12 January, 2017
Year in Review – Singapore Law in 2016
Phase 2 of the Companies (Amendment) Act 2014 came into force: This Act is the most significant update of the Companies Act since 1999. Various provisions came into force in 2015 (Phase 1). The rest of the amendments came into force in January (Phase 2). Phase 2 amendments included: (i) replacing physical registers with electronic registers of members and officers maintained by the Accounting and Corporate Regulatory Authority (ACRA); (ii) merging of memorandum and articles into a single document called the constitution; and (iii) removal of the one share, one vote restriction for public companies.
Penalty clauses: The High Court considered the law on penalty clauses in two cases (iTronic Holdings Pte Ltd v Tan Swee Leon [2016] SGHC 77 and Allplus Holdings Pte Ltd and others v Phoon Wui Nyen (Pan Weiyuan) [2016] SGHC 144). These cases suggest that Singapore law is also moving towards the approach advocated in Cavendish Square Holding BV v Talal El Makdessi; ParkingEye Limited v Beavis [2015] UKSC 67 on how to deal with penalty clauses. The restated position focuses on whether the payment obligation is a primary obligation or a secondary obligation arising from a breach. If it is the latter, then it is unenforceable as a penalty only if the amount is extravagant or unconscionable. Read more…
Changes to Takeovers Code: The Takeovers Code was amended in March to deal with pre-conditional offers, timelines and procedures in cases of competing offers, actions by the target board and timely disclosure of material information.
Enforcement actions taken by the privacy regulator: In April, Singapore’s data privacy regulator, the Personal Data Protection Commission announced that it had taken enforcement actions against 11 organisations for breaching their data protection obligations under the Personal Data Protection Act 2012 (PDPA), and released its grounds of decision for these actions. These cases involved various contraventions of the PDPA, a majority of which related to unauthorised access or disclosure of personal data. This was a significant development given that the PDPA only came into force relatively recently in June 2014. Since April, the PDPC has continued to take enforcement action against several other organisations. It is expected that this trend will continue as awareness of, and the importance placed on, the right to privacy continue to develop. Read more…
Merger of IDA and MDA: The Singapore Infocomms-Development Authority (IDA) and the Media Development Authority (MDA) merged in August to form the Infocommunications Media Development Authority (MIDA). This merger comes as part of a push to capitalise on and manage regulation of the ongoing convergence in traditional and online telecommunications and media services, once very distinct industry sectors. Consequent to this merger, it is expected that changes to laws, regulations and licensing provisions relating to these services (e.g. over-the-top services) will follow.
Singapore International Arbitration Centre (SIAC) publishes new rules: The SIAC published new rules which came into effect in August. With innovative provisions that enhance the existing procedures, these new rules help to entrench Singapore’s positon as the leading venue for international arbitration in Asia. The rules prescribe a framework for the consolidation of multi-contract and multi-party disputes, allow for joinder of parties and non-parties to an arbitration, introduce a procedure for early dismissal of claims which are manifestly unmeritorious, further expedite emergency arbitration proceedings and allow more cases to make use of the expedited procedure mechanism.
Hague Convention on Choice of Court Agreements (the Convention): Singapore ratified the Convention in June 2016 and it came into force in October 2016. This reinforces Singapore’s status as a premier centre for international dispute resolution of cross-border commercial disputes. Where a Singapore court, including the Singapore International Commercial Court (SICC), is the chosen court in an exclusive choice of court agreement, the courts of other contracting states would enforce the choice of court agreement and refer the dispute to the Singapore courts for resolution. In addition, the courts of other contracting states would enforce a Singapore court judgment arising out of a Singapore exclusive choice of court agreement. Read more…
Determination of an offshore case in the SICC: In the first SICC decision (Teras Offshore Pte. Ltd. v. Teras Cargo Transport (America) L.L.C. [2016] 4 SLR 75) given by an international judge, Justice Bernard Eder held that, in determining whether a matter is an offshore case for the purpose of allowing international legal representation before the SICC, the issue in question is not whether an action has a substantial connection with some place other than Singapore, but whether the action has no substantial connection with Singapore. This decision illustrates the progressive approach taken by the SICC to allow international legal representation in cross-border commercial disputes brought before the SICC.
Prima facie existence of an arbitration agreement suffices: In Tomolugen Holdings Ltd and another v Silica Investors Ltd and other appeals [2015] SGCA 57, the Court of Appeal held that a court need only be satisfied on a prima facie standard that an arbitration agreement exists in order to stay Singapore court proceedings in favour of international arbitration. The Court of Appeal further held that shareholder disputes are arbitrable and confirmed the Singapore courts’ powers to grant a case management stay of court proceedings in favour of arbitration.
