Singapore Postpones Effective Date of Amendment to its Companies Act

SINGAPORE – The government of Singapore has announced that it will postpone the effective date of the amendment to the Companies Act 2014 (the Amendment) and the Business Names Registration Act to the second quarter of 2015, as stated by the Accounting and Corporate Regulatory Authority (ACRA) earlier this year. An exact date is yet to be announced, but according to ACRA more details will be made public about two months before the changes are due to take place. Agencies and stakeholders likewise will have more time to adapt to the new legislative changes.

The Companies Act was originally introduced in December 1967, but since then has been reviewed and revised several times, recently in October 2014. The latest amendment marks a significant change to certain aspects of the legislation relating to companies operating in Singapore.

One of the biggest modifications is that small companies will be exempt from audits, a regulation that will benefit approximately 25,000 companies.  ACRA notes that, even if small companies no longer need to prepare audits, they will still be required to keep proper accounts, and that the authorities will conduct checks on a random basis. By definition, a small company needs to meet at least 2 of the three criteria in each of the previous (financial) years:

• 50 or less employees
• Annual revenue cannot exceed SGD 10 million
• Total assets cannot exceed SGD 10 million

Furthermore, every foreign company will be required to file similar financial statements to the ones for local Singapore companies – this will result in much more disclosure on behalf of the foreign entity. With the effective date of the Amendment, it won´t suffice for foreign companies to merely file a balance sheet, instead they will have to include a range of other financial statements, such as:

• Cash Flow
• Changes of equity
• Income
• Director´s and Auditor´s report, if applicable
• Notes to accounts

Another new law applicable to branches of foreign companies states that foreign companies will only need a sole locally resident agent, instead of two.  A locally resident agent is an appointed branch officer – registered in Singapore, who is responsible for ensuring the branch´s compliance with the Companies Act. If penalties are imposed on the branch, he will be held personally liable. In the case that a sole agent wants to resign, a new agent needs to be designated. Aimed to reduce the regulatory burden of foreign companies, the Amendment will align the requirements with those of the Commonwealth, including Hong Kong.

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Under current law, Singapore companies need to allow each member to appoint two proxies that can attend and vote on their behalf at meetings. As a result of the new Amendment, certain intermediaries such as banks, nominee companies or CPF (Central Provident Fund) agents will gain the right to appoint more than two proxies – indirect investors will effectively have the same voting rights as direct shareholders at meetings. The current cut-off time of 48 hours for submission of proxy forms will be extended to 72 hours to allow concerned companies to prepare for larger meetings. ACRA hopes that this new law will encourage “more active shareholder participation and enhance the culture of corporate governance”.

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An additional effort to improve corporate governance in Singapore will be the requirement for CEOs of non-listed Singapore companies to disclose any conflicts of interest regarding shareholding and transactions of said company. Currently, this rule only applies to directors. A similar approach was already adopted for listed companies under the Securities and Futures Act.

As mentioned above, the exact date for implementation of the Amendment is yet to be announced, but it will coincide with the launch of the new, restructured business registration and filing portal called BizFile and the streamlined regulatory fee structure. This new structure will remove the fees for most ad hoc transactions, which previously were charged under a pay-per-use model.

Overall, the Amendment to the Companies act will reduce the burden on companies and improve corporate governance, but certain elements will obligate companies to act with increased diligence, especially if they enter transactions where a conflict of interest regarding their Chief Executive Officer or director arises. With the facilitated regulatory procedures and improved corporate governance culture Singapore is the perfect headquarters for your ASEAN operations.

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