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.
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.
Key Changes
Controllers & Directors
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Local companies, foreign companies registered in Singapore and locally registered LLPs are required to maintain non-public registers of controllers. The Bill defines a controller as any person or corporate entity with “significant control” and “significant interest” (the threshold for significant interest is defined as more than 25% ownership of the company).
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 S$5,000 fine.
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Amendment 2017 grants power to the Minister for Finance to:
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.
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Previously, nominees were not required to disclose their nominee status nor their nominators to their company or to law enforcement. The Bill requires nominee directors to disclose their nominee status and their nominators to the company for which they are acting as a nominee director.
Financial Statements and Documentation
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Previously, a liquidator was required to retain the documents for a wound up company or LLP for a minimum of 2 years.
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.
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Previously, a company of LLP could destroy documents before the end of two year retention period if directed to wind up by:
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.
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Previously, struck off companies and LLPs were not required to keep records.
Amendment 2017 obligates companies to retain accounting records and registers of controllers for 5 year under a penalty of S$2,000 for non-compliance.
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The previous requirement of company secretaries to be physically present at the company’s registered office has been abolished.
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.
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Previously companies were required to execute documents using a Common Seal. Amendment 2017 eliminates the common seal in favor of an alternative signature by authorised persons. Authorised persons are defined as:
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
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The Bill allows foreign corporations to relocate their regional and worldwide headquarters to Singapore by transferring their registration. Previously, foreign companies were required to set up a subsidiary in Singapore to retain their corporate history and branding.
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.
Shareholders
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Previously, foreign companies registered in Singapore were only required to keep shareholder information in a branch register in Singapore.
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.
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Previously, there was no law barring foreign registered companies in Singapore from issuing bearer shares. The Bill removes the opportunity for money-laundering and terrorist financing by not legally recognizing the issuance or transfer of bearer shares.
Financial Year End
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Previously, private companies were not required to hold Annual General Meetings if all members approved. Under Amendment 2017 Private companies can continue to enjoy the exemption from AMGs as long as they send their financial Statements within 5 months of their 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.
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Previously, companies were required to maintain disjointed timelines for holding AGMs based on two criteria:
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.
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Description text goes herePreviously, listed companies with a share capital and a branch outside Singapore were required to file within 60 days of an AGM; this limit was within 30 days 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:
the new financial year is longer than 18 months
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.
Debt Restructuring
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ACRA and the Ministry of Finance changed the legislation regarding debt restructuring to allow companies in financial distress to continue as a going concern. Many of the revisions to the Company Act are borrowed from Chapter 11 of the United States Bankruptcy Code.
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Under Amendment 2017, the Court can grant a moratorium for companies in financial distress that benefit the debtor as follows:
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.
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Distress companies have access to additional financing to cover operating costs. Amendment 2017 gives super priority to creditors who offer rescue financing to restructuring debtors.
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The Court has the right to grant a distressed company’s restructuring plan even if a group of creditors objects to the provisions.
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The Bill requires distressed companies to disclose any relevant information to creditors during a moratorium to prevent debtors from liquidating assets while under moratorium.
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Distressed companies and its key creditors can agree on pre-negotiated terms for restructuring with the intention of saving both parties time and unnecessary legal fees.
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Previously, companies could only apply for judicial management when they were unable to pay their debts. The Court would take over the operations of the company and pay the company’s debt when money became available.
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.
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The changes in regulation propose to adopt the UNCITRAL Model Law on Cross-Border Insolvency, which has already been adopted by Australia, Japan, Korea, New Zealand, the UK and the United States. The Model Law provides consistent legislative framework that facilitates arbitration in the event a distress company conducts business in multiple countries.
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.
Final Note
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.
