Recent Changes to the Singapore Company Act

Last modified: December 11, 2015

Singapore-Company-Act

One of the factors that contribute to the Singapore’s being an attractive investment destination is the regime’s commitment to upgrading its laws and legislations. It helps its business community in dealing with the changes in the business circumstances at the practical level.

Changes to the Singapore Company Act – Phase I

On 1 July 2015, Singapore implemented improved audit exemption criterion for the private companies. The latest changes to the Company Act (Chapter 50 of 2006 Revised Edition) were passed by the parliament 8 October 2014. ACRA (Accounting and Corporate Regulatory Authority), on 15 April 2015, announced that the changes will be effected in two phases.

Audit Exemption Criterion for Exempt Private Companies

Singapore authorities have always taken care of their small businesses. In the past, they have granted audit exemption to the EPCs (Exempt Private Companies). It enabled these businesses in reducing the cost of their statutory compliance. The stipulated criterion was,

  • The company should have no more than 20 shareholders.
  • None of these should be a corporate shareholder.
  • The annual revenue should be S$5 Million or less.

Audit Exemption Criterion: Small Companies

According to the ACRA’s dictates, the new audit exemption requirements will be applicable to the financial year starting on or after 1 July 2015. Only companies, incorporated as the private companies will benefit from it. In addition, they must abide by at least 2 of the 3 following requirements.

  • Its total annual revenue is $10Million or less
  • Its total assets are $10Million or less
  • Its number of employees is 50 or less

According to the new amendment, a business tagged as the small company can lose the status if it stops being a private company or fails to meet the 2 of the 3 criterion for 2 consecutive financial years.

Small Company Status for the New and Existing Company

  • The existing Singapore companies can qualify as a small company in the first or second financial year after 1 July 2015.
  • A new business incorporated on or after 1 July 2015, also need to seek the qualification during the first or second financial year.

This is a transitional provision applicable for the first 2 financial years after enactment of the change.

Changes to the Singapore Company Act – Phase II

The implementation of the Small Company criterion was the part of phase 1. Following are the changes that will be implemented as a part of phase 2 from the first quarter of 2016.

  • Re-appoint of directors aged 70 and above will not require the shareholders’ endorsement
  • The directors will qualify for quasi-loans, credit transactions, and related arrangements
  • It will update the directors’ disclosures requirements to Chief Executive Officers of the company
  • The changes will enable a company to furnish indemnity against liability incurred by directors to third parties
  • The Company Registrar will have the right to debar directors and secretaries
  • The shareholders having 5% voting rights will be able to demand a poll
  • The law will allow multiple proxies regime to empower indirect investors
  • Simple regulations to govern the electronic transactions of documents
  • The improved framework for passing written resolutions by written means for unlisted public companies
  • The one-share-one-vote policy will no more be applicable to the public companies
  • A new mechanism for the re-denomination of shares will become available to the companies
  • The changes will introduce improved amalgamation process
  • The provisions relating to the Central Depository System will become part of the Securities and Futures Act
  • The dormant non-listed companies will enjoy exemption from the preparation of financial statements
  • The updated provisions to regulate the revision of defective accounts
  • Extension of summary financial statements to all companies
  • ACRA will now maintain electronic records of shareholders of private companies
  • ACRA will maintain electronic records of company officials like directors of all companies
  • Memorandum of association and articles of association will need to be drawn as a single constitution
  • The charities registered under the Charities Act will not need to apply to drop the term ‘limited’ from their names
  • The directors and other officials will be able to report an alternate address
  • It will update the striking-off provisions for the local Singapore companies
  • It will introduce changes in the reservation and protection of company names
  • All amendments relating to foreign companies

Singapore is quick to respond to the market forces and that is why it is an attractive destination for the investors from all over the world. Singapore is prompt in updating its regulations.

On the other hand, authorities are strict and come down heavily against unlawful activities. It is evident from the tough stance it has taken to prevent money laundering. It has implemented strict rules and regulations to the corporate service provider firms to plug one of the loopholes.