Selected Key Legislative Amendments to Singapore Companies Act be effected in 2016 (Phase 2)
The Companies (Amendment) Act 2014 (“Amendment Act”) was passed by Parliament on 8 October 2014 and assented to by the President on 18 November 2014.
ACRA has announced a 2-phase implementation approach to the legislative amendments to Singapore Companies Act (“CA”), where about 40% of the over 200 legislative amendments will take effect in the first phase on 1 July 2015, while the second phase encompassing the rest of the legislative amendments is expected to take effect in the first quarter of 2016.
Selected Key Legislative Amendments to Singapore Companies Act be effected in 2016
The Selected Key Legislative Amendments to Singapore Companies Act be effected in 2016 are:
Directors and Chief Executive Officers
1. New Sections 173 and 173G – Alternate Address
These individuals must report their residential addresses and changes to these with ACRA. Information on residential addresses is publicly available. Note that “manager” is the term for a “Chief Executive Officer” in the current Companies Act.
A Director, CEO or Company Secretary is allowed to provide his or her alternate address to be reflected on ACRA’s public records. Alternate address refers to that address that is recorded in place of the residential address.
Alternate address must be an address:
(i) where an individual can be located;
(ii) in the same jurisdiction as individual’s residential address; and
(iii) not a postal office box address
ACRA will keep individual’s residential address confidential. If alternate address is proven invalid, it will be replaced with residential address and the individual is subject to a penalty for breach of the requirement and is not allowed to provide an alternate address for a period of 3 years.
- New Section 155A – Disqualification for being director in not less than 3 companies which were struck off within 5-year period
A director who has at least 3 of his companies struck off within a period of 5 years will be disqualified from acting as director, or to take part in the management of any company for a period of 5 years starting after the date on which the last of the 3 companies were struck off from the date the third company is struck off. For the avoidance of doubt, the striking off of the 3 companies relates only to striking off initiated by ACRA and does not include voluntary applications for striking off.
- New Section 155(B) – Debarment regime for director or secretary
ACRA may order debarment of director or secretary of a company for failing to lodge documents with ACRA for a continuous period of at least 3 months after prescribed deadline. A debarred person will not be allowed to take on new appointment as director or secretary but will be allowed to continue with existing appointments. Debarment may be lifted when defaults have been rectified. ACRA intends to enforce this section from the first quarter of 2016.
- No maximum age limit for director
Approval from shareholders must be sought for the appointment of person who is 70 years old and above as director of a public company or subsidiary of a public company.
Removal of maximum age limit (i.e. 70 years and above) of directors of public company or subsidiary of a public company. Hence, the requirement for shareholders’ approval to reappoint directors aged 70 and above is not required.
- Disclosure obligation for CEO
- Section 156 – Disclosure of interests in transactions/proposed transactions or by virtue of holding any office or property
- Section 165 – Disclosure of shareholdings and interests in shareholding (and any change thereof) in the company or related corporation
The above disclosure obligations are extended to CEO (who is also not a director).
A CEO must disclose his and his family members’ interests in securities of the company, but not required to disclose:
(i) interest in participatory interests in the company; and
(ii) interest of him and his family’s interest in securities of the company’s related corporations.
CEO is any one or more persons, by whatever name described, who:
(i) is in direct employment of, or acting for, or by arrangement with, the company; and (ii) principally responsible for the management and conduct of the business of the company, or part of the business of the company, as the case may be.
Disclosures of interests of a director or CEO in transactions may be disclosed through a declaration at a meeting of directors or a written notice to the company. From the Effective Date, existing Managers registered with ACRA will be treated as CEO and his or her name and particulars will be entered in the register of Chief Executive Officers in ACRA’s records (Section 173D).
A company is required to maintain Register of CEO’s shareholdings, in addition to the Register of Director’s shareholdings.
Late filing penalty will not be imposed for companies whose CEOs were appointed prior to 3 Jan 2016 but whose information is updated with ACRA between 3 Jan 2016 to 30 June 2016.
- New Sections 172B, 163A & 163B – Company to indemnify directors against third party claims
From the Effective Date, a company will be allowed to provide the following to its officers (including a director) in respect of their liabilities arising from their negligence, default, breach of duty/trust:
(i) Indemnity for liabilities incurred to a third party, except for certain specified liabilities (eg. criminal fines/penalties);
(ii) Loan to pay for legal costs incurred in defending criminal or civil proceedings (on the condition, among others, that the loan must be repaid if their defence is unsuccessful);
(iii) Loan to pay for legal costs incurred in defending themselves in regulatory investigations/actions.
A director/officer may consider working with the company to extend the scope of an existing indemnity to cover the additional circumstances in which a company may indemnify them.
- Sections 162 & 163 – Widening scope of prohibition on director-connected loans
A company (other than an exempt private company) is prohibited from making loans or providing any guarantee or security in connection with loans to: a) its directors or directors of a related company and their family members; or b) another company that is connected to its director(s) (ie. where a director(s) is/are interested in 20% or more of the total voting power).