Court of Appeal rules on controversial summary dismissal case: In 2015, in Iouri Piattchanine v Phosagro Asia Pte Ltd [2015] 5 SLR 1257, the High Court found that breaches by an employee of his fiduciary duties and his express and implied contractual duties were insufficient to justify summary dismissal by his employer for serious misconduct or wilful breach. In October, the Court of Appeal overturned the High Court’s finding that the employee was not guilty of serious misconduct and held that where the breach in question is of a term which constitutes a condition of the contract, it would entitle the innocent party (i.e. the employer) to elect to treat the employment contract as discharged, regardless of the nature and consequences of the breach. Read more…
New tripartite guidelines raise standard of labour conditions: The tripartite partners (Ministry of Manpower (MOM), National Trade Union Congress and the Singapore National Employers Federation) issued new tripartite guidelines in 2016, including: (i) new guidelines on the employment of term contract employees to provide clarity on leave benefits for fixed-term contract employees and advance notification of intention not to renew; (ii) revised guidelines on managing excess manpower and responsible retrenchment; and (iii) revised guidelines on the re-employment of older employees to prepare for the raising of the re-employment age from 65 to 67 in 2017.
Appointment of employment pass holders to the board of directors of another company: In November, MOM clarified that a company has to obtain approval from MOM if the company is appointing an employment pass holder from another company to its board of directors. MOM will generally grant approval if the company is related by shareholding to the employment pass holder’s employer and the employment pass holder is taking up the directorship for purposes related to his primary employment.
AML/CFT: The Monetary Authority of Singapore (MAS) has been increasingly active in enforcing anti-money laundering (AML) and countering the financing of terrorism (CFT) rules, and in August established new departments dedicated to combatting money laundering and strengthening enforcement. MAS closed two private banks for AML failings (having not taken such action for over two decades previously). MAS also took action against numerous other financial institutions for AML/CFT failings, including substantial fines for four international banks, most recently in December. During 2016, MAS has also been willing to take action against individuals deemed responsible for
AML/CFT failings in financial institutions. Further action in this area is expected in 2017.
Outsourcing: In July, MAS issued revised Guidelines on Outsourcing (Outsourcing Guidelines), which set out overarching standards that all Singapore financial institutions are expected to interpret and apply on a case- by-case basis. The Outsourcing Guidelines were issued alongside the Implementation Guide issued by the Association of Banks in Singapore in respect of cloud-based outsourcing in the financial industry. Read more…
SFA amendments: Amendments to the Securities and Futures Act (SFA) took effect from August. Changes were primarily aimed at increasing protection for retail investors and included: (i) a requirement for certain issuers to classify capital markets products; (ii) a requirement to provide investors in certain securities with a product highlights sheet; and (iii) restrictions on use of the terms “capital protected” and “principal protected”.
Offshore bank licences: From April, MAS stopped issuing offshore bank licences with the intention to convert all existing offshore banks to wholesale banks over time. The intention of this change was to simplify the licensing regime applicable to banks.
Year to come – Singapore Law in 2017
Inward re-domiciliation regime: Proposals to allow a foreign company to transfer its registration to Singapore whereby upon completion of the transfer, it will continue as a Singapore company are expected to be implemented in 2017. There are currently no plans to introduce an outward re-domiciliation regime for Singapore companies.
Disclosure of beneficial ownership of Singapore companies: The Companies Act is expected to be amended to make it an obligation for companies to obtain and maintain information on beneficial ownership. The proposed legislative amendments will also include steps that companies should take to identify the beneficial owners and the types of information that should be maintained. The proposals are aimed at facilitating greater corporate transparency and follows a mutual evaluation by the Financial Action Task Force.
Listing of companies with dual class shares: The Companies Act was amended in January to remove the one share, one vote restriction for public companies. In August, the Listings Advisory Committee of the Singapore Stock Exchange (SGX) announced that it was in favour of allowing companies with dual class share structures to list on SGX subject to various corporate governance safeguards. The matter continues to be debated among stakeholders. We expect a formal consultation on the proposals to be launched in 2017.
Debt restructuring proposals: The Committee to Strengthen Singapore as an International Centre for Debt Restructuring issued its recommendations in April. In October, the Ministry of Law issued its proposals to implement one set of the recommendations. These proposals, which are likely to be implemented in 2017, include: (i) the introduction of new provisions to support creditor schemes of arrangements; (ii) the adoption of the UNCITRAL Model Law on Cross Border Insolvency; and (iii) the abolition of the general ring fencing rule in the winding up of foreign companies with a Singapore branch save that ring fencing will be retained for specific financial institutions.
Sustainability reporting for SGX listed companies: SGX listed companies must produce their first sustainability reports in respect of the financial year ending on, or after, 31 December 2017. The amended rules came into effect in July.
Diversity on boards: In October, the Diversity Action Committee presented its recommendations to MAS and SGX listed companies to increase the representation of women on the boards of SGX listed companies. We expect to see reform in the area of gender diversity on boards in 2017.
Cybersecurity Bill 2017: Following the set up of the Singapore Cyber Security Agency (CSA) in 2015, the Singapore Parliament will introduce a Cybersecurity Bill in early 2017. This Bill will be industry-agnostic, and is expected to impose obligations on organisations including taking proactive steps to secure critical information infrastructure, and mandatory reporting for incidents of cyber breach involving such infrastructure. The Bill is also likely to empower the CSA to take enforcement action for cyber breaches, and raise the standards of cybersecurity providers in Singapore.
