Singapore Companies Act(Planned Amendments – 2012)
The Singapore Ministry of Finance in 2007 created a Steering Committee for a review of the Singapore Companies Act. The main goal behind this comprehensive review was to eliminate any existing regulatory complexity and make the compliance requirements more convenient for both individuals and businesses seeking to establish a Singapore company or do business here.
By October 2012, the Ministry approved 192 while modifying 17 recommendations by the Committee. However, 8 recommendations were turned down. According to the Steering Committee these recommendations will help benefit different stakeholders including companies, retail investors, company director(s) and small & medium enterprises (SME).
The recommendations of the Committee will be formed into a draft amendment bill that will undergo public consultation during the initial part of 2013. The following review will shed light on some of the major recommendations in this regard. The review will focus on 2 main aspects – 1) Directors/Shareholders and 2) Company Administration.
Amendment will be made to the Companies Act so that an ordinary resolution can help appoint a director and an individual controlling majority of the directors will be eligible to become a director.
The Committee proposed introducing the position of corporate directorships. The recommendation was not accepted because of the chances of rising complexities and lack of transparency in the enforcement of this position.
Leaving Office and Retirement
A director can resign through written notice, which doesn’t have to depend on the acceptance of the company. Besides, no law will be enforced to assign a specific age for directors to resign. This falls in line with Singapore’s policy to encourage senior citizens to continue holding office and become an active part of the workforce. The Singapore Government realizes that senior citizens form a vast resource of experience and knowledge who should contribute to the business.
Disclosure Mandates for CEOs
CEOs, similar to directors will have to abide by laws requiring disclosure of shareholdings and conflicts of interest. CEOs need to be notified that they will hold the same level of liability as directors when it comes disclosure requirements. The Ministry however rejected the recommendation that required CEOs to demonstrate honesty in their acts and use a rational approach in their decision making.
Alternative Addresses for Directors
It will be allowed for directors to register an alternative address instead of their residential address. Such a move will help in protecting the privacy of the individuals.
Addressing minority shareholder rights and power to demand polls
The minimum percentage of shares for shareholders with the power to request a voting poll is to be reduced from 10% to 5%. This means a larger number of shareholders will get an alternative voting system. The rights of minority shareholders remain the same, especially in the case of minority buyouts against nonconforming shareholders.
Exempting small company from the mandatory audit – Definition of small company for considering the need for statutory audit. Such a private company if it fulfills any of the following 2 criteria out of 3 will be given exemption from audit:
- Has an annual revenue up to SGD 10 million;
- Has overall gross assets less than or up to SGD 10 million;
- Has employee count limited to 50.
The committee estimates that another 10% of companies, equivalent to 25,000 will enjoy benefits from audit exemption. Because of these recommendations, SMEs will have their compliance costs reduced.
Companies can use their share capital for paying off their expenses, commissions or brokerage that arises out of the issue of shares or buybacks.
Under the provisions of the Articles and after placing some safeguards, companies can issue multi-vote shares or non-voting shares. This is going to provide more flexibility to companies for raising capital and meeting different investor demands.
Dormant Companies will now face lesser regulatory requirements. A non-listed dormant company that is not a part of a listed company will be given exemption from preparation of accounts.
The ACRA is poised to become the defining register of directors, auditors and secretaries for Singapore companies. The associated recommendation emphasizes the need for companies to retain a Register of Members and let the public trust in the authenticity of the ACRA register. In case of any changes to the Register of Members, companies will have to inform the ACRA. However, the ACRA is no longer obliged to maintain a register of managers. At the company end, they will continue to retain the register of director shareholdings.
The Memorandum & Articles of Association are to be merged and termed, the “Constitution.” Current companies will not have to bear any costs when merging these documents for forming the Constitution.
Companies can mention in their constitution the electronic mode of transmission they will be using. There will be imposition of minimum standards for usage of electronic transmission.
All these recommendations have been accepted by the Ministry of Finance and are under process to be made into law. These recommendations support Singapore’s policy of making the business community here following the best corporate practices at the international level while offering growth as an international business hub for companies and investors.