Summary of Amendments in the Companies (Amendment) Act 2014
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This article was published in the June 2015 issue of the Singapore Law Gazette,
the official publication of the Law Society of Singapore
Feature
The latest review of the Companies Act ensures that Singapore’s corporate regulatory
framework continues to meet changing business realities, reduce the regulatory
burden and ease compliance for companies whilst safeguarding a transparent
corporate environment that gives ordinary investors confidence. This is the largest
number of changes to the Companies Act since it was enacted in 1967. Various
stakeholder groups such as companies, small-and-medium enterprises (“SMEs”)
and retail investors will benefit from the changes.
Summary of Amendments in the Companies
(Amendment) Act 2014
The Companies Act (“CA”) dates back to 1967. It has since to the CA are largely based on recommendations by a
been reviewed several times to ensure that Singapore’s Steering Committee appointed by the Government to
corporate regulatory regime is a strong regime and that it streamline requirements to reduce regulatory burden on
supports our growth as a global hub for businesses and companies, while strengthening corporate governance
investors. Before this latest set of amendments, the last set where necessary.
of amendments was in 2006. The latest set of amendments
Singapore Law Gazette June 2015
Feature
Continued from page 17
The amendments will be implemented in two phases: employees, customers) other than just shareholders, who
Phase 1 will be implemented on 1 July 2015 and Phase may find the information valuable.
2 is expected to come into effect in the first quarter of
2016. This approach is being adopted as some legislative No Need for Directors’ Report2
amendments are directly linked to the registration and
filing processes in ACRA’s online business filing and Currently, directors must issue a report that is to be attached
information portal (BizFile), which is currently undergoing to the company’s financial statements, and the report must
a major revamp. Hence, about 40 per cent of the over 200 disclose directors’ benefits.
legislative amendments which have no or limited links to
BizFile will take effect in the Phase 1, whilst the rest of the The directors’ report has been abolished and the directors’
legislative amendments, will take effect in Phase 2. This statement has been enhanced to include the certain
article explains some of the key amendments. mandatory disclosures currently required under the
directors’ report, for example, directors’ shareholdings. The
Key Phase 1 Amendments statement will accompany the financial statements of the
company. The statement must contain the information to set
New “Small Company” Criteria For Audit out in the Twelfth Schedule of CA.
Exemption1
The rationale underpinning this amendment is that
Currently, a company is exempted from auditing its disclosures in the directors’ report can be adequately made
accounts annually if it is an exempt private company and elsewhere (such as in the accounts, notes to the accounts,
has an annual revenue of $5 million or less. (An exempt or the directors’ statement in s 201(15) of the Companies
private company has up to 20 members and no corporate Act).
shareholders.)
No More Prohibition Against Financial Assistance
The Amendment Act introduces a new “small company” by Private Companies3
criteria for audit exemption. To qualify for this, a company
must be a private company that meets at least two of three Currently, a company (whether private or public) is not
criteria for each of the previous two financial years. These allowed to give financial assistance to any person (directly
are: or indirectly) for the purpose of acquiring shares in the
company or holding company. The Amendment Act removes
1. Total annual revenue of not more than $10 million. the prohibition for private companies, as shares in private
companies are usually closely held, and shareholders have
2. Total assets of not more than $10 million. greater control over the company’s decision whether or not
to give financial assistance. This amendment will reduce
3. Number of employees not more than 50. costs for private companies. If necessary, creditors of such
companies who wish to seek redress can rely on laws
For a company which is part of a group, the company must pertaining to breach of directors’ duties and fraudulent and
qualify as a small company and the entire group must be a wrongful trading.
“small group”. The “small group” must meet at least two of
the three quantitative criteria on a consolidated basis for the The prohibition will, however, continue to apply to public
immediate past two consecutive FYs. companies and their subsidiaries. The prohibitions are
intended to ensure that the company’s capital are preserved
While audits can be useful, they cost time and money. It is intact and used to pursue the company’s objects. The
also not strictly necessary for ACRA to impose an annual prohibitions also prevent market manipulation. To avoid
requirement for small companies which do not have wide impeding potentially beneficial or innocuous transactions,
public interest or market impact. The amendment will reduce the Amendment Act provides that a company may give
compliance costs for at least 25,000 small companies financial assistance if this will not materially prejudice
which currently do not qualify for audit exemption. Existing the interests of the company or its shareholders, or the
safeguards will be retained (such as requiring all companies company’s ability to pay its creditors.
