About the Companies Act for Directors and CEOs
The Companies Amendment Act was passed in October 2014, causing the Companies Act to have sweeping amendments. In fact, it contains the most changes since its introduction in 1967. The changes are to lessen the burden companies experience with regulations, provide better business flexibility, and improve Singapore’s corporate governance landscape. The industry stakeholders, professional bodies, societies, and academia give feedback. They do this through different public consultation exercises when the Act is under review.
The reforms made in the Companies Act had key changes in five areas. These are the shareholder’s meetings and rights, duties of directors, accounts and audit, capital maintenance, and company administration.
If you want to know more about the key amendments of the companies act for directors and CEOs, you can find the information you need in this article. It will give you an overview of the key amendments that are relevant to Singapore companies.
Electronic Registers of Private Company Members Should Be Kept by ACRA
According to the amendment, ACRA is going to maintain the electric register of private company members. All private companies must file information about share ownership and any changes. The filing date of this information will take effect on the registration date as a regular or cessation member. Therefore, the filing of returns and allotment must be promptly done.
Before the amendment, there was a requirement from private companies to maintain the physical register of members. The ACRA maintaining the electronic registers will change this administrative requirement. As well, the current member registry, which the public will receive. The maintenance of an electronic register by the ACRA accurately depicts actual ownership or private companies. This is at any point and it is helpful in the resolution of disputes that involve ownership issues.
The Amendment Act introduces several proxies regimes that allow certain intermediaries like CPF, license holders of capital market services, and banks that provide custodial services. The purpose of this is to assign more than 2 proxies in general meetings and give their votes. Companies will be unable to opt-out of the multiple regime proxies. This allows indirect investors, even CPF investors and those who hold shares through brokers or nominee banks. Hence, they can be chosen as proxies and participate in meetings. These indirect investors who were chosen as proxies will have the right to vote with a show of hands and a poll.
At the same time, respecting the rights to the shares they hold like they are holding the shares in their own name. The indirect investors can also raise queries they might want to tell the board of directors. This improves corporate governance and transparency, by making sure the company will be accountable to individual shareholders.
According to the new regime for multiple proxies, the cut-off time for submitting proxy forms is now 72 hours, which was 48 hours only. This allows companies to have more time for their meeting preparation. Companies take steps so they can come up with new procedures for appointing proxies within 6 months from the implementation of the Amendment Act.
The Statutory Disclosure Requirement for CEOs
Currently, only company directors must make a statutory disclosure about their shareholding, other companies, and if there are any conflict of interests. It is part of the amendment regime that CEOs should start making statutory disclosures. In that case, they should note that the CEO’s definition should encompass the C-suite Officers – all of them. It is applicable to anyone who is active in the business conduct or part of the company business.
This is all the same with the requirements of companies, and considering the main role that C-suite officials play in company management, it is very essential in the evolution of scenarios in private enterprises.
Small Company Criteria to Be Given Audit Exemption
Until they enforce the amendments, a company’s accounts will not have yearly auditing if it is a private company that has exemption with annual revenue of not more than $5 million.
The Amendment Act enforces new criteria for small companies so they can have an exemption from auditing. In order to qualify, a company should be private that will meet at least two out of three criteria for each of the two previous years. These are:
- They have a total revenue of $10 million or less
- Their total assets are a maximum of $10 million
- Their employees do not exceed 50
For a group company, they must qualify as a small company and they must belong to a “small group.” The “small group” should meet at least 2 out of 3 quantitative criteria on a basis of consolidation for the past two years.
Shareholders 70 Years Old and Above Do Not Require Approval
The approval requirement from shareholders to choose directors who are 70 years old no longer exists. They require approval in the public companies and their subsidiaries.
The amendment now considers the current situation using enterprise boards where the directors are a lot older but efficient, and age is not a hurdle when they are fulfilling office responsibilities. Therefore, this decision to remove the past requirement of needing approval from shareholders is good.
The Prohibition Against Financial Assistance Has Been Lifted for Private Companies
Currently, companies are not allowed to provide financial assistance to anyone for acquiring shares in the company. The Amendment Act does not have this prohibition for private companies because their shares are normally closely held, and the shareholders have more control over the company’s decision regardless if they give financial assistance or not. The amendment reduces the costs that private companies must pay. If necessary, the creditors of these companies who want to seek redress can depend on the laws pertaining to the breaching of directors’ duties in terms of fraudulent and wrongful trading.
However, the prohibition is still in place for public companies and the subsidiaries they have. The purpose of the prohibitions is to make sure that the company capital is preserved intact that is also for pursuing the company objects. The Amendment Act provides that a company can provide financial assistance. This is as long as it will not be against the interests of the company or shareholders, or its capacity to pay their creditors.
Auditors May Resign
The auditor may now resign if the company does not want to have a general meeting or appoint a new director. However, where this company is found on SGX-ST, the auditors must look for the Accounting and Corporate Regulatory Authority (ACRA) to get their consent. They must let the company know about the reason why they are leaving if it happens before the end of their term. This makes sure that listed companies, with shareholders and the public, will not be left without auditors. It must also alert ACRA about any possible breaches under the Singapore Companies Act.
Merging of Memorandum and Articles Under One Constitution
The Memorandum and Articles of Association will be all one document, which will be known as the ‘Constitution’. They do not require any action from companies and they could choose to continue using their current Articles of Association and Memorandum or start using the new format. The Model constitutions are available on the website of ACRA and companies can follow the entire format or only parts of it. The newly incorporated companies must submit their ‘Constitution’. If the company uses a model constitution already, then they do not need to file documents when they register. Instead, they can refer to the Constitution when they register.
This decreases the cost of a company set up and streamlines the administration requirements for companies to follow.
Directors No Need to Report
The directors currently have to provide a report together with their financial statements. Also, it must disclose all the benefits of the director.
This has been abolished, and the directors’ statement is already better, which already includes mandatory disclosures they need for a report. For instance, the shareholdings of the director. The statement accompanies company financial statements. The statement must have information to comply with the CA’s twelfth schedule.
Company Electronic Transmissions
As a way to promote better efficiency and better company administration, the Amendment Act gives simpler procedures. In fact, they already have rules that apply to electronic transmissions for companies. They can now give notice for each document. The document is sent or shown to members by electronic communications. This is done with consent from members, and the modes are written in the constitution.
These are the amendments in the Companies Act for directors and CEOs that companies must comply with. The company directors must know about this to avoid any violations. You can contact 3E Accounting for their Nominee Director Services in Singapore.