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Corporate Compliance Requirement | ACRA Compliance

Annual General Meeting (AGM) and Filing of Annual Returns (AR) in Singapore
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 can be:

  • physically held anywhere in the world, whereby the shareholders meet, or
  • by way of written resolutions, whereby a meeting is not required.

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:

  • Report of Directors & Statement by Directors (Directors’ Statement for a company with financial year/period which ends on or after 1 July 2015)
  • 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:

A company is not required to prepare an Audited Report if:
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 Small Company Concept 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

All locally incorporated companies are required to file their annual returns under the Companies Act within one month of holding the AGM or the passing of written resolutions in place of the AGM.
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
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

Extension of Time

If your company requires more time to comply with the requirements to prepare the financial statements for the holding of an AGM and the filing of an AR, extension of either one or two months before the deadline to hold the AGM can be applied.

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 under each of S175 and S201 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.

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

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

 Companies Act Section   Statutory Requirements  Breach by 
Section 175 A company must hold its AGM in every calendar year and not more than 15 months from the previous AGM. If the company is newly incorporated, it has to hold its AGM within 18 months from its date of incorporation. Both company and director 
Section 197(4) After a company has held its AGM, it has to file the Annual Return within 1 month online via Bizfile, ACRA’s online filing and information retrieval system. Both company and director 
Section 201(1)  For listed companies, the financial statements laid at the AGM must not be more than 4 months old.
For non-listed companies, the financial statements laid at the AGM must not be more than 6 months old.
Director

With effect from 1 Dec 2015, ACRA will be implementing a higher 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)

Prior to these revisions, the penalty for late filing of AR and the composition sums for each breach of s175 and s201 range from $60 to $350, depending on the length of default.

Failing to hold the AGM and to file AR will result in enforcement action including the offer of composition sums that have recently been raised and tiered to reflect the resources expended to pursue enforcement.

If ACRA decides to take enforcement action for the company’s failure to hold an AGM and/or failure to file AR, a new 3-tier composition regime which took effect from 2 November 2015 will be applied to encourage early resolution and deter protracted non-compliance by directors.

Where a company fails to hold the AGM and the AR is not filed, Offer of composition totaling $600 prior to issuance of summon. Next, a summons may be issued against the directors of the company to answer to breaches of s175 and s197 (Offer of composition totaling $1,200 (i.e. $600 for each breach of s175 and s197)). Lastly, the Warrant of Arrest will be issued if the director fails to attend Court to answer to the charges (Offer of composition*totaling $1,800 (ie. $900 for each breach of s175 and s197)).

You may refer to the diagram as follows for explanation as well.

3 Tier Composition

Besides, under the Companies Act, any director who fail to comply with the requirements shall be guilty of an offence and shall be liable on conviction to a fine not exceeding

  • S$5,000 and also a default penalties each for failure to comply with S175 & S197
  • S$10,000 or up to two years imprisonment for failure to comply with S201

The director will also face disqualification for persistent default i.e. three convictions within five years

Other new enforcement actions to be implemented in 1Q2016

  • Disqualification of directors with effect from 2016
    Come 2016, ACRA will introduce a new enforcement power whereby 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
    In 2016, ACRA will introduce a new enforcement power whereby 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 Stepped up enforcement actions for AGM and AR breaches

Certificate of Compliance
Effective April 2010, companies that comply with all the three requirements under Sections 175, 197 and 201 of the Act will have a green tick (green tick) reflected in ACRA’s Online Directory and will be eligible for a Certificate of Compliance. Those not in compliance with any or all the requirements will receive a red cross (red cross) and will not be eligible for the certificate.
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