.
2. Alignment of timelines for holding annual general meetings (AGMs) and filing annual returns (ARs)
Date of implementation: Early 2018
The CAA 2017 will introduce amendments to align the deadlines for companies to hold AGMs and file ARs with the companies’ FYE. This will fix the AGM deadline for each company (assuming that its FYE is unchanged), therefore providing greater clarity and improving companies' compliance with the requirements of the Companies Act.
Pursuant to the CAA 2017, the AGM deadlines will be streamlined as follows:
(a) All listed companies must hold their AGM within four months after their respective FYE.
(b) Any other company must hold its AGM within six months after its FYE.
Pursuant to the CAA 2017, the deadline for filing ARs is as follows:
(a) Companies having a share capital and keeping a branch register outside of Singapore must file their ARs within six months (if listed) or eight months (if not listed) after their respective FYEs.
(b) All other companies must file their ARs within five months (if listed) or seven months (if not listed) after their respective FYEs.
Safeguards will be put in place to prevent companies from arbitrarily changing their FYE. For example, companies must apply to ACRA for approval to change their FYE if the change in FYE will result in a financial year longer than 18 months; or if the FYE was changed within the last 5 years.
3. Exemption from holding AGMs subject to specified safeguards
Date of implementation: Early 2018
The CAA 2017 provides that private companies will be exempted from holding AGMs if they send their financial statements to members within five months after the FYE. This will be in addition to the current regime whereby private companies can dispense with the holding of AGMs if all shareholders approve of such dispensation.
However, a company must still hold an AGM/general meeting in the following circumstances:
(a) If any shareholder requests for an AGM not later than 14 days before the end of the 6th month after the FYE, the company must hold an AGM by the end of the 6th month after the FYE. The company may seek the Registrar’s approval for an extension of time to hold AGM.
(b) If any shareholder or auditor requests for a general meeting to lay financial statements not later than 14 days after the financial statements are sent out, the company must hold a general meeting.
Dormant relevant companies exempt from sending financial statements will not need to hold an AGM, subject to the abovementioned safeguards.
4. Inward re-domiciliation regime in Singapore
Date of implementation: Within first half of 2017
The CAA 2017 introduces an inward re-domiciliation regime in Singapore. Re-domiciliation is a process whereby a corporation transfers its registration from its home jurisdiction to another jurisdiction. A corporation may choose to re-domicile for regulatory, strategic or organisational reasons, while retaining its identity and history in the various regulatory jurisdictions it has presence in, and minimising operational disruptions. Other jurisdictions that currently have re-domiciliation regimes include Australia, Canada and New Zealand. The inward re-domiciliation regime allows foreign corporate entities to transfer their registration from its original jurisdiction to Singapore, besides the current options of setting up a subsidiary or branch in Singapore.
An inbound foreign corporate entity that is re-domiciled to Singapore will become a Singapore company and be required to comply with the Companies Act like any other Singapore company.
For the avoidance of doubt, re-domiciliation does not:
(a) create a new legal entity;
(b) prejudice or affect the identity of the body corporate constituted by the foreign entity or its continuity as a body corporate;
(c) affect the property, or the rights or obligations, of the foreign corporate entity; and
(d) render defective any legal proceedings by or against the foreign corporate entity.
For a foreign entity to be entitled to apply for transfer of registration, it must be a body corporate that can adapt its legal structure to the company limited by shares structure under the Companies Act. In addition, it must, within 60 days after the issue of the notice of transfer of registration by ACRA, submit to ACRA a document evidencing that the foreign corporate entity has been de-registered in its place of incorporation.
C. Enhancing the debt restructuring framework in Singapore
The CAA 2017 also introduces changes to Singapore’s corporate rescue and restructuring processes to position Singapore as a choice venue to conduct international debt restructuring.
For an update on these amendments to the Companies Act which relate to the enhancement of Singapore's debt restructuring framework, please refer to "An Update on the Restructuring and Insolvency ("R&I") Regime in Singapore" by Lauren Tang and Mabel Tan.
For further information, please contact:
Colin Jarraw Partner, Stephenson Harwood (Singapore) Alliance
colin.jarraw@shlegalworld.com