Prohibition extended to loans, quasi-loans, credit transaction or related arrangements in connection with: a) director-connected loans by the company; or b) company or limited liability partnership connected to a director (ie. where a director(s) is/are interested in 20% or more of the total voting power) Company can extend loans, quasi-loans, credit transaction or related arrangements, to a director or another company connected to its director(s) if prior approval has been obtained in a general meeting, in which the interested director (and family) abstained from voting.
- New Section 201A – Exemption from the preparation of financial statements for dormant companies – Applicable to financial statements that end on or after 3 January 2016
A dormany company is exempted from the statutory audit requirements but is still required to prepare financial statements.
Dormant unlisted companies (other than subsidiaries of listed companies) will be exempted from preparation of financial statements, subject to the following:
(i) Total assets of the company does not exceed S$500,000/- during the financial year; 5 Boardroom Limited All rights reserved
(ii) Dormant from the time of its formation or since the end of the previous financial year; (iii) Statement on the dormancy of a company by Directors; and
(iv) Shareholder(s) (not less than 5% of the total issued shares (excluding treasury shares) or total number of members in the dormant company) and ACRA empowered to direct dormant company to prepare and lodge financial statements.
Dormant company in a group may only be exempted if it belongs to a group in which the consolidated total assets of the group does not exceed S$500,000/- during the financial year.
Dormant holding company and their subsidiaries, and dormant unlisted company which exceeds S$500,000/- during the financial year must continue to prepare financial statements but exempt from statutory audit requirements. Section 205B(2) and (3) shall apply in determining whether a company is dormant.
- Section 203A – Summary of Financial Statements
Option to provide summary financial statements to members extended to all companies and not only listed companies.
- New Section 202A and 202B – Defective Financial Statements
When defective financial statements (that do not comply with accounting standards/statutory requirements) are detected:
(i) Voluntary revision by directors – Directors are allowed to voluntarily revise the company’s financial statements to correct any errors as soon as practicable before the next financial statements is prepared; or
(ii) ACRA enforcement – ACRA may apply for court order to compel a company to revise its financial statements.
ACRA intends to enforce these two sections by end of January 2016.
11. Statutory Registers to be maintained by ACRA
All companies are required to maintain and update physical registers of members.
ACRA will maintain the company’s statutory registers (ie. Register of Members for private companies and Register of Directors, CEOs, Secretaries and Auditors for all companies.) ACRA’s Electronic Register of Members for private companies will be the main and authoritative register.
Private companies are subject to real-time registration with ACRA on share ownership and changes in share ownership (Section 196A). (e.g. The effective date of allotment/ transfer/ cancellation/ redemption of shares/share buyback will be the date of lodgement with ACRA) Public companies are required to lodge notifications of the aforesaid changes within 14 days from the effective date.
- Section 35,36,37 and 39 – New concept of “Constitution” for private companies
A person incorporating a company must submit the memorandum and articles of the company to ACRA. The articles may adopt all or any of the regulations contained in Table A of the Fourth Schedule.
Company (private and limited by guarantee) incorporated on or after the Effective Date will have a Constitution (which will be prescribed by ACRA) instead of Memorandum and Articles of Association (“M&A”). Company may choose to adopt entire model or model with variations. If the entire model is adopted, the model can be as at the point of incorporation or whatever version that is in force from time to time. No action is required for The removal of auditor independence provisions that is also dealt with in the Code of Professional Conduct and Ethics as set out in the Fourth Schedule to the Accountants (Public Accountants) Rules.
- Section 344 – Strike off provisions for local companies
(i) The current 3-month notification period from ACRA before a company is struck off the register will be reduced to 60 days (ii) Extension of striking off notification from ACRA to the directors, secretaries, members, IRAS and CPF Board (Currently, only the company, directors and company secretaries are notified). (iii) Reduction of period for struck off companies to be restored to the register from 15 years to 6 years. (iv) In addition to to the High Court, ACRA is also allowed to restore companies that have been struck off.
Shareholders’ Rights and Meetings
- Section 178 and 181 – Multiple proxies & extended cut-off time
Unless the company’s Articles of Association provide otherwise, a member can only appoint up to 2 proxies who can vote only by poll. There is a 48-hour cut off time before the meeting for submission of the proxy form.
The following types of members (relevant intermediaries) are allowed to appoint more than 2 proxies:
(i) Licensed bank (or its wholly-owned subsidiary) which provides nominee services and holds shares in that capacity;
(ii) Capital markets services licence holder which provides custodial services for securities and holds shares in that capacity; and
(iii) CPF Board, in respect of shares purchased on behalf of CPF investors.
A company, whose constitution indicates a 48-hour cut-off time for the submission of proxy instruments, will have to amend their constitutions to extend the cut-off time for submission of proxy instruments from 48-hour to 72-hour.
- Section 178 – Demanding for a poll
The threshold to demand a poll (other than election of Chairman of the meeting and adjournment of the meeting) is reduced from 10% to 5% of the total voting rights.
- New Section 387C – Electronic Transmission of notices and documents
Companies may transmit documents and notices by electronic means subject to certain conditions stated in the Act.
