Singapore Companies Amendment Act 2017
The Companies (Amendment) Act 2017 (“CAA 2017”) was passed on 10 March 2017 and came into operation on 31 March 2017. It aims to (a) Reduce Compliance Costs and Administrative Burden; (b) Make the ownership and control of business entities more transparent; and (c) Boost Singapore’s Competitiveness as a Business Hub.
Selected Key Legislative Amendments to Singapore Companies Act be effected from 31 March 2017
Maintenance of Registers
- Sixteenth Schedule – Register of Controllers
Singapore-incorporated companies, Singapore-registered LLPS and Singapore-registered branches of foreign companies are now required to maintain and update a register of controllers, which must be made available to the Registrar of Companies and public agencies upon request. Such information will not be publicly available.
Under Part XIA, Section 386AB of the Act, a Controller refers to an individual with ‘significant interest’ in or ‘significant control’ over the company.
(i) ‘Significant interest’
For the purposes of Part XIA, Section 2(1) of the Sixteenth Schedule of the Act provides that a Controller with ‘significant interest’ in a company with share capital may include an individual who has an interest in more than 25% of the shares in the company, or possesses shares representing more than 25% of the total voting power. For companies without share capital, a controller with “significant interest” refers to an individual who holds a right to share in over 25% of the capital or 25% of the company’s profits.
The new Sixteenth Schedule provides for the following in respect of joint interests and rights:
- A person who has an interest in or holds rights jointly with another person will be considered to have an interest in that share, or as holding that right (as the case may be).
- If shares in respect of which a person has an interest and the shares in respect of which another person has an interest are the subject of a joint arrangement between those persons, then each person will be considered as having an interest in the combined shares of both of them.
- If rights held by a person and the rights held by another person are the subject of a joint arrangement between those persons, then each person will be considered as holding the combined rights of both of them.
As such, a joint arrangement is defined broadly to be an arrangement to exercise all or substantially all rights (conferred by the shares or rights) jointly in a pre-determined way. It will include any scheme, agreement or understanding. Such joint arrangement need not be legally enforceable, but there must be at least certain degree of stability, so one-off “arrangements” do not qualify.
(ii) ‘Significant control’
Section 1 of the Sixteenth Schedule of the Act also provides that a controller would have “significant control” if the individual:
- Holds the right to appoint or remove directors who hold a majority of the voting rights at directors’ meetings;
- Holds more than 25% of the rights (whether directly or indirectly) to vote on matters that are to be decided upon by a vote of the members of the company; or
- Has the right to exercise significant influence or control over the company.
Companies are required to investigate and obtain information (new Section 386AG), take reasonable steps to update (new Section 386AH) or correct information (new Section 386AI) on the register if they have sufficient grounds to believe that such particulars have been changed or are erroneous.
Individauls and corporations who know or believe that they are registrable controllers are also required to provide information and change of information (new Sections 386AJ and 386AK)
Where a reporting entity is a subsidiary or part of a group of companies, one has to carefully scrutinise the connecting legal entities. All controllers of the reporting entity will generally be registrable, unless the controller’s significant interest in or significant control over the reporting entity is through certain entities such as a Singapore-incorporated company required to maintain a register of controllers or other entities exempted from this regime (Please refer to the new Section 386C). As such, foreign companies without a branch registered in Singapore do not come under the regime, but the tracing of controllership continues up the chain of entities.
Under the new Section 386AA of the Companies Act, certain entities from the requirement to maintain the register of controllers. They include public companies listed in Singapore, Singapore financial institutions, and companies listed outside Singapore and which are subject to regulatory disclosure requirements and adequate transparency requirements in respect of their beneficial owners.
To help relevant entities prepare to comply with these new requirements, existing entities will be given a transitional period of 60 days from 31 Match 2017 to set up the Register of Controllers, while new entities incorporated on or after 31 March 2017 must put in place such register within 30 days of incorporation.
- Section 386L (b) – Register of Nominee Directors
Locally incorporated companies will be required to keep a Register of Nominee Directors, these registers must similarly be made available to the Registrar and public authorities upon request. The amended Companies Act imposes a duty to disclose on a nominee director to:
(i) inform the company of that fact;
(ii) provide prescribed particulars of the person for whom the director is a nominee; and
(iii) inform the company of changes in the director’s particulars or status as nominee.
A “Nominee Director” is a director that is accustomed or under an obligation, formal or informal, to act in accordance with the directions, instructions and wishes of any other person.
- Public Registers for Foreign Companies
Under Section 379 of the Act, foreign companies registered in Singapore are now required to maintain public registers of its members in Singapore. The Companies Amendment Act 2017 voids the issuance and transfer of bearer shares and share warrants by foreign companies registered in Singapore.
- Usage of Common Seal
Companies are required to use their common seal for execution of documents as a deed, or certain documents such as share certificates. The affixation of the common seal on the document is usually in the presence of two persons connected with the company (i.e. a director and company secretary).
The amendment 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 these documents by having them signed by authorised persons:
(a) A director and a company secretary of the company;
(b) Two directors; or
(c) A director of a company in the presence of a witness who attests the signature.
