Parliament created the Companies Act to minimize regulatory burdens on Singaporean companies and thereby increase the overall ease of doing business in the country. In 2016, both the Ministry of Finance (MOF) and ACRA conducted a review of the Companies Act. They did this to check that the act itself did not weaken Singapore’s position as a global hub for foreign and local businesses and investors. Upon review, they proposed the Companies (Amendment) Bill of 2017 and the Limited Liability Partnerships (Amendment) Bill. Parliament passed both of these proposals in March of 2017.
These latest amendments demonstrate Singapore’s commitment to the country’s global position. They also prove Singapore’s reliance on a robust regulatory regime.
What changes are being made? Why?
Aim: Reduce Compliance Costs and Administrative Burden
- Private companies not required to hold annual general meetings (AGMs) subject to specified safeguards
- Simplify the requirements for holding AGMs and filing annual returns
- Remove the mandatory requirement to use a common seal
Aim: Make the ownership and control of business entities more transparent
- All companies and LLPs required to obtain and maintain beneficial ownership information (unless exempted)
Aim: Boost Singapore’s Competitiveness as a Business Hub
- Introduce an inward re-domiciliation regime (allows foreign corporate entities to easily transfer their registration to Singapore)
Companies of all sizes benefit from these regulations, including small and medium enterprises (SMEs). Private companies face reduced compliance costs, as they are now exempt from holding AGMs. Administrative burdens also decline with these new regulations, as the timeline for filing annual returns and holding AGMs is simplified.
Singapore’s economy also benefits thanks to the inward re-domiciliation regime. Easier transfer of foreign company registration translates into a higher level of connectivity for the country as well as increased foreign investment.
The reputation of Singapore also improves with these regulations. They bring transparency in regard to the ownership and control of business entities, as companies and LLPs are required to obtain and maintain beneficial ownership information. However, certain exemptions will be given. Still, these regulations uphold Singapore as a clean and well trusted financial hub in which companies can operate.
Singapore’s corporate rescue and restructuring process are also facing changes. Please read the Ministry of Law’s website for more information.
Register of controllers
The amendments require that Singapore-incorporated companies, Singapore-registered LLPs and Singapore-registered branches of foreign corporations maintain a register of controllers.
Who is a controller?
The new section 386AB of the Companies Act (Cap. 50 of Singapore) (CA) defines an individual or a corporation as a “controller” of a reporting entity based on one of two thresholds:
- Significant control: (a) the right to appoint or remove a majority of directors; (b) the right to exercise or the actual exercise of significant influence or control over the relevant entity; or (c) holding more than 25% of the voting rights (whether directly or indirectly) on matters to be decided at a meeting of the reporting entity; or
- Significant interest: having an interest in more than 25% of the shares or shares with more than 25% of the total voting power in the company. Where the entity has no share capital, holding the right to share in more than 25% of the capital or profits of the company.
Who has an “interest”?
Sections 7(1A) to (6A), (8), (9) and (10) of the CA generally determines if a person has an “interest”.
The new regulations dictate that shares or rights held by a nominee on behalf of another individual will be considered held by the individual, rather than the nominee.
The new Sixteenth Schedule also provides the following in respect of joint interests and rights:
- A person who has an interest in or holds rights jointly with another person is considered to have an interest in that share, or as holding that right (as the case may be).
- If shares in respect of which a person has an interest and the shares in respect of which another person has an interest are the subject of a joint arrangement between those persons, then each person will be considered as having an interest in the combined shares of both of them.
- If rights held by a person and the rights held by another person are the subject of a joint arrangement between those persons, then each person will be considered as holding the combined rights of both of them.
- In this connection, a joint arrangement is defined broadly to be an arrangement to exercise all or substantially all rights (conferred by the shares or rights) jointly in a pre-determined way. It includes any scheme, agreement or understanding. Such joint arrangement need not be legally enforceable, but there must be at least some degree of stability about it, so one-off “arrangements” do not qualify.
The new regulations also include reporting requirements. These require careful scrutiny up the chain of legal entities when a reporting entity acts as subsidiary or part of a group.
