ACRA issues its Practice Direction No. 1 of 2013

27 February 2013

Jolie Giouw

The Accounting and Corporate Regulatory Authority of Singapore (ACRA) has on 22 January 2013 issued practice directions setting out the legal requirements of the Companies Act (Act) in relation to financial reporting imposed on companies and foreign companies and the general procedures to be follow when applications under the Act are made.

Types of applications that may be made under the Act

Approval to acquire land under section 23(2)

A company formed for specified purposes such as providing recreation or promoting commerce or any other like object not involving the acquisition of gain by the company or its individual members must obtain approval before it may acquire, sell or mortgage property/land.  

Approval to drop “Limited” or “Berhad” from a company’s name under sections 29(1) and 29 (2)

These applications may be approved if certain requirements are met. Companies intending to register as charities are specifically advised to do so prior to applying to omit the word “Limited” from their name.

Approval for alteration of M & A under section 29(4)

Companies wishing to alter its memorandum and articles of association which require consent from the Minister must apply for such consent.

Order authorising any subsidiary to continue to have or to adopt a financial year end which does not coincide with that of the holding company under section 200(3)

Section 200(1) of the Act requires directors of a holding company that is not a foreign company to take steps to align the financial year ends of its subsidiaries with that of the holding company within 2 years from the date a company becomes a subsidiary of the holding company. However, the directors of the holding company may seek an exemption from this requirement under section 200(3) if compliance would be unduly burdensome or would render the holding company’s accounts misleading.

Relief from any requirement of the Accounting Standards under section 201(14)

Sections 201(1A), (3) and (3A) of the Act require the directors of a company to present a set of true and fair financial statements at its annual general meeting (“AGM”). The statements must comply with the provisions of the Act and the Companies (Accounting Standards) Regulations (“Accounting Standards”), which includes the Singapore Financial Reporting Standards. The company is allowed to depart from the Accounting Standards if certain requirements are met.

Relief from requirements as to form and content of accounts and reports under section 202

Section 202 of the Act allows a company to apply for relief from requirements as to the form and content of accounts or consolidated accounts (other than a requirement of the Accounting Standards) or to the form and content of the directors’ report required by section 201 (6) or (6A). Section 202 of the Act allows a company to apply for relief if compliance would be unduly burdensome, render the accounts or reports misleading or be inappropriate in the company’s circumstances.

Waiver from filing of local branch accounts under section 373(5)

A foreign company is required under section 373(5) of the Act to lodge the audited accounts of its Singapore branch that, in so far as is practicable, complies with the Accounting Standards and which gives a true and fair view of the branch’s operations in Singapore for the last preceding financial year of the foreign company (“Branch Accounts”). A foreign company may apply for an exemption if compliance is impractical having regard to the nature of the foreign company's operations in Singapore, it would be of no real value to prepare Branch Accounts, having regard to the amount involved it would involve expense unduly out of proportion to its value, or it would be misleading or harmful to the business of the foreign company or to its related company.

Relief from the requirements relating to the form and content of accounts or reports lodged under section 373(7)

Section 373(1) of the Act imposes an obligation on a foreign company which is required to prepare its balance sheet and the requisite documents (“Head Office Accounts”) and hold an AGM by the laws of the place of its incorporation or origin, to file the Head Office Accounts within 2 months after its AGM, together with a declaration verifying that they are true copies. If a foreign company is not required to prepare its Head Office Accounts and hold an AGM in its place of incorporation or origin, section 373(4) of the Act allows the foreign company to file a set of audited accounts which complies with the Accounting Standards, within 7 months from the end of its last FYE. A declaration verifying that the accounts are true copies must also be lodged with the accounts.

A foreign company may apply under section 373(7) of the Act for relief from the requirements relating to the form and content of its accounts or reports to be lodged. A foreign company which is unable to lodge the audited accounts of its Singapore branch that, in so far as is practicable, complies with the Accounting Standards, may similarly apply for such relief under section 373(7) of the Act.

General procedure

Applications to drop the word “Limited” or “Berhad” from a company’s name, or to alter a company’s memorandum and articles of association should be lodged with ACRA at least two months before the expected date of response and all other  applications in relation to the  should be lodged at least one month before the expected date of response.

Care should be taken to ensure that applications are accompanied by all the required information as stipulated in the respective annexes to the Practice Direction to avoid a delay in the review and processing of the application. ACRA will notify applicants if there is incomplete information or if additional information is required. Should the applicant fail to furnish ACRA with the requested information within 5 working days or seek an extension of time, ACRA will process the application based on the information made available or reject the application if the available information is insufficient to support the application.

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