Companies may choose to retain the use of common seals based on business needs, if they wish to do so.
- Retention of Records of Liquidated Companies for Five years
The Companies Amendment Act 2017 removes the options for companies and LLPs to destroy records early if they are wound up by their members, partners or creditors. Records of companies which are struck off or voluntarily wound-up by their members or creditors, including all books, papers, accounting records and registers of controllers, are now required to be retained for at least five years instead of the previous duration of two years.
Selected Key Legislative Amendments to Singapore Companies Act targeted to be effected first half of 2017
4. Introduction of Inward Re-Domiciliation Regime
The Companies (Amendment) Act 2017 has introduced an inward re-domiciliation regime to allow foreign corporate entities to transfer their registration to Singapore instead of setting up subsidiaries (e.g. foreign corporate entities that may want to relocate their regional and worldwide headquarters to Singapore and still retain their corporate history and branding). The regime will be implemented within the first half of 2017.
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. Re-domiciliation will not affect the obligations, liabilities, properties or rights of the foreign corporate entities. It must meet certain prescribed requirements and their application will be subject to the Registrar’s approval. Eg. Foreign corporate entities must reserve its proposed name and rules on name reservations apply.
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 obligations, liabilities, property rights or proceedings of the foreign corporate entity; and
(d) affect legal proceedings by or against the foreign corporate entity.
Selected Key Legislative Amendments to Singapore Companies Act be effected from early 2018
5. Alignment of timelines for holding annual general meetings (AGMs) and filing annual returns (ARs)
The timelines for holding Annual General Meetings (AGMs) and the filing of annual returns will be aligned with the company’s FYE, where:
(a) All listed companies must hold their AGM within 4 months after their respective financial year end.
(b) Any other company must hold its AGM within 6 months after its financial year end.
Annual Returns Filing
(a) Companies having a share capital and keeping a branch register outside of Singapore must file their ARs within 6 months (if listed) or 8 months (if not listed) after their respective financial year end,
(b) All other companies must file their annual returns within 5 months (if listed) or 7 months (if not listed) after their respective financial year ends.
Safeguards will be put in place to prevent companies from arbitrarily changing their financial year end, eg. application to ACRA for approval to change their financial year end if the change in financial year end will result in a financial year longer than 18 months, or if the financial year end was changed within the last 5 years.
6. Exemption from holding AGMs subject to specified safeguards
Currently, private companies need not hold AGMs if all members have approved a resolution to dispense with the holding of AGMs. The Companies Amendment Act 2017 provides that private companies will be exempted from holding AGMs if they send their financial statements to members within 5 months after the financial year end.
However, a company must still hold an AGM/general meeting in the following circumstances:
- A member who wishes to request that an AGM be held must notify the company to hold an AGM not later than 14 days before the last day of the 6th month after FYE;
- Directors must hold an AGM within 6 months after FYE if notified by any one member of the company to do so. The company may seek the Registrar’s approval for an extension of time to hold AGM; and
- Private companies must hold a general meeting to lay financial statements if any member or auditor requests for it not later than 14 days after the financial statements are sent out.
Private dormant relevant companies exempt from sending financial statements will not need to hold AGM, subject to the above-mentioned safeguards.
Selected Key Legislative Amendments to Singapore Companies Act with no indication of effective date
7. Enhancement of Debt Restructuring Framework in Singapore
(a) Enhanced Moratoriums Against Creditors
The amendments provide for enhanced moratoriums against creditor action by the courts on an application by a company that has proposed or has intentions to propose a creditor scheme. This would include an automatic 30-day moratorium, with certain safeguards for creditors, that will begin from the date of the application to court.
The enhanced moratoriums for restructuring allows for automatic moratoriums and moratoriums with in personam worldwide effect. These moratoriums can be extended to (i) prevent creditors from taking action overseas (where the creditor has a presence in Singapore) and (ii) related entities of the debtor.
Rescue financing provisions will also allow new financing that is raised to support the debtor during a restructuring to be granted super priority over other creditor claims. The grant of super priority over existing security will be subject to safeguards in order to ensure that existing secured creditors are not unfairly prejudiced.
Previously, the Court can only sanction a scheme if the requisite majority approval has been obtained from all classes of creditors. Now, there will be cram-down provisions which allow for a scheme to be approved even if a class of creditors oppose the scheme, subject to the test of unfair prejudice to the dissenting creditors.
(b) New Judicial Management Amendments
The new provisions allow the Court to make a judicial management order when a company “is likely to become unable to pay its debts” as opposed to the existing threshold which is “will be unable to pay its debts”. Judicial management process can therefore be initiated at a much earlier stage, increasing the likelihood that the company be saved from liquidation. In addition, judicial management will now be available to foreign companies.
(c) New Provisions For Cross-Border Insolvency
The Act will now adopt the United Nations Commission on International Trade Law (UNCITRAL) Model Law on Cross-Border Insolvency which will facilitate the recognition of cross border insolvency processes in Singapore and align Singapore’s insolvency regime with the Chapter 11 Bankruptcy laws of the United States.
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