The Ministry of Finance ("MOF") and the Accounting and Corporate Regulatory Authority ("ACRA") have invited public feedback to proposed amendments to the Companies Act by 13 January 2017.
The proposed amendments to the Companies Act may be broadly viewed in two categories:
1. Proposals to reduce regulatory burdens and improve the ease of doing business
Aligning timelines to hold AGMs and file annual returns with companies' financial year - ends, exempting private companies from holding AGMs subject to certain safeguards, and removing the requirement to use common seals;
2. Proposals to improve transparency
Requiring companies to obtain and maintain beneficial ownership information and to make the information available to law enforcement authorities upon request (not to the public), voiding the issuance and transfer of bearer shares and warrants by foreign companies registered in Singapore, and requiring nominee directors to disclose their nominee status and nominators to their companies or law enforcement authorities.
Proposals to reduce regulatory burdens and improve ease of doing business
(a) Alignment with companies' financial year end
It is proposed to align the timeline for companies to hold annual general meetings ("AGMs") and file annual returns ("ARs") with their financial years.
- Listed companies and non-listed companies should hold their AGMs no later than the last day of the 4th month or 6th month after their financial year end ("FYE") respectively.
- Listed companies and non-listed companies should file their ARs no later than the last day of the 5th month or 7th month after FYE respectively.
- Listed companies and non-listed companies with a branch register outside Singapore should file their ARs no later than the last day of the 6th month or 8th month after FYE respectively.
- Private companies which send their financial statements by the last day of the 5th month after FYE may file their ARs only after sending the financial statement. Other companies, which are required to hold AGMs, may file their ARs only after the AGM date.
- Companies will be able to apply for extensions of time to file ARs.
In conjunction therewith, safeguards regarding companies' FYEs are also being proposed:
- Companies are to notify the Registrar of their FYE upon incorporation, and of any subsequent change;
- If a company wishes to change its FYE after having previously changed its FYE in the last 5 years, the Registrar's approval will be required;
- Unless otherwise allowed by the Registrar, the duration of the financial year ("FY") must not be longer than 18 months in the year of incorporation, or in any year in which there is a change in the FYE;
- Companies may only change FYEs for the current FY and not for previous FYs;
- Existing companies will have an FYE deemed by law. If a company had previously notified ACRA of its FYE date, that date will be deemed by law to be its statutory FYE. If a company had not previously notified ACRA of its FYE date, its incorporation date will be deemed by law to be its statutory FYE; and
- Companies with unusual financial years (e.g. 52 or 53 weeks instead of 1 year) will have a FYE that changes every year; the Registrar will approve such changes in FYE without the companies submitting applications.
(b) Exemption for private companies to hold AGMs
It is proposed that private companies be exempted from holding AGMs if the following safeguards are satisfied:
- Financial statements are sent to the company's members within 5 months after FYE (unless the private company is dormant and exempt from laying financial statements); and
- No member requests for an AGM to be held, at least 14 calendar days before the last day of the 6th month after FYE.
The existing option for private companies to dispense with holding AGMs will be retained, but the timeframe will be amended for consistency with the new exemption.
In addition, directors must hold an AGM within 6 months after FYE on the request of any member made by the specified deadline.
Companies may seek the Registrar's approval for extensions of time to hold AGMs.
(c) Remove requirement to use common seals
It is proposed to remove the legal requirement for companies and limited liability partnerships ("LLPs") to use common seals, although companies and LLPs can choose to retain the use of common seals based on business needs.
Companies incorporated in Singapore will be able to make contracts under common seal or through an authorised person. Foreign companies will be able to make contracts in any manner or through an authorised person, in accordance with the laws of its territory of incorporation.
It is mandatory for companies incorporated in Singapore to have a company secretary. The new Section 41(B) of the Companies Act proposes that documents may additionally be signed on behalf of a company by a director and a secretary of the company, or by 2 directors of the company, as an alternative to affixing the common seal. For a foreign company, the laws of its territory of incorporation will apply.
Section 41C of the Companies Act, which deals with the execution of deeds by a company, will be amended to allow a company to execute deeds without using a common seal.
Proposals to improve transparency
Currently, Sections 190 and 191 of the Companies Act require public companies to maintain a register of shareholders at their registered offices. Under Division 4A of Part V of the Companies Act, ACRA maintains an electronic public register of shareholders of private companies. Professional intermediaries including financial institutions are required to maintain beneficial ownership and control information of their clients. However, up till now, Singapore-incorporated companies have not been required to maintain beneficial ownership and control information.
It is proposed that companies and LLPs be required to obtain and maintain beneficial ownership information and to make the information available to law enforcement authorities upon request (not to the public). This is to make the ownership and control of business entities more transparent, and to boost Singapore's ongoing efforts to maintain its high corporate governance standards and strong reputation as a trusted and clean financial hub. It is also in line with international standards for combating money laundering, terrorism financing and other related threats to the integrity of the international financial system, such as the international standards set by the Financial Action Task Force ("FATF") and the Global Forum on Transparency and Exchange of Information for Tax Purposes ("GF").
