Introduction
Service providers who used to face grouses or challenges when asked for details on companies' shareholders and ultimate beneficial owners would now have an easily understandable and frequently-quoted legislation to point to when asking for details on controllers and nominee directors.
The Companies (Amendment) Bill was passed by Parliament on 10 March 2017, and subsequently the Accounting and Corporate Regulatory Authority (ACRA) announced that the changes to the Companies Act would be implemented in phases. The first phase will be implemented on 31 March 2017, and the remaining two phases would take effect later in 2017 and early 2018 respectively.
The objective for the latest revisions has been to ensure that our corporate regulatory regime continues to stay robust and support Singapore's growth as a global hub for businesses and investors while ensuring that corporate entities are not used for any illicit purposes or to facilitate flow of illegal funds.
This article sets out the key legislative changes that will impact companies and will take effect from 31 March 2017, for your guidance and incorporate our comments on some of the changes. The changes that would take effect in subsequent phases are not covered below.
Position with effect from 31 March 2017 | |
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Company administration | Comments |
A. Requirement to retain and use a common seal would be
removed -> Companies are no longer required to use the common seal in the execution of documents as a deed or other documents such as share certificates. |
Companies can choose not to purchase the common seal or keep
custody over common seals – thus reducing the costs of
acquiring and maintaining a seal. Companies may however choose to
retain a seal if dealing with foreign jurisdictions that require
execution of a document under a seal. Documents that used to be executed by seal would be effective if signed by authorised persons (without any requirement to affix the common seal on the document). Such authorised persons would be the same as the current position - either a director and the company secretary; two directors of a company; or a director of a company in the presence of a witness who attests the signature. |
B. Requirement to maintain register of nominee
directors and nominators and containing the particulars of the
nominators -> Companies would require nominee directors to disclose their nominee status and nominators to their companies. This would be a private register to be produced to regulatory authorities when requested. |
This requirement would help to determine the true status of a
local director if companies are being set up in Singapore by
foreign entities or individuals - it should however be noted that a
nominee director should be fully aware of the business and
activities of the company so as to discharge one's duties as a
director effectively. |
C. Requirement to maintain a register of
controllers
A controller who has significant interest in a company may include any of the following:
A controller who has significant control on a company is a person who:
Companies newly incorporated on or after 31 Mar 2017 will have a transitional period of 30 days to set up the register.
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The objective behind the new register of controllers is to make
the ownership and control of corporate entities more transparent
and reduce opportunities for the misuse of corporate entities for
illicit purposes. As it is now, banks and corporate service
providers are already required to identify the ultimate controller
of an entity under existing AML/KYC requirements. This new requirement would be helpful in providing a statutory basis for gathering information in order to maintain a register of controllers of corporate entities when such entities are being incorporated.
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D. Requirement to maintain public register of members
for foreign companies
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Other requirements
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As evident above, most significant changes to take effect from 31 March 2017 are requirements to maintain new registers of nominee directors and registrable controllers in order to determine the 'true' beneficial ownership and control of business entities. These changes are anticipated to enhance Singapore's global reputation as a trusted and clean financial hub where illicit flow of funds through setting up of entities in Singapore is strictly prohibited.
While the new requirements would increase obligations on companies to maintain new registers and service providers to request additional information from clients, one can at least point to the legislation and its objectives when making the requests for such information and record the responses (or lack thereof) accordingly.
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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.