to keep proper accounting records, and empowering
shareholders with at least 5 per cent voting rights to require
a company to prepare audited accounts). This change also
recognises a broader group of stakeholders (eg creditors,
Singapore Law Gazette June 2015
Feature
Allowing Listed Companies to Make Selected Off- he has acquired in his capacity as director or employee of
Market Acquisition of Shares in Itself in Accordance the company, if the board has specifically authorised such
with an Agreement Authorised by the Company4 disclosure. The director must declare at the board meeting,
the name and office or position held by the shareholder. The
Currently, the Act prohibits listed companies from buying back disclosure must not be likely to prejudice the company.
shares through discriminatory offers (ie selective off-market
buybacks). The Amendment Act allows listed companies to The Amendment Act does away with the need to specify
make selective off-market acquisition of shares in itself, in such details in the mandate. Instead, the director is allowed
accordance with an agreement authorised by the company. to disclose information, if the disclosure is authorised by
The Amendment Act clarifies that sponsoring an odd-lot the board in respect of all or any class of information or
program does not amount to financial assistance. only such information specified in the authorisation. The
information must not be likely to prejudice the company.
Existing safeguards for selective off-market buybacks (eg
approval by special resolution) are retained in the Act. This will facilitate more efficient management of groups with
Additional rules relating to repurchase offers to odd-lot listed subsidiaries. Improper use of information or insider
shareholders by listed companies may be addressed in the trading will be dealt with under the Securities and Futures
listing rules. SGX is currently reviewing the SGX-ST Listing Act.
Manual for alignment with the changes to the Companies
Act, and intends to communicate its proposals to the public Shareholders’ Approval Not Required for Payment
later this year of Compensation (Subject to a Prescribed Limit)
to Executive Director for Termination of His
The amendment aims to reduce administrative costs Employment6
for companies with a substantial number of odd-lot
shareholders and allow odd-lot shareholders, who are Certain types of payments to a director for loss of office
currently discouraged from selling their small holdings due are currently exempted from shareholders’ approval under
to high transaction costs, to dispose their shares. the Act. The Amendment Act introduces a new exception,
where the:
Relaxing of Conditions for Nominee Directors to
Disclose Information to Nominating Shareholders5 1. termination of employment is based on an existing
agreement between the company and the director;
Currently, a nominee director is only allowed to disclose to
the shareholder who has nominated him, information that
Singapore Law Gazette June 2015Feature
2. amount that is paid out is not more than the director’s Expanding the Scope of Statutory Derivative Action8
total emoluments for the one year immediately
preceding that director’s termination of employment; The Amendment Act introduces amendments to allow
and derivative actions to be brought against companies listed
on a securities exchange in Singapore. This is an effective
3. particulars of payment are disclosed to shareholders way to promote the efficient enforcement of directors’ duties
before payment is made. and improve protection of minority shareholders’ rights.
Payment to an executive director as an employee should be The Amendment Act expands the scope of s 216A to allow
for the board to decide, as employees are appointed by the a complainant to bring arbitration proceedings in the name
board. Compensation for loss of office as a director should and on behalf of a company, or intervene in an arbitration
be for shareholders to decide, because shareholders to which a company is party, for the purpose of prosecuting,
appoint the directors. Such a distinction is critical, especially defending or discontinuing the arbitration on behalf of the
where a person is both director and employee. company. This amendment recognises the increasing use
of arbitration as alternative dispute resolution.
Abolition of Share Warrants7
Key Phase 2 Amendments
Since 29 December 1967, companies have been prohibited
from issuing share warrants. The bearer of a share warrant Dormant Company Financial Reporting9
is entitled to the shares specified in the warrant. There is no
requirement for the bearer’s name to be registered in the To reduce regulatory costs for dormant companies which
register of members. There is a transitional arrangement have lower public impact, the Amendment Act provides a
under the current Act (which has been in place for over new exemption for dormant non-listed companies with not
40 years), for bearers of share warrants issued before more than $500,000 in total assets from having to prepare
29 December 1967, to convert the warrants to registered financial statements for an FY. Other dormant companies
shares. which do not fulfil the said criteria will still enjoy audit
exemption. For listed companies and their subsidiaries,
To strengthen transparency of companies, the Amendment there will be no change – that is, they must prepare financial
Act phases out any outstanding share warrants by giving statements although they will be exempt from audit.
bearers two years to surrender the warrants for cancellation
and have their names entered in the register of members. Updates on Requirements Relating to Summary
Outstanding share warrants that are not surrendered Financial Statements
accordingly, will be cancelled by the company.
