Singapore Reviews Companies Act
Thursday, June 23, 2011
Singapore’s Ministry of Finance (MOF) and the Accounting and Corporate
Regulatory Authority (ACRA) have invited public feedback on the final report
of the Steering Committee that has been reviewing the Companies Act, and on
a review of the regulatory framework for foreign entities in Singapore.
The Steering Committee was set up by the MOF in October 2007 to carry out a
fundamental review of the Companies Act. It was said that the review was aimed
at ensuring an efficient and transparent corporate regulatory framework that
would support Singapore’s future growth as an international hub for both
businesses and investors.
The Steering Committee made recommendations that existing disclosure requirements
for company directors should be extended also to chief executive officers, as
the latter also make key decisions; together with a further enfranchisement
of indirect investors, such that members of a company who provide custodial
or nominee services will be allowed to appoint multiple proxies, provided that
each proxy is appointed to exercise the rights attached to a different share.
Currently, public companies can only issue shares that carry one vote per share,
although the restriction does not apply to private companies. To allow public
companies greater flexibility in capital management, the report recommends allowing
them to issue non-voting and multiple vote shares subject to certain safeguards.
Listed companies may also be subject to additional restrictions imposed by the
Small company criteria would be introduced for audit exemption. At the moment,
a company must be audited unless it is dormant, or an exempt private company
(EPC) with revenue of SD5m (USD4m) or less. An EPC is a private company whose
members are persons, and which has not more than 20 members. The report recommends
replacing the EPC criterion with a “small company” criterion for
A company would qualify as a “small company” if it is a private
company and fulfils two of the following three criteria: total annual revenue
of not more than SGD10m; total gross assets of not more than SGD10m; and/or
no more than 50 employees. The report further recommends that
a subsidiary may be exempt from audit as a “small company”, only
if the entire group of companies meets the “small company” criteria
on a consolidated basis.
A company’s Memorandum and Articles of Association would be
merged into one document known as the Constitution. In addition, the report
recommends that there should be two models of the Constitution for private companies
and public companies limited by guarantee. There will be no prescribed model
Constitution for public companies limited by shares, given the complexity of
such companies and since they will be in a better position to determine their
With regard to foreign companies, the Companies Act presently contains the
provisions for their registration and regulation. However, the Steering Committee
has now taken the view that, in the future, those laws relating to foreign entities
(as re-named), namely branches of foreign corporations registered in Singapore,
should be placed in separate legislation to facilitate the streamlining of the
Certain of the requirements and procedures for registration of foreign entities
are proposed to be streamlined, as would their continuing filing obligations.
It is recommended that requirements to file non-essential information (for example,
changes in the authorized capital and in the number of members) be removed.
It was emphasized that, while there is no intent for any significant widening
of the scope of regulation of foreign entities, they would be subject to enhanced
financial disclosure requirements and accountability for financial information
filed by foreign entities for greater transparency. It is recommended that foreign
entities lodge with ACRA components of their financial statements similar to
those expected of locally-incorporated companies.
The proposed standalone legislation will not regulate the operations of subsidiaries
(incorporated in Singapore) of foreign companies, which will continue to be
regulated under the Companies Act.
The three-month public consultation period began on June 20, 2011, and
will end on September 16, 2011.