The Accounting and Corporate Regulatory Authority of Singapore ("ACRA"), together with the Companies Act Working Group, has announced certain recommendations and proposed amendments to the Companies Act (Cap. 50) of Singapore (the "Act") and its subsidiary legislation.
Generally, the recommendations and proposed amendments seem directed at increasing the ease of doing business in Singapore, with a number of changes proposed to allow digitalisation, streamlining of filing processes, clarifying financial reporting requirements and updating outdated provisions in the Act.
The proposed amendments are currently in the public consultation phase,which will run from 20 July - 17 August 2020. The public is invited to provide feedback on these proposed amendments.
We have set out below a high-level summary of some of the recommendations and proposed amendments. This list is not exhaustive. We would also highlight that these recommendations and amendments may not ultimately be adopted and amended in the Act, but they provide a good flavour of what ACRA and the Companies Act Working Group are looking to achieve in their recommendations and amendments.
- Removing the requirement for physical shares certificates.
- Facilitating digital meetings and clarifying the application of existing digitalisation provisions under the Act by introducing provisions that clarify that unless the constitution provides otherwise, a company may hold general meetings and board meetings digitally.
- Permitting digitalisation of documents and allowing documents to be sent using a mode of electronic communication.
- Refinement of types of companies under the Act and financial reporting requirements
- Introducing a concept of “publicly accountable company” for the purposes of financial reporting and tailoring the financial reporting obligations to a broader group of stakeholders (e.g. shareholders, creditors), based on the public interest/accountability of companies. In connection with this, requiring all companies to audit their financial statements except dormant companies and small non-publicly accountable companies.
- Introducing a concept of a “micro” company (i.e. a company with total annual revenue and total assets each being not more than S$500,000) and allowing such companies that are non-publicly accountable to prepare simplified financial statements.
- Requiring two separate filings for annual return and for financial statements as compared to the current filing which includes both annual return and financial statement in one filing.
- Streamlining financial reporting requirements for foreign companies by requiring foreign companies to lodge:
- Financial statements in accordance with the accounting standards substantially similar to the accounting standards prescribed by the Accounting Standards Council;
- Financial statements in accordance with the applicable accounting standards in the foreign company's jurisdiction of incorporation; or
- Unaudited summary financial statements as prescribed by ACRA.
- Allowing foreign companies with insignificant operations in Singapore to lodge unaudited branch accounts instead of audited statements of assets, liabilities and profit and loss in respect of the Singapore branch. "Insignificant operations in Singapore" means that each of the total revenue, total expenses, total assets and total liabilities in the unaudited balance sheet and profit and loss account arising out of the foreign company’s operations in Singapore do not exceed S$5 million.
- Removing the requirements for public companies limited by shares to convene statutory meeting and to prepare statutory report.
- Shareholder protections
- Requiring two tiers of approval by both shareholders of the company and shareholders of a class of shares for selective buybacks under section 76D of the Act.
- Excluding shares held or acquired by the following persons from the computation of the 90% threshold for compulsory acquisition under section 215 of the Act:
- A person who is accustomed to or is under an obligation whether formal or informal to act in accordance with the directions, instructions or wishes of the transferee in respect of the transferor company;
- A body corporate controlled by the transferee;
- A person who is, or is a nominee of, a party to a share acquisition agreement with the transferee;
- The transferee’s close relatives (i.e. spouse; children, including adopted children and step-children; parents; and siblings);
- A person whose directions, instructions or wishes the transferee is accustomed to or is under an obligation whether formal or informal to act in accordance with, in respect of the transferor company; and
- A body corporate controlled by a person described in v. above.
More information on the proposed amendments can be found here and here.