This post is also available in: 简体中文 (Chinese (Simplified))

Corporate Compliance Requirement – ACRA Compliance

ACRA ComplianceRequirement for Companies, Foreign Companies and Limited Liability Partnerships to maintain Register of Registrable Controllers

Companies, foreign companies and LLPs (unless exempted) are required to maintain beneficial ownership information in the form of a Register of Registrable Controllers, and to make the information available to public agencies upon request.

Who can be a “Controller” of a Company?

1. A Beneficial Owner/Controller who has “significant interest” which is defined as an individual or a legal entity that has a:
– interest in more than 25% of the shares
– shares with more than 25% of total voting power in the company

2. A Beneficial Owner/controller who has significant control on a company who:
– holds the right to appoint or remove directors who hold a majority of the voting rights at directors’ meetings;
– holds more than 25% of the rights to vote on matters that are to be decided upon by a vote of the members of the company; or
– exercises or has the right to exercise significant influence or control over the company.

Requirement for Companies to maintain Register of Nominee Director

Companies are required to keep a register of its nominee directors containing the particulars of the nominators of the company’s nominee directors

A Director is a nominee director if he/she is accustomed or under an obligation whether formal or informal to act in accordance with the directions, instructions or wishes of any other person.

Statutory requirements for Annual General Meeting (AGM) and filing of Annual Returns (AR) for private companies with Financial Year End (FYE) ending on or after 31 August 2018

1. Alignment of timelines for holding of AGMs and filing of ARs to the FYE

(i) Holding of AGMs
– For listed companies: to hold AGM within 4 months after FYE
– For any other company: to hold AGM within 6 months after FYE

(ii) Filing of Annual Returns
– For companies having a share capital and keeping a branch register outside Singapore: to file annual returns within 6 months (if listed) or 8 months (if not listed) after FYE
– For other companies: to file annual returns within 5 months (if listed) or 7 months (if not listed) after FYE
– Annual return can be filed only:

  • after an AGM has been held;
  • after financial statements is sent if company need not hold AGM; or
  • after FYE if company need not send financial statements.

2. Exemption for private companies from holding AGMs subject to specified safeguards

– Private companies are exempted from holding AGMs if they send their financial statements to members within 5 months after the FYE.

(a) A member who wishes to request that an AGM be held must notify the company to hold an AGM not later than 14 days before the last day of the 6th month after FYE;
(b) Directors must hold an AGM within 6 months after FYE if notified by any one member of the company to do so. The company may seek the Registrar’s approval for an extension of time to hold AGM; and
(c) Private companies must hold a general meeting to lay financial statements if any member or auditor requests for it not later than 14 days after the financial statements are sent out.

– Dormant relevant companies
Dormant relevant companies exempt from sending financial statements will not need to hold AGM, subject to the above-mentioned safeguards.

3. To prevent companies from arbitrarily changing their FYE, the following safeguards are put in place:

(a) companies must notify the Registrar of their FYE upon incorporation and of any subsequent change;
(b) companies must apply to the Registrar for approval to change their FYE:
– if the change in FYE will result in a financial year longer than 18 months; or
– if the FYE was changed within the last 5 years; and
(c) only FYE of the current and immediate previous financial year (provided that statutory deadlines for the holding of AGM, filing of annual return and sending of financial statements have not passed) may be changed; and
(d) unless otherwise approved by the Registrar, the duration of a company’s financial year must not be more than 18 months in the year of incorporation.
(e) companies with unusual financial year period (not 12 months) should notify ACRA via the notification of change of FYE if they want to avoid applying for approval to change FYE every year
(f) Existing companies will have their FYE deemed by law to be any date previously notified to the Registrar as their FYE date. In the absence of such notification, the anniversary of the date of incorporation will be deemed by law to be their FYE. Companies can change their FYE by notifying ACRA before or after the effective date of the new laws on FYE.

