Parliament has passed the Companies (Amendment) Bill 2014 (the Bill), making over 200 changes to Singapore’s company laws. In this article, we summarise some of the key changes affecting the way companies are to be governed.
’ONE SHARE ONE VOTE’ RULE REMOVED
The ‘one share one vote’ restriction imposed on public companies has been lifted. Public companies will now be able to issue shares with different voting rights (including shares with limited or no voting powers), if permitted by its constitutional documents. This will provide public companies with greater flexibility in capital management. In order to create a different class of shares, a public company is required to pass a special resolution and the rights attached to such different class of shares must also be set out in the constitutional documents of the company.
STATUTORY DUTY OF DISCLOSURE EXTENDED TO CEOS
The Bill has extended the duty of disclosure of conflict of interest and shareholding interest in a company to CEOs. The disclosure regime was previously only applicable to directors. This change has been introduced owing to the increasing importance of the CEO’s role in the management and operation of a company.
‘SMALL COMPANY’ CRITERIA FOR EXEMPTION FROM STATUTORY AUDIT
For a private company to avail itself of an exemption from statutory audit, the Bill has replaced the concept of an ‘exempt private company’ (a private company with no corporate shareholders and no more than 20 members) with a new concept of a ‘small company’. To qualify as a ‘small company’ in a particular financial year, a company must satisfy any 2 of the following criteria for each of the 2 financial years immediately preceding that financial year:
- the revenue of the company for each financial year does not exceed S$10 million;
- the value of the company’s total assets at the end of each financial year does not exceed S$10 million; and
- it has at the end of each financial year not more than 50 employees.
A parent company or a subsidiary company will not be able to avail itself of this exemption unless such parent company or subsidiary company itself is a small company and the corporate group is a ‘small group’ i.e. a group which satisfies any 2 of the 3 criteria mentioned above on a consolidated group basis.
Existing safeguards like keeping proper accounting records and empowering shareholders with 5% voting rights to require an audit remain intact.
INTRODUCTION OF MULTIPLE PROXIES REGIME
Under the Bill, a shareholder of a company classified as a ‘relevant intermediary’ (such as licensed banks and capital market services licence holders), may appoint more than 2 proxies to attend and vote at shareholders’ meetings, unlike under the previous regime where a shareholder could appoint a maximum of 2 proxies. This will enable indirect investors, such as Central Provident Fund (CPF) investors, to be appointed as proxies to attend shareholders’ meetings and encourage more active shareholder participation in general meetings.
CONSENT OF ACRA NEEDED FOR PREMATURE RESIGNATION BY AUDITORS OF PUBLIC INTEREST COMPANIES
The Bill requires the auditors of public interest companies (such as companies listed on the Singapore Exchange) or their subsidiaries to obtain consent from the Accounting and Corporate Regulatory Authority (ACRA) if they wish to retire before the end of their terms of appointment. This will ensure that a company is not unfairly left without an auditor and will also protect an auditor where the company refuses to hold a general meeting to appoint a replacement auditor.
REGISTRAR’S POWER TO DEBAR DIRECTORS AND COMPANY SECRETARIES
The Bill empowers the Registrar of Companies to pass a debarment order against a director or a company secretary for failure to file any return, account or other document for a continuous period of 3 months or more. A debarred person will not be allowed to take any new appointments, though he may continue with his existing appointments immediately before the order was passed. Either upon an application from the debarred person or on his own accord, the Registrar may cancel or suspend the debarment order if the default is rectified or on other grounds as may be prescribed.