Singapore proposes amendments to Companies Act

Written on 3 Sep 2020

Regulator looks to update Singapore's corporate regime to reflect global legislative, economic and technological developments and to strengthen competiveness

Singapore's Accounting and Corporate Regulatory Authority has announced a public consultation exercise to seek feedback on the Companies Act Working Group’s (CAWG) report and recommendations on proposed amendments to the Companies Act (CA).

With a view to the evolving business environment, the CAWG considered the facilitation of the use of technology by companies, and the need to balance an efficient and effective regulatory framework with the compliance burden on companies.

The report and recommendations by the CAWG focused on six areas – click through for a summary – in particular to ensure Singapore's corporate laws and regulatory framework stay competitive.

Competitive edge

The overarching purpose of the proposed amendments to the CA is to reduce the compliance cost and burden on companies and facilitate the increasingly prevalent use of technology, which will be beneficial for businesses. While the proposed amendments are not yet definitive, they are in line with Singapore’s Smart Nation initiative and emblematic of a generally pro-business approach from a regulatory viewpoint.

Further details of the proposed amendments can be found here.
 


 

Regulator's recommendations

Facilitating digitalisation

Digital Meetings

  • Board meetings may be held digitally.
  • Unless the constitution provides otherwise, a company may hold general meetings digitally and in more than one location.
  • All companies are able to accept proxy instructions given by electronic means instead of having to stipulate this in the company’s constitution.

Application of digitalisation provisions to documents under the Companies Act

  • A document may be sent using a mode of electronic communication (including via publication on website) by: companies or directors to persons who are not members, officers or auditors of the company; members, officers, or auditors to companies or directors; and persons who are not members, officers, or auditors to companies or directors, where in each case there is an agreement between the parties for the document to be sent using that mode of electronic communication.
  • An agreement may be constituted between the company and its members by a company’s constitution such that, if the constitution provides that all members may send a document to the company through a particular mode of electronic communications, the members may send a document using that mode of electronic communications to the company.

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Types of companies and financial reporting

Publicly accountable companies

  • Introduction of the concept of a “publically accountable company” for the purposes of financial reporting to adapt the financial reporting obligations in the CA to a broader group of stakeholders (for example, shareholders and creditors), based on the public interest and accountability of companies. A publically accountable company should be defined as: a company that is listed or is in the process of issuing its debt or equity instruments for trading on a securities exchange in Singapore; a company the securities of which are listed on a securities exchange outside Singapore; a financial institution; and (d) a company limited by guarantee registered under the Charities Act (Cap 37). This concept is intended to replace the present concepts of “public company” and “private company” for the purpose of financial reporting.

Micro companies

  • Introduction of the concept of a “micro company” so that micro non-publicly accountable companies are allowed to prepare reduced and simplified financial statements. A micro company should be defined as a company that fulfils the requirements of total annual revenue and total assets each being not more than S$500,000 for the previous two consecutive financial years.

Review of financial reporting requirements

  • Except for dormant companies and small non-publicly accountable companies, all companies should audit their financial statements.
  • Refinement of the small company audit exemption criteria by removing the criterion of number of employees from the current small company definition. The CAWG took the view that the number of employees is not decisive of whether a company has public interest (for example, companies may outsource work and large business operations may be automated with few employees).
  • Removal of the “small group” concept in the current small-company audit exemption and to clarify that the criteria for this exemption should continue to apply on a consolidated basis to parent companies. This is to address the complexities present in cases involving multiple layers of shareholding, where a company can be both a subsidiary and a holding company.
  • All companies should be required to file financial statements, except for dormant relevant companies and prescribed companies (for example, companies where their financial statements contain confidential and commercially sensitive information) that meet the criteria in the regulations.
  • All filed financial statements should be made available to the public, except for filed documents relating to gazetted exempt private companies which are wholly owned by the government under section 12(2A).

Financial reporting obligations for foreign companies and Singapore branches

  • Streamlining the financial reporting requirement for foreign companies that operate in jurisdictions that use accounting standards that are not comparable to Singapore’s, or are not required to prepare financial statements in accordance with any accounting standards. Such foreign companies will no longer be required to prepare two different sets of financial statements.
  • To allow foreign companies with “insignificant operations in Singapore” to lodge with the Registrar unaudited branch accounts, instead of an audited statements of assets, liabilities and profit and loss in respect of the Singapore branch. Insignificant operations in Singapore means none of the balances for total revenue, expenses, assets and liabilities in the unaudited balance sheet and profit and loss account that arise out of the foreign company’s operations in Singapore exceeds S$5 million: .

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Matters relating to directors and company secretaries

  • Removal of the prohibition against a sole director of a company appointing himself or herself as the company secretary.

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Safeguarding shareholders’ interests

Variation/Abrogation of class rights

  • Amendment to section 74 to provide that a variation or abrogation of class rights must be approved by at least 75% of the class-rights holders, unless the constitution of the company states otherwise. This is contrasted with the current position whereby section 74(1) is silent on a specific proportion of shareholders whose consent is required for the variation or abrogation of class rights.

Share Buybacks

  • Two tiers of approval by both: the shareholders of the company; and the shareholders of a class of shares should be required for selective buybacks within that class of shares under section 76D.

Review of Compulsory acquisition of shares threshold

  • Exclusion from the computation of the 90% threshold for compulsory acquisition under section 215 for shares held or acquired by the following persons: (a) who is accustomed or is under an obligation whether formal or informal to act in accordance with the directions, instructions or wishes of the transferee in respect of the transferor company; (b) a body corporate controlled by the transferee; (c) who is, or is a nominee of, a party to a share acquisition agreement with the transferee; (d) the transferee’s close relatives (such as a spouse, children, including adopted children and step-children, parents; and siblings); (e) whose directions, instructions or wishes the transferee is accustomed or is under an obligation whether formal or informal to act in accordance with, in respect of the transferor company; and (f) a body corporate controlled by a person described in (e).

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Share capital and financial assistance

Alteration of Share Capital

  • Amendment of section 71 to enable directors of a company to alter the share capital of the company by increasing its share capital or capitalising its profits, without issuing new shares, and without the need for an ordinary resolution approving the alteration.

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Updating outdated provisions

Proposed updates

  • Alignment of the definition of a “child” under the Securities and Futures Act and the CA.
  • Updating of Form 45 of the Second Schedule to the Companies Regulations to include a statement that the director is qualified to act as a director.
  • Updating of the two model constitutions in the Companies (Model Constitutions) Regulations 2015.