Currently, under s 203A, a listed public company is allowed
Update Limit on Preferential Payments to Employees to send summary financial statements to its members
of Insolvent Companies provided that they contain the prescribed information. With
the changes in the Amendment Act, all companies (and
Currently, employees of an insolvent company are entitled not only listed companies) are allowed to send summary
to their salaries, followed by retrenchment benefits and ex- financial statements to members. There will also be a new
gratia payments, in priority of other unsecured creditors. provision in the Companies Act to clearly provide that the
Under the current Act, the limit on such priority payment is directors of company are responsible for ensuring that the
“five months’ salary of the employee or $7,500, whichever summary financial statements comply with the requirements
is lower”. in the Companies Act.
The $7,500 limit is based on the monthly salary cap of The amendment serves to clarify the current drafting
$1,500 for non-workmen under the Employment Act of 1993. which does not clearly indicate directors’ responsibility
The Amendment Act updates this limit and specifies in the for summary financial statements, even though there are
subsidiary legislation a new limit of “five months’ salary or penalties for breach.
five times the salary cap for non-workmen referred to in Part
IV of the Employment Act, whichever is lower”. This means New Alternate Address Regime10
that the limit is automatically updated when the salary cap
for non-workmen is adjusted in the Employment Act. Currently, a director needs to report his personal particulars
(including residential address) to ACRA. This information
Singapore Law Gazette June 2015Feature
is available to the public. To protect one’s privacy, the constitution that is in force from time to time. If the company
Amendment Act allows a director to report an alternate chooses the latter, there is no need for it to amend its
address, but this must be an address where the director constitution whenever changes are made to the model
can be physically located. The director must still provide his constitution.
residential address to ACRA which will be kept confidential
if he opts to publish his alternate address on the public Extension of Disclosure Requirements to CEOs14
records.
Currently, directors are required to disclose:
ACRA’s Electronic Registers
1. conflict of interests in, transactions or proposed
The Amendment Act introduces the following electronic transactions with a company, or, holding of any office or
registers which will be updated and maintained with ACRA: property; and
1. ACRA’s electronic register of members (“ROM”) for 2. shareholdings in a company and its related corporations.
private companies11
The Amendment Act extends the disclosure requirements
Companies must register share ownerships and changes to to CEOs of all companies, although CEOs of non-listed
such information, with ACRA, and the effective membership/ companies need not disclose shareholdings of related
cessation date will be based on real time registration. The corporations, nor participatory interests of the non-listed
ROM will be publicly available, and a company may access company or its related corporations. This change aligns the
its own records for no charge. CA disclosure requirements with that of the Securities and
Futures Act.
2. ACRA’s electronic registers of directors,
secretaries, auditors and chief executive officers, It is important for the CEO, who is at the apex of the
for all companies12 company’s management, and can influence its decision-
making, to disclose the required information as such
A company must update the Registrar within 14 days after disclosures serve to improve transparency and promote
the date of change of director, secretary, auditor or chief better corporate governance.
executive officer. The word “manager” has been replaced
by “chief executive officer”, but the legal definition remains
substantially similar. The register of managers will be
replaced by the register of chief executive officers; and
details of any current managers in ACRA’s records will be
automatically transferred to and remain in the register of
CEOs, until the Registrar is notified by the company of any
change.
These amendments serve to streamline the administrative
process for companies, and allow the public greater access
to records.