Third party funding for international arbitration: The Singapore Government is moving towards legalising third party funding for international arbitration, arbitration-related court matters and mediation. The proposed legislation to legalise third party funding, the Civil Law (Amendment) Bill, was read in the Singapore Parliament in November 2016, and the legislation is expected to be enacted in the first half of 2017. This move aligns Singapore with practices in the global major arbitration centres including London, Paris and Geneva where third party funding is increasingly utilised in international arbitration.
New Employment Claims Tribunal to handle salary-related disputes: A new Employment Claims Tribunal will be established from April 2017 to deal with salary-related disputes. The Tribunal will hear: (i) statutory salary-related disputes from employees covered under the Employment Act, the Retirement and Re- Employment Act and the Child Development Co-Savings Act; and (ii) contractual salary-related claims from all employees except domestic workers, public servants and seafarers. All parties are required to go through mediation before their claims can be heard.
There will be a limit of S$30,000 on claims for cases with union involvement, and S$20,000 for all other claims.
Enhanced statutory family-friendly leave benefits: From January 2017, unwed mothers will receive the same maternity leave entitlement (16 weeks of paid maternity leave) as lawfully wed mothers, and paid paternity leave of fathers will increase from one week to two weeks. From July 2017, paid adoption leave for mothers with adopted children will increase from four weeks to 12 weeks, and mothers will be permitted to share up to four weeks of maternity leave with their husbands (instead of the current one week).
Increase of re-employment age: From July 2017, employers must offer re-employment to eligible employees who turn 62, up to the age of 67 (instead of the current 65) to continue their employment, provided that certain statutory requirements are met. If the employee is eligible but the employer is unable to offer re-employment, the recommended minimum and maximum employment assistance payment to be offered to the employee will be increased to S$5,000 and S$13,000 respectively (from the current S$4,500 and S$10,000). In addition, the statutory provision which allows employers to reduce wages of workers turning 60 by up to 10 per cent will be removed.
Mandatory retrenchment notifications: A new requirement on mandatory retrenchment notifications will take effect from January 2017. Employers who employ at least 10 employees will be required to notify MOM if five or more employees are retrenched within any six-month period from January 2017. Read more…
Financial Technology (FinTech) developments: MAS was active throughout 2016 in positioning Singapore as a hub for the development of FinTech and innovation. In particular, MAS established a FinTech office in April, and has entered into co-operation agreements with numerous overseas regulators. MAS has also established a “regulatory sandbox” intended to facilitate experimentation by innovative financial firms in a reduced-regulation temporary environment, and published new FinTech Regulatory Sandbox Guidelines in November. Further developments in this area are expected in 2017 as MAS has announced numerous initiatives including: (i) an activity-based payments regulation framework; (ii) enabling digital financial advice (also known as robo-advice) and insurance; (iii) initiatives in collaboration with the ABS to make electronic payments seamless and convenient; and (iv) a proof-of-concept project to use blockchain technology for inter- bank payments (which is being developed between MAS, SGX and eight banks). Read more…
Reform of payment systems regulation: MAS published a consultation paper in August proposing to introduce an activity-based payments regulation framework. The proposals are intended to modernise and streamline Singapore’s currently fragmented payments regime (which is currently split across separate pieces of legislation). MAS envisages that future rounds of consultation in 2017 and beyond will focus on specific policies and draft legislation.
Risk-based capital framework for Singapore insurers (RBC 2): MAS published a third consultation paper in July 2016 on RBC 2 following on from previous consultations in 2012 and 2014. The consultation closed in October, and the proposals will be further developed in 2017. In particular, a second full scope quantitative impact study is expected to be undertaken.
Protection of customer money/assets: MAS published a consultation paper in July in respect of enhancements to the regulatory requirements applicable to the protection of customers’ moneys and assets. Building on this consultation, draft legislative amendments (primarily amendments to the Securities and Futures (Licensing and Conduct of Business) Regulations) are expected to be published in 2017.
Banking (Amendment) Bill: The Banking (Amendment) Bill 2016 was passed by the Singapore Parliament in February. This bill introduces a wide range of amendments to the Banking Act to strengthen prudential safeguards, corporate governance and risk management controls in the banking industry. We expect that the amendments will come into force in 2017.
Securities and Futures (Amendment) Bill: The Securities and Futures (Amendment) Bill 2016 was moved for first reading in the Singapore Parliament in November. The amendments to the SFA proposed under this bill include (amongst others): (i) bringing most OTC derivatives within the regulatory scope of the SFA; (ii) transferring regulatory oversight of commodity derivatives to MAS; (iii) modifying the definitions of “accredited investor” and “institutional investor”; (iv) introducing a regulatory regime applicable to short-selling; and (v) introducing a new regulatory regime for financial benchmarks.
For further information, please contact:
Hyung Ahn, Partner, Linklaters
hyung.ahn@linklaters.com
