In a move widely seen as an attempt to further enhance Singapore's status as a business-friendly destination, Parliament recently passed the Companies (Amendment) Bill 2017, ushering in a swathe of company law reforms. In this alert we take a look at the provisions in the Companies (Amendment) Act 2017 (the "Act") and assess the extent to which they will achieve Parliament's objectives.
Singapore will see a shake-up of its company laws following the passing of the Companies (Amendment) Bill 2017 on 10 March 2017. The amendments set out in the Act (the Amendments) will take effect in a series of phases. The first phase in relation to: (i) transparency of ownership; (ii) control of business entities and LLPs; and (iii) the common seal, came into effect on 31 March 2017.
The Amendments will align Singapore's company laws with international standards set by the Financial Action Task Force (FATF) and the Global Forum on Transparency and Exchange of Information for Tax Purposes. It is also hoped that the Amendments will reduce regulatory burdens and improve the ease of doing business in Singapore.
Substantial changes have also been made to Singapore's debt-restructuring provisions. It is hoped that the new framework will lead to Singapore being increasingly seen as an international centre for debt restructuring and will also facilitate corporate rescues.
We have set out below a summary of the main substantial changes.
Private companies (section 175A)
Private companies need not hold annual general meetings (AGMs) if they send their financial statements to members within five months of the financial year-end.
While this is a welcome amendment as it will reduce the administrative burden on companies, it is important that private companies will still be held accountable. Therefore, safeguards have been put in place to the effect that private companies will be required to hold an AGM in the event that any shareholder requests one, not later than 14 days before the end of the sixth month following the financial year-end. In addition, private companies will be required to hold a general meeting to present their financial statements if any shareholder or auditor requests one, not later than 14 days after the financial statements have been sent out to shareholders.
Aligning timelines for holding AGMs and filing annual returns (sections 175 and 197)
The deadlines for holding AGMs and filing annual returns have been amended and are now tied to a company's financial year-end. These amendments should ensure consistency and clarity of process and are aimed at reducing the regulatory burden on companies.
Transfer of registration – inward re-domiciliation (sections 355 – 364A)
To attract businesses, the law has been amended so that a foreign corporate entity may now transfer its registration to Singapore under the new Part XA, sections 355 – 365A and apply to be registered as a company limited by shares under the Companies Act of Singapore.
Maintaining register of controllers (section 386AF)
Singapore-incorporated companies and foreign companies registered in Singapore will be required to maintain a register of their controllers. The register will not be available to the public. The company in question will have to ensure that the register of controllers is up to date and made available to the registrar of companies and law enforcement authorities upon request.
Public register of shareholders (section 379)
Foreign companies registered in Singapore will be required to maintain a public register of shareholders. This is similar to the current requirement for locally incorporated public companies and is in line with international standards set by FATF.
Register of nominee directors (section 386AL)
Singapore-incorporated companies will have to maintain a register of nominee directors. The register will not be available to the public. Nominee directors will now have to disclose their nominee status and their nominators. This is to mitigate the risks of money laundering and terrorist financing.
A number of amendments have been made to enhance the debt-restructuring framework with the aim of simplifying the process and making Singapore a more attractive option for the rehabilitation and restructuring of companies which are in financial difficulty.
Judicial management (section 227B)
The amendment will enable companies to apply for a judicial-management order when the company is "likely to be unable to pay its debts", rather than the current scenario whereby such an order can only be applied for when the company is already unable to pay its debts.
Scheme of arrangement (section 211A-J)
A new framework to support schemes of arrangement that implement debt-restructuring proposals will be enacted. The scope of moratoriums against creditor action has been extended so that it is similar to the moratoriums which are available by way of judicial management. Provisions have also been inserted which would make it easier for foreign-incorporated companies to satisfy the jurisdictional tests and consequently easier to propose a scheme of arrangement which falls under the jurisdiction of the courts of Singapore.
The court will also be able to restrain creditor action overseas if the creditor is within the jurisdiction of the Singapore courts.
New cram-down provisions will allow a scheme to be approved even if a class of creditors opposes the scheme, provided that dissenting creditors are not unfairly prejudiced. The new amendments also allow fast-tracking of pre-negotiated schemes of arrangement between a company and its key creditors by dispensing with the scheme meeting.
Removing the requirement for a common seal (new sections 41A, B and C)
With a view to aligning laws with the current practices of other jurisdictions and what is increasingly becoming market practice, the requirement for companies to use the common seal for the execution of deeds and share certificates will be abolished and instead an alternative of signatures by authorised persons will be introduced. Authorised persons in a company are limited to:
- a director and the company secretary;
- two directors; or
- a sole director, where that director signs in the presence of a witness who attests the signature.
Extension of retention periods for records of wound-up companies
The records of wound-up companies must be retained by a liquidator for a minimum of five years, up from the current two years. In addition, the option for a company to destroy its records early if it is wound up by members or creditors has been removed.
It is anticipated that the Amendments will lead to a more streamlined process for the regulation of companies which are incorporated in Singapore so as improve the ease of doing business there. The Amendments should also make the ownership and control of companies more transparent.
Furthermore, the amendments and enhancements to the debt-restructuring framework will hopefully position Singapore as a forum of choice for debt restructuring. Given Singapore's significance as a shipping and offshore centre, the amendments will hopefully lead to Singapore being well placed to handle issues relating to the rehabilitation and restructuring of companies in difficulty.
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.