(a) A Maintain beneficial ownership information
It is proposed that non-listed companies in Singapore should:
- Take reasonable steps to identify and obtain information on their beneficial owners ("controllers"), by sending out notices to anyone who: (i) they know or have reasonable grounds to believe to be controllers; or (ii) knows or is likely to know the identity of the controllers;
- Be required to send notices to a controller if they know or have reasonable grounds to believe that the particulars of the controller have changed or are inaccurate;
- Maintain a register of controllers at prescribed places (e.g. the company's registered office or registered filing agent's registered office;
- Ensure that the register of controllers is kept up-to-date, by updating the register within 2 days of receiving information;
- Declare in the annual declaration filed with ACRA that the register of controllers is kept up-to-date; and
- Make the register of controllers available to the Registrar and law enforcement authorities upon request, and not to the public.
Persons who receive a notice from the company must provide his particulars if he is a controller, or provide any information that he is aware of. Controllers must provide information and changes to information. Particulars to be prescribed are likely to include:
- Full name;
- Residential address;
- Identification number;
- Date of birth;
- Date on which the person becomes and ceases (if applicable) to be a controller; and
- Whether the person has significant interest in or significant control over the company.
Newly incorporated companies will be required to have and maintain the register of controllers within 30 days from the date of incorporation. Existing companies will have 60 days from the date of commencement of the regime to have and maintain the register of controllers.
However, persons need not disclose information if such information is subject to legal privilege.
To avoid duplicative reporting, companies can stop tracing controllers once the tracing reaches a Singapore-porated company that will also be required to maintain the register of controllers, or is exempt.
The Registrar or authorised officers may have access to records and documents relating to controllers, but not the general public. The Minister may direct the Registrar to maintain a central register of companies' controllers. The courts may be empowered, upon the Registrar's application, to direct any company to rectify its register of controllers.
Listed companies will be exempted as they are already subject to Part VII of the Securities and Futures Act (Disclosure of Interests). Directors and shareholders of Singapore financial institutions are already subject to "fit and proper" checks by the Monetary Authority of Singapore ("MAS").
In addition, it is proposed that:
- Foreign companies registered in Singapore to maintain registers of controllers and public registers of shareholders. Non-compliance will be an offence by the foreign company, its directors and authorised representatives;
- Liquidators to retain records of wound-up companies and LLPs for 5 years (instead of 2) to enable timely response to international requests for information, and to comply with FATF and GF standards;
- Officers, partners or managers of struck-off companies and LLPs to retain accounting records and registers of controllers for 5 years; and
- The option for companies and LLPs to destroy records early (before the end of the current 2 year period) if wound up by their members partners or creditors, be removed to comply with FATF and GF standards.
(b) New definitions of "controller", etc.
FATF defines "beneficial owner" as the natural person who ultimately owns or controls a customer and/ or the natural person on whose behalf a transaction is being conducted. It also includes those persons who exercise ultimate effective control over a legal person or arrangement.
It is proposed to introduce new definitions for "controller", "corporate controller", "individual controller", "legal entity", "significant control" and "significant interest", based on UK legislation.
The definition of "significant control" will be based on the right to appoint or remove a majority of directors, and the right to exercise, or the actual exercise of, significant influence or control over certain matters.
The definition of "significant interest" will be based on a person's interest in more than 25% of the shares and/ or 25% of the voting rights. If a company does not have a share capital, the definition of "significant interest" will be based on the person's right to share in more than 25% of the company's capital or profits.
A new provision will also define when a corporation, unincorporated association, or partnership has a state of mind for a particular conduct, in conjunction with the offence provisions.
(c) Bearer shares
It is proposed that the issuance and transfer of bearer shares and share warrants by foreign companies registered in Singapore, be void, to mitigate the risks of money laundering and terrorist financing. Section 66 of the Companies Act already prohibits Singapore-incorporated companies form issuing bearer shares and share warrants.
(d) Nominee directors
It is proposed that nominee directors disclose their nominee status and nominators to companies or law enforcement authorities. Nominee managers of LLPs will be required to provide certain information to their LLPs, but there is no requirement to disclose their nominators to their LLPs or to law enforcement authorities. Companies and LLPs will be required to maintain the information received from nominee directors or managers indefinitely and to provide the information to the Registrar and law enforcement authorities on request.
These latest proposals present a measured and pragmatic approach for Singapore, as a global financial centre, to remain internationally competitive whilst continuing to strengthen its robust regime to combat money laundering and terrorist financing activities. Simplifying and streamlining certain administrative and compliance requirements, such as exempting all private companies from holding AGMs if certain safeguards are adhered to, reduces time and monetary costs for companies and increases Singapore's attractiveness to businesses. Requiring companies to obtain and maintain updated beneficial ownership information, but restricting access to such information to only the appropriate authorities, presents a feasibly balanced approach to a difficult issue, and complements the existing requirements for professional intermediaries such as financial institutions, law firms and accounting firms, to conduct customer due diligence.
For more details, the consultation documents may be accessed on MOF's website: www.mof.gov.sg , ACRA's website: www.acra.gov.sg , and the REACH consultation portal: www.reach.gov.sg . Written comments may be submitted to the Ministry of Finance by 13 January 2017 via email: MOF_Public_Consultation@mof.gov.sg . A summary of the comments and correspondence will be published by MOF and ACRA. Respondents' identities will not be disclosed.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.