24 June, 2015
The Companies (Amendment) Act 2014 (“Amendment Act”) was passed in Parliament on 8 October 2014. On 15 April 2015, the Accounting and Corporate Regulatory Authority (“ACRA”) announced that the legislative changes to the Companies Act (“Act”) will be effected in two phases. About 40% of the over 200 legislative amendments will take effect in the first phase on 1 July 2015. In this regard, the provisions coming into operation on 1 July 2015 have been set out in the Companies (Amendment) Act 2014 (Commencement) Notification 2015 published on 3 June 2015. The second phase is expected to come into effect in the first quarter of 2016.
The proposed amendments to the Act have the key objectives of reducing regulatory burden, providing greater business flexibility and improving corporate governance. This article, being the first of a two-part series, focuses on the key legislative amendments to be implemented in phase 1 on 1 July 2015.
1. No Shareholders’ Approval Required For Payment Of Compensation To Executive Director For Termination Of Employment Up To A Prescribed Limit
Brought to you by An approved SGX Continuing Sponsor At present, pursuant to section 168(1)(a) of the Act, shareholders’ approval is required for payment of compensation to a director for loss of office as an officer of the company or its subsidiary or payment of consideration in connection with his retirement from office. The legislative amendments introduced provide for an exemption from obtaining shareholders’ approval subject to certain conditions being satisfied:
(a) The payment does not exceed the total emoluments paid to the director for the one year immediately preceding his termination of employment;
(b) The termination of employment is based on an existing agreement between the company and the director; and
(c) Particulars of the payment are disclosed to shareholders before the payment is made.
The rationale for the amendment is that an executive director is an employee of the company and the payment of such compensation is usually determined by the board. Specifying the payment limit and requiring disclosure to shareholders before payment is made are safeguards added for transparency and as a check on the Board.
2. Allowing Listed Companies To Make Selected Off-Market Acquisition Of Shares In Itself In Accordance With An Agreement Authorised By The Company
Section 76D(1)(b) has been deleted to allow listed companies to conduct selective off-market acquisitions. New sections 76(8)(m) and 76(8A) have clarified that sponsoring an odd-lot program does not amount to financial assistance.
3. Removal Of Prohibition Against Financial Assistance By Private Companies And Introducing New Exceptions To Financial Assistance
The financial assistance prohibition against private companies will be removed, following the amendment to section 76(1), and the newly enacted section 76(1A) restricts the financial assistance prohibition to public companies. However, certain exceptions to financial assistance have been made for public companies so as to avoid impeding potentially beneficial or innocuous transactions. The exceptions are as follows:
(a) There will be no material prejudice to the interests of the company or shareholders or the company’s ability to pay its creditors;
(b) Distributions made in the course of the company’s winding up;
(c) Allotment of bonus shares;
(d) Redemption of redeemable shares of a company in accordance with its constitution.
4. Permitting Use Of Capital For Share Issues And Buybacks For Brokerage, Commissions
A company can use its share capital to pay any expenses (including brokerage or commission) incurred directly in the issue of new shares.
5. Allowing Companies To Issue Shares For No Consideration
A company having a share capital may issue shares for which no consideration is payable to the issuing company.
6. Company Secretaries Of Private Companies Need Not Be Physically Present At The Company’s Registered Office
Pursuant to the new section 171(3A), company secretaries of private companies need not be physically present at the company’s registered office.
7. Prescribing The Requirements Of A Company Secretary Of A Public Company In Regulations
Section 171(1AA) is amended to recognize other qualifications besides the Singapore Association of the Institute of Chartered Secretaries and Administrators (SAICSA) for a company secretary. All qualifications will therefore be put on equal footing and this will provide flexibility for the list to be updated in the future.
8. Abolition Of Transitional Arrangements For Share Warrants
Section 66 is amended to phase out the transitional arrangement for bearers of share warrants issued before 29 December 1967 to convert the warrants to registered shares. The amendment addresses the growing international expectation to strengthen the transparency of companies. Pursuant to the amendment, the bearers of these warrants would be given a final two-year period, from the time the amendment is effected, to surrender the warrants for cancellation and have their names entered in the register of members. Companies will cancel any outstanding share warrants that are not so surrendered.
9. Relaxing Conditions For Nominee Directors To Disclose Information To Nominating Shareholders
The current section 158 of the Act only allows for limited disclosure of company information i.e. a director can disclose company information, not otherwise available to him, to a person whose interests the director represents, if certain conditions are satisfied: (i) the director’s declaration at the meeting regarding the recipient and information; (ii) the director is authorised to disclose; and (iii) the disclosure will not likely prejudice the company.
Section 158 is now amended to enable the Board of Directors to allow disclosure of company information, subject to the overarching consideration that it is not likely to prejudice the company and is made with authorisation of the Board of Directors. The authorisation can be for disclosure of all or any class of information, or only such information as specified in the authorisation.
For further information, please contact:
Chong Huat Tan, Partner, RHTLaw Taylor Wessing
tanchonghuat@rhtcap.com
Kok Liang Chew, Partner, RHTLaw Taylor Wessing
kokliang.chew@rhtcap.com
Amanda Chen, Partner, RHTLaw Taylor Wessing
amandachen@rhtcap.com
Raymond Ang, Director, RHTLaw Corporate Advisory
raymond.ang@rhtcs.com
Lissa Siau, Associate Director, RHTLaw Corporate Advisory
lissasiau@rhtcorporate.com
Shirley Tan, Associate Director, RHTLaw Corporate Advisory
shirleytan@rhtcorporate.com
Michelle Wong, Associate Director, RHTLaw Corporate Advisory
michellewong@rhtcorporate.com
Sally Loh, Associate Director, RHTLaw Corporate Advisory
sallyloh@rhtcorporate.com
Song Lin, RHTLaw Taylor Wessing
song.lin@rhtcap.com
Nathaniel C.V. , RHTLaw Taylor Wessing
nathaniel.v@rhtcap.com
Shervyn Essex, RHTLaw Taylor Wessing
shervyn.essex@rhtcap.com
