Singapore Companies (Amendment) Act 2017
The Singapore Companies Act was amended in 2017. The 2017 Amendment has made significant changes to the manner in which companies are regulated in Singapore. In summary, these changes are designed to improve transparency about the ownership and control of the company, reduce regulatory burden, improve the ease of doing business and simplify the restructuring of a company’s debt. These changes will impact the compliance requirements for Singapore based companies; therefore, officers and shareholders of such companies should be aware of these changes and should ensure that they comply with the new regulations.
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The Ministry of Finance and the Accounting and Corporate Regulatory Authority (ACRA) plan to implement Amendment 2017 in three phases. The first phase comes into effect on March 31, 2017, and is intended to improve the transparency of companies and LLPs. The second phase is set to be implemented in the first half of 2017; it allows foreign corporate entities to transfer their registration to Singapore instead of setting up subsidiaries. The final implementation, targeted for early 2018, will allow companies to align company filings and Annual General Meetings with their financial year end.
Controllers & Directors
ACRA approved the changes in order to meet recommendations from the Financial Action Task Force (FATF). The FATF recommendations are designed to reduce the opportunities for money laundering and terrorist financing.
Companies are expected to take reasonable action to identify their controllers. Amendment 2017 defines reasonable action as sending out notices to anyone whom the company knows or has reasonable cause to believe to be a controller, or to a party who knows the identity of the controller or likely has knowledge of the controller.
A company is deemed to have taken effective action once it has traced a controller to any of the following the entities:
- A company (local or foreign registered) or LLP that maintains the registry of controllers, or is exempt from the Amendment.
- A corporation with shares listed on an approved exchange in Singapore.
- A trustee or an Express Trust.
Companies and LLPs will not be held liable if they do not receive a response or the response contains inaccurate information. Anyone who receives a notice is obligated to provide their details as a controller or any information they are aware of about the controller. Non-compliance by a person results in a $5,000 fine.
- Exempt any person or class of persons from registering as a controller.
- Amend the list of exempt entities and change the threshold for “significant control” and “significant interest”.
- Require the Registrar to create a central register for controllers in the event it becomes an internationally agreed standard.
Financial Statements and Documentation
The regulation extends the minimum period to 5 years, which falls in line with the document retention period required in Australia, Hong Kong and the UK.
- A Court order
- A voluntary order by members or partners
- An order from creditors
The Bill removes options 2 and 3 to prevent companies conducting illicit activity from destroying documents before the retention period.
Amendment 2017 obligates companies to retain accounting records and registers of controllers for 5 year under a penalty of $2,000 for non-compliance.
Impact on startups: Adds more flexibility to company operations. For example, a company secretary can be located at the secretarial firm’s office while the registered address can be the company owner’s home office.
- A director and the secretary of a company
- Two directors of a company
- A director of a company in the presence of a witness
For LLPs authorised persons defined as:
- Two partners of an LLP
- A partner of an LLP in the presence of a witness
Foreign companies relocated to Singapore must comply with all regulations in the Companies Act and the relocation does not absolve a company of its obligations and liabilities nor strip it of its properties or rights.
The change in the legislation requires foreign companies registered in Singapore to disclose shareholder information publicly. The Bill also follows the recommendations outlined by FATF and the Global Forum of Transparency Exchange of Information for Tax Purposes.
Financial Year End
Private companies are still obligated to Hold AMGs if:
- Any shareholder requests an AGM 14 days prior to the end of a 6th month period after the financial year end.
- Any shareholder or auditor requests an AGM with 14 days of filing the financial statements.
- Hold the initial AGM within 18 months of incorporation and then subsequent AGMs on an annual basis at intervals no more than 15 months
- Financial Statements tabled at an AGM require an additional AGM held within 4 months for listed companies or 6 months for all other companies
The Bill proposes holding AGMs no later than 5 months after their financial year end for listed companies and 7 months for all other companies.
The Bill allows listed companies to file annual returns within 4 months of their Financial Year End (FYE). All other companies must file within 5 months of their FYE.
Listed companies with share capital and a branch outside of Singapore must file annual returns no later than the last day of the sixth month after their financial year end or 8 months for all others.
Companies are discouraged from arbitrarily changing their financial year end. However, if a company wishes to change their FYE they must adhere to the following requirements:
- Notify the Registrar of their Financial Year End upon incorporation and after any changes to the FYE.
- Gain approval from the Registrar to change their Financial Year End if:
a. the new financial year is longer than 18 months
b. the FYE was changed in the last 5 years
Unless approved by the Registrar a company’s FYE can not be longer than 18 months in the year of incorporation.
- A 30-day moratorium automatically takes effect immediately after a filing to restructure or the intention to file.
- The Court can restrain creditor’s actions overseas as long as the creditor falls within Singapore’s jurisdiction.
- The moratorium also extends to cover the distressed company’s related entities.
Amendment 2017 allows companies to apply for judicial management when they are unlikely to pay their debts. Under judicial management the Court can also request a moratorium and secure rescue financing.
The Bill also eliminates the ring-fencing rule, which previously required companies to first pay off any liabilities in Singapore before using the proceeds of an asset sale to finalize foreign debt.
The changes to the Companies Act improve transparency about the ownership of company and LLPs, provide new measures to ease the burden of doing business, and promote Singapore as an attractive jurisdiction for international debt restructuring.