All controllers of the reporting entity will generally be eligible for registration, unless the controller’s significant interest in or significant control over the reporting entity is through certain entities (such as a Singapore-incorporated company) required to maintain a register of controllers or other entities exempted from this regime (see new section 386AC). In this respect, foreign companies without a branch registered in Singapore do not come under the regime and tracing should continue up the chain.
Inspection of register – Not available for general public inspection
Under the new section 386AF(11), the register of controllers must not be disclosed or made available for inspection, except upon request by Accounting and Corporate Regulatory Authority (ACRA) or other public agencies.
The new section 386AA of the CA exempts certain entities from the requirement to maintain the register of controllers.
The exempted entities include public companies listed in Singapore, Singapore financial institutions, and companies listed outside Singapore and which are subject to regulatory disclosure requirements and adequate transparency requirements in respect of their beneficial owners.
Duties on officers and controllers
A reporting entity will have certain duties such as the following:
- Duty to investigate and obtain information (new section 386AG)
- Duty to keep information up-to-date (new section 386AH)
- Duty to correct information (new section 386AI)
Individuals and corporations who know or believe that they are controllers eligible fore registration are also under the duty to provide information and change of information (see new sections 386AJ and 386AK).
In prosecuting a corporation or partnership for a breach of any of these duties, ACRA will consider the state of mind of any officer, employee or agent of that corporation or partnership as evidence that the corporation or partnership had that state of mind (new section 386AD).
Effective date – 31 March 2017
These requirements for the register of controllers will take effect from 31 March 2017 per the ACRA.
To ensure that entities are prepared to comply with the new regulations, pre existing entities are given a transitional period of 60 days from 31 March. By the end of that time frame they must have registered controllers and thereafter must continue to maintain the required registers. Companies considered new (incorporated on or after 31 March) must comply with the regulations within 30 days of incorporation.
Requirement of nominee directors to disclose nominee status
The section 386AL requires a nominee director of a Singapore-incorporated company to:
- Inform the company of that fact;
- Provide prescribed particulars of the person for whom the director is a nominee; and
- Inform the company of changes in the director’s particulars or status as nominee.
- Meaning of nominee director
For the purposes of these reporting requirements, a nominee director is a director accustomed or under an obligation whether formal or informal to act in accordance with the directions, instructions or wishes of any other person (new section 386AL(8)).
Register of nominee directors – Not available for general public Inspection
These regulations also require that Singapore-incorporated companies keep a register of its directors who also act as nominees. Only requests from the ACRA or other public agencies may inspect or request copies of the register (new section 386AL(5)).
Effective date – 31 March 2017
The requirements regarding disclosure of a director’s staus as a nominee will take effect from 31 March 2017 per the ACRA. Similar to before, existing nominee directors will be granted a transitional period of 60 days from 31 March. The disclosure requirements applies within 30 days for nominee directors of new companies Companies are considered new if they incorporated on or after 31 March.
Inward re-domiciliation for foreign entities
As mentioned before, these regulations introduce an inward re-domiciliation regime in Singapore. This allows foreign corporate entities to transfer their registration to Singapore without having to set up subsidiaries. Now, foreign corporate entities looking to relocate their headquarters to Singapore may do so while keeping their corporate history and branding.
Still, foreign corporate entities in this category must meet certain requirements. For instance, they are required to be bodies corporate (new section 356) that can adapt their legal structure to the companies limited by shares structure under the CA (new section 358). Other qualifying criteria also holds (new section 360).
A foreign corporate entity that is re-domiciled to Singapore will be required to comply with the CA like any other Singapore-incorporated company (new section 361(1)). Re-domiciliation will not affect the obligations, liabilities, properties or rights of the foreign corporate entities (new section 361(2)).
Effective date – first half of 2017
The re-domiciliation regime will be implemented within the first half of 2017 per the ACRA.
Singapore’s government is committed to the transparency of business operations in the nation. Additionally, the legislation prioritizes growth and global positioning for the city state. These regulations in sum aim to strengthen Singapore as a leading financial centre.
If you are looking to incorporate your company in Singapore, either as a foreign or local entity, check out our website here.