Statutory requirements for AGM and filing of AR for private companies with FYE ending before 31 August 2018
Every Singapore Company needs to hold its annual general meeting (AGM) once in every calendar year and its financial statements are to be tabled at the AGM for the shareholders’ approval.
The Singapore Companies Act (Cap.50) states that every company is required to hold an AGM:

  • once in every calendar year; and
  • within 15 months from the date of the last AGM; or
  • within 6 months from its financial year end date, whichever earlier

EXCEPTION:

Newly incorporated companies are allowed to hold the first AGM within 18 months from the date of incorporation.

An AGM must be physically held anywhere in the world, whereby the shareholders meet.

The following matters are to be discussed at an AGM:

  • To approve the Director’s Report/Audit Report
  • To approve directors’ fees, remuneration and emolument
  • To re-elect the director(s) (if applicable)
  • To reappoint auditors
  • To declare dividends, if any
  • To transact any other business

Requirement for Accounts
When an AGM is held, directors of the company are required to set before the shareholders the relevant documents, such as the company’s annual financial statements compiled in accordance with the Financial Reporting Standards of Singapore, consisting of:

  • Directors’ Statement
  • Independent Auditors’ Report (if required)
  • Balance Sheet
  • Profit and Loss Statement
  • Statement of Changes in Equity
  • Cash Flow Statement
  • Corresponding Notes to Financial Statements

 Note: Section 201 of the Companies Act states that the financial statement must not be more than six months old from the date of the AGM.

Requirements of Audited Accounts:

Audit exemption criteria:
For a company with its financial year beginning prior to 1 July 2015:

  • The company does not have any corporate shareholders;
  • The total number of individual shareholders must be less than 20; and
  • Annual turnover of the company must be less than S$5 million.

For a company with its financial year beginning on or after 1 July 2015, the Company must qualify as a small company for the immediate past two consecutive financial years.

A company qualifies as a small company if (a) it is a private company in the financial year in question; and (b) it meets at least 2 of 3 following criteria for immediate past two consecutive financial years:
(i) total annual revenue is not more than $10m;
(ii) total assets is not more than $10m;
(iii) no. of employees is not more than 50.

For a company which is part of a group, to qualify to the audit exemption:
(a) the company must qualify as a small company; and
(b) the entire group must be a “small group”

For a group to be a small group, it must meet at least 2 of the 3 quantitative criteria on a consolidated basis for the immediate past two consecutive financial years.A company which meets the above requirements can prepare an Unaudited Report which is commonly known as the Unaudited Financial Statements.

Please refer to More Details on Small Company Concept for Audit Exemption for illustration and more information.

 Note: A company is considered dormant during a period in which no accounting transactions occur. Dormant companies can be exempted from preparing Audited Reports, but will still be required to prepare an Unaudited Report.

Dormant Company

With effect from 3 January 2016, a dormant non-listed company (other than a subsidiary of a listed company) is exempt from requirement to prepare financial statements, if:
(a) the company fulfils the substantial assets test; and
(b) the company has been dormant from the time of formation or since the end of the previous financial year.

The substantial assets test is that the total assets of the company at any time within the financial year must not exceed $500,000. For a parent company, the consolidated total assets of group at any time within the financial year must not exceed $500,000.

Dormant listed companies and their subsidiaries, and dormant unlisted companies which do not fulfil the substantial asset test must prepare financial statements but are exempt from audit. This remains unchanged from the current position.

Requirements for an Annual Return

Under the Companies Act, all locally incorporated companies are required to file their annual returns.
The following company information is required for filing annual returns:

  • Name & Registration Number
  • Registered address
  • Principle activities
  • Company type during financial year
  • Summary of share capital and shares
  • Registered charges
  • Information about officers of the company
  • Information about shareholders
  • Dates of annual returns, annual general meeting and accounts
  • Financial statements (XBRL format), if necessary

Filing Financial Statements in XBRL format
Your company would be required to file its financial statements in XBRL format during the filing of annual return, if your company is:

  • Insolvent (total assets – total liabilities = negative value)
  • Has a corporate shareholder for the financial year and is not dormant

Extension of Time

If your company requires more time to comply with the requirements to the holding of AGM and the filing of AR, you can lodge with ACRA, an application for an extension of two months before the deadlines.

