The Companies (Amendment) Bill No.25 of 2014 (“CA Bill”) that was passed on 8 October 2014 sought to develop the corporate framework through reducing regulatory burden on companies. More than 200 changes will be implemented in the Companies Act, marking it as the most extensive set of amendments since the Companies Act was first enacted.
The first key proposal aims to expand the scope of companies who are exempted from having their accounts audited. This is done through introducing the “small companies” category, which comprises a private company who meets at least 2 of the following criteria in each of the previous two financial years: (a) Total annual revenue of not more than SGD 10m; (b) Total assets of not more than SGD 10m; and (c) number of employees does not exceed 50. These small companies will still be required to keep proper accounts. The second key provision will provide more flexibility in raising capital through repealing the current one-share-one-vote restriction, and allowing public companies to issue shares with different voting rights, including special or limited rights.
The other provisions in the CA Bill include: (1) permitting private companies and companies limited by guarantee to adopt the whole or part of several model constitutions prescribed for different types of businesses; (2) allowing the registers of private company members to be maintained by ACRA; and (3) extending the requirement of disclosing conflicts of interest in transactions and shareholdings in the company and related corporations to CEOs in order to recognize the increasingly important role that these CEOs play in company decisions.
Another significant change in the CA Bill entails the abolishment of financial assistance prohibition for private companies. The lift in this restriction allows private companies to adopt a business-friendly approach to acquisition deals involving private companies without undergoing time-consuming “whitewash” procedures. Although public companies and their subsidiaries will still be subject to the financial assistance prohibition, the CA Bill creates a new exemption function where they will be allowed to acquire shares in the company or a holding company so long as it does not materially prejudice the interests of the company, shareholders, and its ability to pay its creditors.
Nizam Ismail, Partner, RHTLaw Taylor Wessing