In its public consultation issued on 20 July 2020, the Accounting and Corporate Regulatory Authority (ACRA) and the Companies Act Working Group sought feedback on proposed amendments to the Companies Act (CA). Some of the key recommendations are highlighted below.
Dematerialisation of shares and facilitating digitalisation
The use of digital media and technology were considered and proposed amendments were made to facilitate digitalisation including:
- removing the requirement for physical share certificates;
- enabling companies to hold meetings digitally and in more than one location unless the company’s constitution provides otherwise;
- including a requirement for all companies to accept proxy instructions given by electronic means instead of leaving this to be stipulated in the company’s constitution;
- permitting digitalisation of all documents sent to members, officers or auditors and all company records and documents required to be retained for inspection; and
- allowing documents to be sent using a mode of electronic communication, including through publication on a website.
Review of company types
The concept of a “publicly accountable company”, such as a listed company, financial institution or registered charity, for the purposes of financial reporting will be introduced into the CA to replace the concepts of “public company” and “private company”. This aims to tailor the financial reporting obligations in the CA to a broader group of stakeholders such as shareholders and creditors, based on the public interest or accountability of companies.
The concept of a “micro” company will also be introduced and will be defined as a company whose total annual revenue and total assets for the previous two consecutive financial years are each not more than S$500,000. This aims to allow such companies that are non-publicly accountable to prepare reduced or simplified financial statements.
Refinements to financial reporting requirements
Currently, all companies are required to file financial statements except dormant relevant companies and solvent exempt private companies (SEPCs). It is proposed that the exemption to SEPCs be broadened to prescribed companies that meet the criteria in regulations to be issued (which will include SEPCs).
Other proposals include:
- making all filed financial statements available to the public, except for filed documents relating to Gazetted exempt private companies which are wholly-owned by the Government;
- separating the filing requirement for annual reports and financial statements, while retaining their current time frames for filing;
- granting the Registrar and the Minister power to exempt a company and classes of companies, respectively, from compliance with any or all requirements in the Accounting Standards prescribed by the Accounting Standards Council (Accounting Standards) and require compliance with other accounting standards;
- allowing foreign companies to file financial statements in accordance with accounting standards that are substantially similar to the Accounting Standards or with the applicable accounting standards in their respective jurisdictions of incorporation; and
- allowing foreign companies with “insignificant operations in Singapore” to file unaudited branch accounts. “Insignificant operations in Singapore” means that none of the balances (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 exceeds S$5 million.
Removing outdated requirements and clarifying provisions in the CA
Finally, the proposed amendments aim to remove and clarify outdated CA provisions by:
- removing requirements for public companies limited with a share capital to convene statutory meetings and prepare a statutory report;
- granting the Registrar the power to update registers upon changes in director and secretary appointments; and
- setting the date indicated in ACRA’s BizFile+ system as the date a company is legally dissolved/restored, instead of the date published in the Gazette.
The proposed CA amendments will be a positive development to ensure Singapore’s corporate laws and regulatory framework keep abreast with companies’ changing practices in the current business landscape. In addition, the easing of compliance requirements would improve efficiency in companies’ operations and provide regulatory support in meeting COVID-19 Safe Management Measures in the workplace.
Disclaimer: This article is for general information only and does not constitute legal advice.