Non-compliance – Risk of High Penalty Amount, Summon and Arrest Warrant for late AGM or late Annual Return

ACRA has taken a serious step to ensure the AGM and AR breaches issue is resolved. It has increase the penalty to a flat rate of $300 for each breach regardless of the length of default, increase the offer of composition to $300 for late AGM and filing of AR under S175 and S197 respectively and most importantly, debarring a person from acting as a company director in Singapore in the event of default of a relevant requirement in the Companies Act for a continuous period of 3 months or more.

The following are 3 key statutory requirements that companies and directors are prone to breaching:

 Companies Act Section   Statutory Requirements  Breach by 
Section 175 Requirement for companies to hold AGM Both company and director 
Section 197 Lodgement of Annual Return via Bizfile online. Both company and director 
Section 201(1)  Laying of financial statements at the AGM Director

ACRA imposes a high penalty and summon for late filing of AGM:

  • a flat penalty of $300 for the late filing of AR regardless of the length of default;
  • a composition sum of $300 for holding the AGM late (s175 of the Companies Act)
  • a composition sum of $300 for layout out-of-date financial statements at the AGM (s201 of the Companies Act)*

*Applicable for FYE ending before 31 Aug 2018

Failing to hold the AGM and to file AR will result in enforcement action including the offer of composition sums.

If ACRA decides to take enforcement action for the company’s failure to hold an AGM and/or failure to file AR, a 3-tier composition regime will be imposed to encourage early resolution and deter protracted non-compliance by directors.

Prosecutorial action

ACRA will consider prosecuting the directors in court if:-

  1. they fail to register and attend DCP when ACRA write to them to offer them a chance to attend the DCP (only first time offenders are eligible); or 
  2. they fail to compound (when offered a chance to compound); or 
  3. the circumstances of the case are such that composition is not appropriate, for example, multiple breaches or recalcitrant breaches. 

If a director seeks to compound his breach(es) after a summons has been issued, ACRA may not allow him to compound. 

After a summons is issued by the courts, ACRA will send the summons to the director at his residential address by post. The summons will indicate the State Court number, date and time that the director has to attend court. If the director fails to attend court, a warrant for his arrest will be issued by the court. The director must attend court even if he has written to ACRA to review his summons.

In court, the director can decide whether to plead guilty or claim trial to the charges. If the director is convicted by the court, he may be fined up to a maximum of $5000 per charge.

 

Other enforcement actions

  • Disqualification of directors
    A director who has at least 3 of his companies struck off within a period of 5 years will be disqualified from acting as director, or to take part in the management of any company for a period of 5 years starting after the date on which the last of the three companies were struck off from the date the third company is struck off. For the avoidance of doubt, the striking off of the three companies relates only to striking off initiated by the Registrar and does not include voluntary applications for striking off.
  • Debarment of director or company secretary
    A director or company secretary who is in default of a relevant requirement in the CA for a continuous period of 3 months or more may face a debarment order from the Registrar preventing him from taking on new appointments as director or company secretary of other companies.

For more information, visit Enforcement actions against companies and directors for annual return filing breaches

Certificate of Compliance

Companies that comply with all the three requirements under Sections 175, 197 and 201 of the Act will be eligible for a Certificate of Compliance. Those not in compliance with any or all the requirements will not be eligible for the certificate.

Company Seal

A company seal (sometimes referred to as the corporate seal or common seal) is an official seal used by a company. Company seals were predominantly used by companies in common law jurisdictions, although in modern times, most countries have done away with the use of seals.

Under the Companies Act, Singapore 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 execute documents by having them signed by the Authorised persons of the companies as follows:

Authorised persons for companies

  • A director and the secretary of a company; or
  • Two directors of a company; or
  • A director of a company in the presence of a witness who attests the signature

For existing companies that wish to do away with the use of its common seal, the Constitution of the Company will have to be amended to remove the requirement to use the common seal.

Need help filing your AGM, AR and XBRL in Singapore?
3E Accounting can assist you with the preparation and filling of your AGM, AR and XBRL!