This content is from: Local Insights

Singapore completes Companies Act review

Jane SimSerene Sia
Through a press release on October 3 2012, Singapore's Ministry of Finance (MOF) confirmed that it has completed its review of the Companies Act. Following the public consultation carried out in 2011, the MOF has accepted 192 and modified 17 recommendations of the Steering Committee.

This is the largest number of changes to the Act since it was enacted in 1967. The wide ranging changes are aimed at maintaining Singapore's competitiveness as a business hub, reduce regulatory burden and compliance costs for companies, provide greater flexibility for companies, and to improve the country's corporate governance landscape. Most importantly, it will bring benefits to various stakeholder groups such as companies, small and medium-sized enterprises (SMEs), retail investors and company directors. Following are some of the noteworthy changes:

i) Companies will be allowed to issue non-voting shares and shares carrying multiple votes, if their articles allow it and subject to certain safeguards. This will give companies greater flexibility in capital management and will align the law with that of the US, UK, New Zealand and Australia, which allow companies to issue classes of shares with different voting rights, subject to companies' articles. The Australian Stock Exchange imposes prohibitions on listed companies through listing rules.

In the case of public listed companies, however, the MOF and the Monetary Authority of Singapore (MAS) recognise that a dual-class share structure may give rise to issues pertaining to entrenchment of control, and the Singapore Exchange should, in consultation with the MAS, carefully evaluate whether the listing of companies with a dual-class share structure should be permitted and whether listed companies should be allowed to issue non-voting shares and shares with multiple votes.

In addition, the statutory duty of disclosure requirements will be extended to the chief executive officer of a company. This is consistent with the Securities and Futures Act which requires the directors and CEO of listed companies to notify the company of their shareholdings.

ii) A new small company concept will be introduced for determining the requirement for statutory audit, as this will help SMEs to reduce compliance costs. A small company will be defined as a private company that fulfils two of the following three criteria: total annual revenue of not more than S$10 million; total gross assets of not more than S$10 million ($8.21 million); and not more than 50 employees. This is expected to benefit about an additional 10% of all companies or approximately 25,000 more companies, which do not qualify under the current exemption criteria.

iii) With regard to retail investors, a multiple-proxies regime will be introduced to allow indirect investors and CPF investors to attend and vote at shareholders' meetings. This will provide for more active participation at general meetings by indirect investors, and help to strengthen the culture of corporate governance.

The MOF plans to table the amendment Bill in Parliament to implement the changes by end of 2013. MOF will seek public feedback on the draft Bill in early 2013.

For more information, please visit Ministry of Finance's website at http://app.mof.gov.sg/index.aspx for its October 2012 press release.

Jane Sim and Serene Sia

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