The Ministry of Finance (MOF) and the Accounting and Corporate Regulatory Authority (ACRA) are seeking public feedback on the second part of the draft Companies (Amendment) Bill covering legislative amendments in respect of foreign companies and other aspects of the Companies Act of Singapore. Public feedback is also being sought in respect of three new areas.
Key Proposed Amendments – Foreign Companies
The key proposed amendments to the existing regulatory framework governing foreign companies are as follows:
- A foreign company will only be required to appoint at least one authorised representative (referred to as “agent” under the current framework) instead of at least two. The changes are intended to streamline registration requirements and reduce the regulatory burden on foreign companies.
- A foreign company will be required to file with the Registrar similar components of its financial statements as those expected of a Singapore-incorporated company. Such change is intended to enhance continuing disclosure requirements and accountability for financial reporting by foreign companies. The public will have access to a more comprehensive picture of the financial position of such companies, comparable to what they can access for Singapore-incorporated companies.
- There will be three new grounds for striking off foreign companies:
- Where the sole authorised representative has given notice of resignation to the foreign company and lodged a notice with the Registrar, but the foreign company has failed to respond or appoint another authorised representative within a period of twelve months.
- Where an authorised representative of a foreign company has received no instructions from that foreign company within twelve months of a request made by the authorised representative to determine if the foreign company intends to continue its registration in Singapore.
- Where the foreign company does not appoint a replacement authorised representative for more than six months after the death of the sole authorised representative.
Key Proposed Amendments – Other Aspects of the Companies Act
The key proposed amendments to other aspects of the Companies Act are as follows:
- Presently, if a person and his associates control 20% or more of a body corporate, that person is deemed to have an interest in any shares held by that body corporate. The scope of the deemed interest provision will be narrowed by the exclusion of a company’s holding company and fellow subsidiaries from the definition of associates which currently includes a holding company, fellow subsidiaries and subsidiaries.
- The Registrar will have enhanced powers to rectify errors in the register.
- The record-keeping requirement obliging every company, its directors and managers to retain documents used to prepare financial statements for a minimum of five years shall be extended to financial statements laid before an annual general meeting or sent to members.
- The circumstances under which the Registrar may determine that a company is not carrying on business for the purposes of striking off will be enhanced. The Registrar may take into consideration the following circumstances in determining whether a company is not carrying on business:
- The company has failed to file its financial statements/annual return for a prescribed period.
- The company has failed to respond to correspondence sent by the Registrar beyond a specified period.
- The Registrar has received information from credible third-party sources such as government agencies that the company is not carrying on business and these agencies have requested ACRA to initiate striking off action.
- The Company is left with no directors or locally resident directors or the Registrar is unable to contact or locate the directors of the company.
- A person may be disqualified from acting as a director if three or more companies for which he was a director are struck off as a result of ACRA-initiated reviews within a period of five years. This change seeks to prompt company directors to wind up defunct companies of their own accord.
- The Registrar to be given new powers to debar directors and secretaries who have failed to lodge any documents at least three months after the prescribed deadlines under the Companies Act. A debarred person is not permitted to take on any new appointment as director or company secretary (as the case may be) although such debarred person may continue with existing appointments. The debarment will be lifted when the default has been rectified or the debarred person has ceased to be a director or company secretary (as the case may be) of the company in default.
Key Proposed Amendments – New Areas under Review
The three new areas under review by MOF and ACRA are as follows:
- Whether the share buyback limit in the Companies Act should be further liberalised or removed to allow a Singapore-incorporated company to have greater flexibility in buying back its shares.
- Whether the salary cap for priority payment to an employee of an insolvent company should be updated and a review of the ranking of priority payments to an employee of an insolvent company.
- Phasing out the transitional arrangements in place for bearers of share warrants to convert these shares to registered shares with feedback being sought on the appropriate methods for the phasing out of outstanding share warrants, if any.
The consultation documents can be accessed on MOF’s website (www.mof.gov.sg), ACRA’s website (www.acra.gov.sg) and the REACH consultation portal (www.reach.gov.sg). A summary of the comments received from the consultation exercise together with responses by MOF and ACRA are expected in early 2014.