What You Need to Know About the Companies Act for Shareholders
The government made an announcement that the Companies Act for shareholders receives changes based on the review of four years and public consultations. These are made by a special committee. A bill that has the amended Companies Act is going to be drafted and placed for public consultation prior to its Parliament reading in the middle of 2013. The changes were made to benefit companies, retail investors, SMEs, and shareholders of companies. The changes are to lessen regulatory requirements, minimize the costs of compliance, offer more flexibility, and encourage more corporate governance for the companies.
Dematerialization of the Share Certificates
The share certificate of a document verifies what a stockholder owns. Right now, companies must issue the physical share certificates to the shareholders within 30 days since the shares were transferred, and within 60 days of new share allotment. Right now, the Companies Act of Singapore sees two kinds of evidence of share titles:
- A certificate that is part of the common or official company seal.
- The electronic register of the members that are maintained by ACRA for the private companies.
The CAWG recommends amending the act so the requirement to give physical share certificates ends. This is sensible because ACRA maintains the Electronic Register of Members (EROM) of the private limited companies on January 3, 2016. The change aims to:
- Make the share transfer process more efficient by preparing and signing the physical share certificates.
- Allowing the e-certificates to become normal, which lessens the necessity to track the paper documents.
Kinds of Companies and Financial Reporting
- Introduction of “publicly accountable company” for the purpose of financial reporting.
- Concept introduction of micro non-publicly accountable companies that may prepare reduced/simplified financial statements. Micro companies are those that have a total revenue and total assets that are not more than S$500,000 for two straight years.
New Financial Reporting Obligations
Today, the companies that were incorporated in Singapore must prepare and show financial statements that comply with the Singapore Financial Reporting Standards (SFRS). This report should include these documents:
- Report of the directors and their statements
- Independent report on their audit
- Comprehensive income statement
- Financial position statement
- Statement of their cash flow
- Financial statement notes
After passing the amendments, micro-companies that are not publicly accountable may prepare a reduced financial statement that comprises of:
- Comprehensive income statement
- Financial position statement
- Certain key disclosures
Safeguard the Interests of Shareholders
- Section 74 amendment mandates the variation or class abrogation rights should have an approval of at least 75% of the holders of class rights. The exception would be if something else is provided in the constitution. In order to keep the provision that allows shareholders to hold 5% of the issued shares of the class that applies to the court to object the proposed variation or class rights abrogation.
- Shares that are held or required by specific persons to not be included from the 90% computation of threshold for the compulsory acquisition following section 215
At Least 1 Director and Shareholder
Companies can be incorporated by any person and still exist by one person. However, this is a legal requirement that the sole director has to be a local resident of Singapore. For these companies, the director and company secretary must not be the same person. In case there is no director that was left to run the company, shareholders are going to be personally liable. They would be accountable for the debts that the company incurs anytime 6 months after the director’s office becomes vacant.
Disclosure of Director Obligations
The Singapore company director should disclose the company particulars of the shares of related corporations that the director is registered, or shows interest. As a holding corporation of the company, it is a “related corporation.” The Singapore subsidiary director should disclose their shareholdings and interests in the holding company also.
File Unaudited Accounts
Companies that have ‘insignificant’ operations can file their unaudited branch accounts, instead of the statement of assets, profits, loss, and liabilities. Having this kind of operation in Singapore means that the total expenses, assets, revenue, or liabilities of those firms are more than S$5 million.
ACRA looks for feedback on how it defines ‘insignificant operations’ and if they have concerns around that allows foreign companies to prepare lower financial statements.
When they already pass the changes, companies should specify in the constitutions how they will hold digital meetings. The amendments enable this, instead of making it mandatory or prescriptive. Companies that want to hold meetings traditionally or in-person can still elect to do this.
More propositions include taking out the requirement for public companies to hold the statutory meetings. The directors no longer have to submit a statutory report to members before the meeting. This puts Singapore on the same level as Hong Kong, Australia, UK, and New Zealand. They must also reduce compliance burdens.
The Registrar Has Power to Update Changes
ACRA wants to give the registrar the power to update changes when they appoint secretaries. This is to ensure that those registers give accurate information. It wants to ensure the dates made by the registrar will strike or restore a company from the registrar. It will clarify and match the dates that are indicated in the BizFile system of ACRA. This removes the ambiguity of the company’s legal status.
Displaying Company Name
The statutory requirement for a company to show its name outside the office is no longer mandatory. It is easy to find a company based on its registered office address, they have no reason to impose this requirement. Companies no longer have to display a signboard if they do not want to since it only adds to their business costs. In addition, it will also facilitate the set up of home-based businesses as part of the Home Office Scheme.
Raise Capital for Private Companies
Private companies can now raise their capital through the exempted and private offerings without having to convert to public companies. However, these companies must comply with the Securities and Futures Act for the offerings they made to the public.
Companies should put their registration number on their business letters, invoices, statements of account, invoice official notes, publications, and business cards.
These are the changes to the Companies Act for shareholders that you need to know about. You can get a Singapore Incorporation Package by contacting 3E Accounting. They will give you what you require and even help you get started.