For publication of notice or documents via a website, there is a need for:
(i) the company and the member to agree in writing to such mode of transmission;
(ii) agreement must be in relation to the meeting to which the notice relates or to the document being transmitted;
(iii) the notice of document must be published on the website such that it is or can be made legible;
(iv) the member must be notified of the publication and how notice or document may be accessed; and
(v) the notice must continue to be published until the conclusion of the meeting.
Company must revise their Constitutions to provide new modes of electronic transmission, subject to following safeguards: (i) Implied consent mode – members agree to receive notices/documents by electronic communications, and will not have the right to elect to receive physical copies. (ii) Deemed consent mode – members may elect within a specific period whether to receive such notices/documents by electronic communications or as a physical copy. If no election is made within the specific period, the member will be deemed to have consented to receive by electronic communications. Important documents (eg. takeover documents or rights issues) must be sent via physical copy.
- New Section 64A – Non-voting or multiple vote shares
Unlisted public companies are allowed to issue non-voting or multiple vote shares, subject to the following safeguards: (i) Shareholders’ approval for issuance via special resolution. (ii) Rights of shares must be specified in Constitution and clearly demarcate to shareholders. (iii) Information on voting rights for each class of shares must be specified in notice of any meeting and proposed resolution. (iv) Holders of non-voting shares will have equal rights for resolutions on (a) winding up; and (b) varying of the rights of non-voting shares. SGX is reviewing whether to allow listed companies to issue shares with different voting rights.
- New Section 73, 73A and 73B – Redenomination of shares
Company is allowed to convert currency of share capital to another currency by ordinary resolution.
The term “Agent” will be replaced by “Authorised Representative” to better reflect the accountability and responsibility expected of that office.
19) Authorised Representative
- Minimum number of authorised representative will be reduced from 2 to 1.
- Consent to act by authorised representative must be lodged with ACRA.
- Foreign company to make available for inspection at the registered office the evidence of appointment of each authorised representative
- The sole authorised representative cannot resign until a replacement is appointed.
20) Section 368A – Duty of directors and Authorised Representatives to provide information to foreign Company
Directors and Authorised Representative(s) are required to furnish such information within 14 days to the foreign company for compliance with section 372(1), such as changes in constitution of the foreign company, directors of the foreign company, authorised representative, situation of registered office of the foreign company in its place of incorporation and in Singapore, name of foreign company, description of the business carried on by the foreign company. Foreign company is required to notify ACRA within 30 days of the aforesaid changes.
21) Section 370A – Alternate Address
Directors and Authorised Representatives are allowed to provide alternate address to be reflected on ACRA’s public records.
Alternate address must be: (i) where individuals can be located; (ii) in same jurisdiction as individual’s residential address; and (iii) not a post office box number. ACRA will keep individual’s residential address confidential. If alternate address is proven invalid, it will be replaced with residential address and the individual is subject to criminal sanctions and is not for a period of 3 years to provide an alternate address.
22) Section 373 – Lodgment of Financial Statements
- Foreign company to lodge financial statements prepared in accordance with any applicable accounting standards acceptable to ACRA or similar to those expected of local public company
- Foreign company to lodge a statement of the name of auditor who audited the financial statements
- ACRA may exempt a foreign company’s account relating to their operations in Singapore from audit requirements if the foreign company is dormant in Singapore
- Foreign company may apply for an extension of time to prepare and file their Singapore branch accounts
- ACRA empowers to grant waiver from filing certain financial documents
- ACRA empowers to grant relief from any requirements relating to audit or form and contents of the Singapore branch accounts.
Every director or authorised representative is liable for non-compliance with section 373 (a fine not exceeding $50,000.)
23) Section 375 – Obligation to state name of foreign company
- Remove requirement to exhibit its name and place of formation outside its registered office and every place of business in Singapore
- Must state its unique entity number issued by ACRA in a legible form on all business letters, statements of account, invoices, official notices and publications of or purporting to be issued or signed by or on behalf of the company.
- Existing foreign company need to comply after the expiration of 12 months from the Effective Date.
24) Cesser of business in Singapore
ACRA will, as soon as practicable after the lodgment of the notice of cesser, record in the register that the company has ceased to have a place of business in Singapore or ceased to carry on business in Singapore, as the case may be. Companies are to lodge the notice of liquidation or dissolution within 14 days instead of 1month.
25) Additional grounds for striking off by ACRA
ACRA may strike off a foreign company if it has reasonable cause to believe that:
(a) it has ceased business in Singapore; or
(b) being used for an unlawful purpose.
Additional grounds for striking off:
- Failure to appoint an authorised representative within 6 months after the date of the death of its sole authorised representative.
- Failure to respond or appoint another authorised representative within 12 months after the sole authorised representative has given notice in writing to the foreign company that he desires to resign and has lodged a notice under section 370(3) with the Registrar.
- Failure to give instructions with respect to a written request from the sole authorised representative for instructions as to whether the company wishes to cancel or continue its registration within 12 months after the date the written request was sent.
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