Merging of Memorandum and Articles into
“Constitution”13
The Amendment Act introduces “Model Constitutions”. A
company may choose to adopt either the whole model (in
force at the time of registration or from time to time) for the
type of company to which it belongs; or part of the model. If
it adopts a model constitution without amendments, it does
not need to file the constitution but can refer to the type
of constitution chosen during registration. In addition, the
model constitution adopted can be either the constitution
as at the point of registration, or whatever version of the
Singapore Law Gazette June 2015Feature
Updating ACRA’s Striking Off Regime15 Remove One-Share-One-Vote Restriction for Public
Companies17
The Amendment Act introduces some key changes to the
striking off regime: The Amendment Act removes the existing one-share-
one-vote restriction for public companies. There will be
The three-month “show cause” period for a company to safeguards to protect the rights of existing shareholders
respond to a notification in the Gazette that it will be struck and ensure that investors are well-informed. For example,
off, is reduced to 60 days. shareholders’ approval must be obtained for the issuance
of different classes of shares with different voting rights.
An appeal to the Court against the striking off of a company Information on the different voting rights must be provided
must be done within six years (as opposed to 15 years when the notice of the meeting and proposed resolution
previously). is issued. The rights of shares must be specified in the
company’s constitution, and, must be clearly demarcated.
There is a clear distinction in the provisions for a company Non-voting shares will carry equal voting rights on
to apply to the Registrar for striking itself off, and for striking- resolutions for: (i) winding up; and (ii) varying the rights of
off initiated by the Registrar. Procedures for the notification, non-voting shares.
publication and objection to the striking off will, however, be
similar. The amendment liberalises the regime for non-listed public
companies which will have greater flexibility in raising
An application may be made to the Registrar to capital, and allow investors a wider range of investment
administratively restore a struck off company for striking opportunities, although for listed companies, the Singapore
off initiated by him, if no appeal to the Court has been Exchange and Monetary Authority of Singapore are still
made. The application must be within six years after the reviewing whether such companies should be allowed to
dissolution of the company. Moreover, the Registrar will issue shares with different voting rights.
have new powers to restore a company struck off due to
his mistake. (This does not include a mistake that is made New Multiple Proxies Regime to Enfranchise
on the basis of wrong, or false or misleading information Indirect Investors18
given by an applicant for the striking off of the company.)
Administrative restoration shortens the restoration period, Currently, unless the articles of a company provide
for consistency with the limitation period for the recovery of otherwise, a member can appoint up to two proxies, and a
debts and reduces costs for restoration. proxy can only vote by poll.
New Debarment Regime16 The Amendment Act introduces a new multiple-proxies
regime where specified intermediaries (such as banks
To prevent irresponsible directors and company secretaries and capital market services licence holders that provide
from holding similar positions in other companies, and nominee or custodial services), will be allowed to appoint
to promote greater compliance with filing requirements, more than two proxies to attend shareholders’ meetings.
the Registrar will be empowered to debar any director or
company secretary of a company that has failed to lodge Indirect investors (including CPF members who have
any documents that must be lodged with ACRA, at least invested in the shares of companies through CPF Agent
three months after the prescribed deadlines. If a person Banks or the CPF Board) can also be appointed as proxies
were debarred, he cannot take on any new appointment as to participate in and vote at shareholders’ meetings. Such
a director or company secretary. However, he may continue participation is important for a healthy, well-functioning
with his existing appointments. capital market.
The Registrar will exercise his powers judiciously. Before Company Expressly Allowed to Indemnify Directors
a debarment order is made against a person, ACRA will Against Claims from Third Party19
send him a notice, at least two weeks beforehand. He will
be required to explain why he should not be debarred. The As Singapore companies become more globalised, there
debarment order may be lifted by the Registrar when the is the risk of such companies being exposed to liabilities to
default has been rectified, or on such other prescribed third parties (for example, arising from the frequent class
grounds. actions by groups of shareholders in the US). Thus, the
Companies Act is amended to expressly allow a company to
Singapore Law Gazette June 2015Feature
indemnify its officers (including directors) for claims brought else to replace him; and if he were to pass away, then the
by a third party, except for certain specified liabilities. foreign company must find a replacement within 21 days.
Company Allowed to Indemnify Directors Against Alignment of financial reporting requirements with local
Potential Liability20 companies23
The Act will be amended to state clearly that a company can Under the current Act, the balance sheet merely provides
lend funds to a director for meeting expenditure incurred or an overview of a company’s financial condition but does not
to be incurred by him in defending criminal/civil proceedings provide details of the company’s financial transactions over
in connection with any alleged negligence, default or breach an interval of time. ACRA would prefer a more comprehensive
of duty/trust by the director in relation to the company, to disclosure requirement that provides greater consistency
enable the director to avoid incurring such expenditure. with the information available on local companies.
