Singapore Companies Act – Recent Amendments
First enacted in 1967, the companies act has undergone several changes till date. These changes are based on the review and public consultations of the steering committee, as well as the Ministry of Finance. The last comprehensive review was carried out in 1999. The main motive of the changes or developments in the companies act is to benefit the companies, investors, and shareholders. The changes are targeted to bring about a reduction in the regulatory requirements, minimization of the compliance costs, and increased flexibility in the governance for companies.
Singapore Companies Act (Cap 50 of the 1994 revised edition of the Singapore Statutes) governs all the companies in Singapore. The act provides the regulatory framework for the formation as well as the liquidation of companies here. It also provides the features for the working type of the companies, for example, the act will decide if a company will be a limited liability or sole proprietorship etc. The act provides the pathway for companies to carry out the dealings with its clients, or other companies.
The Companies Act (Proposed Amendment) 2014
MOF (Ministry of Finance) and ACRA (Accounting and Corporate Regulatory Authority) jointly prepared a draft version of the amendments to the bill in November 2013, after a month-long public consultation exercise. Following the preparation of the draft came the submission of the bill to the Parliament on 17 February 2014, by ACRA and MOF. These amendments are mainly targeted towards the corporate service providers (CSPs), and are expected to be implemented by end 2014.
The key highlights of this latest bill includes-
- Provision to strengthen the regulatory framework of corporate service providers (CSP)
- Measures to bring about strict regulations for filing agents and other qualified individuals, who carry out tax filing or other business transactions, on behalf of their clients, with the respective registries
- Provision of uptight parameters for a person to register and renew his registration as a filing agent or a qualified individual
- The authority is given to the respective registries to reject or disqualify an applicant, if he/she has a background of fraud, dishonesty, undischarged bankruptcy, or conviction.
- Additional requirement for the CSPs of completing certain prescribed courses and training
- Implementation of severe penalties for breach of terms and conditions by the CSPs
- Besides the above given highlights of the proposed amendments, there are a few more amendments to the already existing regulatory framework.
Amendments for Foreign Companies –
- Foreign companies can appoint only one authorized incorporating services provider instead of the previous requirement of at least two. Reduction in the registration requirements, are brought about to reduce the regulatory burden on them.
- A foreign company should file the financial statements only in the format that is approved by the registrar in Singapore.
- There will be three new parameters for liquidation of foreign companies:
- In case the sole authorized representative gives a notice of resignation to the foreign company and notifies the same to the registrar, but the foreign company fails to respond or appoint another authorized representative within a period of twelve months.
- In case when an authorized representative, receives no instructions from the foreign company, within twelve months of request made by him to determine, if the foreign company still intends to continue its registration in Singapore.
- Where the foreign company fails to appoint a replacement authorized representative, for more than six months after the death of the current sole authorized representative.
Other Key Amendments of the Companies Act
- If a person holds 20 percent or more of a company’s shares, then that person is allowed to have an interest in the shares held by the corporate body including all its associates.
- The Registrar will have an increased say in rectifying the errors in the register.
- The financial statements that are laid before the annual general meeting or those that are sent to the members should also be retained for a minimum of five years.
- The circumstances under which registrar can determine that a company could be struck-off are enhanced. It may do so when
- The company fails to file the financial statements for the prescribed period
- The company fails to respond to correspondence beyond a specified period of time
- Report from credible third-party agencies, that the company is not carrying out business
- There is no director for the company and the registrar is unable to trace them
- A person, who has served as a director of more than three defunct / struck off companies, will be disqualified from acting as the director.
- If a director or company secretary fails to file or lodge documents, the Registrar will have the rights to debar him from taking up such responsibilities in the future. The debarred person can continue with his existing assignments, but cannot take up new assignments, until the charges on him are lifted.
The changes in the regulatory regime would help to bring about a positive change in the way the CSPs carry out their business, and further help to reduce the burden of registration on the companies that are looking forward to incorporate a company in Singapore.