In 2007, the Singapore Ministry of Finance (MOF) appointed a Steering Committee (“SC”) to undertake a comprehensive review of the Singapore Companies Act (“CA”). The objective of the Review was to further reduce regulatory burden and ease compliance for business and individuals looking to set up and do business in Singapore.
In October 2012, the MOF has accepted 192 and modified 17 recommendations of the SC. 8 recommendations have not been accepted. The SC feels that the recommendations contained within the Review will bring benefits to various stakeholder groups such as companies, small-and-medium enterprises (SMEs), retail investors and company directors.
The SC recommendations will be incorporated into a draft amendment bill and a further public consultation will take place in the first quarter of 2013.
In this overview, we will set out some of the significant recommendations of the SC. The overview will concentrate on 2 key areas, directors and shareholders, and company administration.
Directors and Shareholders
- Appointment of directors – The CA will be amended to state that a director can be appointed by ordinary resolution and that a person who controls the majority of directors will be considered a director.
- Corporate directorships – The SC considered the position of introducing corporate directorships in Singapore. Corporate directorships will not be allowed due to the lack of transparency and difficulties in enforcement of corporate directors.
- Loss of office and retirement – Director’s will be allowed to resign by written notice and that the resignation will not be conditional upon the company’s acceptance. In addition, there will be no law requiring directors to resign at a certain age. This is in line with the Government’s policy of encouraging senior citizens to remain in the workforce. Singapore considers its senior citizens to be a resourceful bank of knowledge and experience to be utilised in business.
- CEO’s disclosure requirements – CEO’s will be subject to the same duties to disclose conflicts of interest and shareholdings as directors. CEO’s will be on notice that they will be held to a similar level of accountability as directors for disclosure obligations. However, the MOF did not accept a recommendation that CEO’s be bound by a duty to act honestly and to use reasonable diligence.
- Alternate addresses for directors – Director’s will be able to register an alternate address, other than their residential address. This will serve to protect the privacy of directors.
- Right to demand a poll and minority shareholder rights – The threshold percentage of shareholders requesting a voting poll will be lowered from 10% to 5%. This provides an alternative voting system for a greater number of shareholders. There are no changes to minority shareholders rights, in particular, minority buyouts in the case of dissenting shareholders.
- Small company exemption from statutory audit – A new small company concept will be introduced for determining the requirement for statutory audit. A small company which is a private company that fulfils two of the following three criteria will be exempt from audit:
(i) Total annual revenue of not more than S$10 million;
(ii) Total gross assets of not more than S$10 million;
(iii) Has no more than 50 employees.
It is estimated that an additional 10% of companies or about 25,000 companies will benefit from the audit exemption. As a result of this recommendation, SME’s can look forward to lower compliance costs.
- Companies will be allowed to use its share capital to pay for expenses, brokerage or commissions that result from an issue or buyback of shares.
- Companies will be allowed to issue non-voting shares and shares carrying multiple votes if their Articles allow it and subject to certain safeguards to be put in place. This will give companies greater flexibility in raising capital, and meet different investor preferences.
- The regulatory burden for Dormant Companies has been reduced. A dormant non-listed company that is not a subsidiary of a listed company will be exempt from the requirement of preparing accounts.
- ACRA will become the definitive register of directors, secretaries and auditors for companies in Singapore. This recommendation will dispense with the need for companies to maintain a Register of Members and allow the public to rely on the ACRA register. Companies will continue to be required to notify ACRA of any changes to the Register of Members. ACRA will no longer be required to keep a register of managers. Companies will still be required to maintain a register of director’s shareholdings.
- The Memorandum and Articles of Association will be merged and renamed the “Constitution”. Existing companies will not be required to incur any costs in merging the documents to form the new Constitution.
- Companies will be allowed to specify in their constitutional documents the mode of electronic transmission to be used. Certain safeguards will also be imposed to set minimum standards on the use of electronic transmission.
The recommendations are accepted by the MOF and to be made law, must support the Singapore Government’s strategy of ensuring Singapore’s business community is in line with global best corporate practice while encouraging growth as a global hub for both businesses and investors.