Such a loan will be subject to specified terms, namely that
the loan must be repaid to the company/or any liability of Depending on whether a foreign company is required by
the company must be discharged if in the event that the the law of the place of its incorporation to prepare financial
director is convicted in the proceedings, or judgment is statements in accordance with applicable accounting
given against him in the proceedings, or the Court refuses standards which are similar to the Singapore Financial
to grant the director relief. Reporting Standards, or, standards which are acceptable to
ACRA, the amended provisions require a foreign company
Extend Regime for Loans to Include Quasi-Loans, to lodge its financial statements with ACRA with similar
Credit Transactions, Related Arrangements21 components in the statements like those expected of
locally-incorporated companies. The foreign company and
Currently, a company (other than an exempt private the directors and authorised representative who knowingly
company (“EPC”)) is not allowed to make loans, or provide and wilfully authorise or permit the default, would be liable
a guarantee, or provide security in connection with loans to a fine not exceeding $50,000.
made to its directors, or directors of a related company and
their spouse or children; and another company (“borrowing Expanding grounds for striking-off of foreign company24
company”) if the directors of the lending company have
interest in 20 per cent or more of shares of borrowing Currently, the Registrar may strike-off a foreign company
company. where he has reasonable cause to believe that the foreign
company has ceased to carry on business or to have a
The Amendment Act extends the above prohibition to quasi- place of business in Singapore; or if he is satisfied that the
loans, credit transactions or taking part in arrangements foreign company is being used for an unlawful purpose or
in connection with such director-connected loans by the for a purpose prejudicial to public peace, welfare or good
company; and loans, quasi-loans, credit transactions and order etc.
related arrangements made or entered into for limited
liability partnerships (“LLP”) connected to a company’s To safeguard for the sole authorised representative of a
directors (ie where a director is interested in 20 per cent or foreign company, the Amendment Act introduces three new
more of the total voting power in that LLP). grounds for striking-off:
Amendments Relating to Foreign Companies 1. where the authorised representative wishes to resign
but is unable to do so because there is no one to
Reduction in Number of agents and renaming of “agent” replace him, and the foreign company has failed to
to “authorised representative”22 respond or act on this matter within 12 months;
The current requirement for a foreign company to appoint 2. where the authorised representative has asked the
at least two locally-resident agents, will be reduced to a foreign company whether it intends to cancel or
minimum of one under the Amendment Act. The term “agent” continue its registration under the Companies Act,
will be replaced by “authorised representative”. This new and the foreign company has not responded with any
change of name is meant to show the importance of the role instructions within 12 months of this request.
of the authorised representative who is accountable and
responsible for the foreign company. This sole authorised 3. where the foreign company does not appoint a
representative can only resign where there is somebody replacement authorised representative for more than
Singapore Law Gazette June 2015Feature
six months following the death of the sole authorised 15 Amended s 344 and new ss 344A to G.
representative. 16 New s 155B.
17 New s 64 and 64A.
The striking off affects only the registration of the foreign
18 Amendments to s 181.
company in Singapore, and not its existence.
19 New s 172B.
This article is not intended to be exhaustive. Further details 20 New ss 163A and 163B.
are available at: https://www.acra.gov.sg/Legislation/
21 Amendments to ss 162 and 163.
Companies_Act_Reform/
22 Repeal and re-enactment of s 368.
23 Repeal and re-enactment of s 373.
► Law Reform Department
24 Amendment of s 377.
Accounting and Corporate Regulatory Authority
Notes
1 New s 205C and Thirteenth Schedule.
2 Repeal and re-enactment of s 201.
3 Amendment of s 76.
4 Amendment of s 76D.
5 Amendment of s 158.
6 Amendment of s 168.
7 Amendment of s 66.
8 Amendment of s 216A.
9 New s 201A.
10 New s 173 and ss 173A to I, new s 36, new ss 368A and B, new s 370A, amended s
372 and amended s 12.
11 New s 189A, amended ss 190 to 196, new ss 190A to D, and amended s 12.
12 New s 173 and ss 173A to I, and amended s 12.
13 New s 4(12), amended s 22, and new ss 35 to 37 and 39.
14 Amendment of s 158.
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