The Companies (Amendment) Act 2014 (the “Amendment Act”) was gazetted on 1 December 2014. Once in force, the Amendment Act will introduce wide ranging changes to the Companies Act. This article highlights in particular, the key changes in relation to corporate governance and administration.
The Amendment Act introduces a new multiple proxies regime, allowing specified intermediaries such as CPF, banks and capital market services licence holders which provide custodial services to appoint more than two (2) proxies to attend and vote at general meetings. Companies will not be able to opt out of this multiple proxies regime. This will enable indirect investors, including CPF investors as well as those who hold their shares through nominee banks or brokers, to be appointed as proxies and participate in shareholders’ meetings. Such indirect investors appointed to attend as proxies shall have the right to vote on a show of hands and on a poll with respect to the rights attached to the shares held by them, as if they were holding such shares in their own name. They will also be able to raise any queries they may have for the board of directors of the company. This will improve corporate governance and transparency, by ensuring that the company is accountable to every individual shareholder.
In view of the new multiple proxies regime, the cut-off time for submission of proxy forms will be extended from 48 hours to 72 hours to allow companies more time to prepare for meetings. Companies will have to take steps to work out the new procedures for proxy appointments within the six (6) month grace period provided from the date the Amendment Act comes into force.
Disclosure by CEOs
With the heightened recognition of the role that chief executive officers ("CEOs") (who may not be directors) play in the operations and management of a company, in order to further improve corporate governance and transparency, the Amendment Act extends the obligation to disclose interests in transactions to CEOs, in addition to directors. Such disclosure will include interests of the CEO and his family members in securities of the company and conflicts of interests in transactions with the company or arising from any offices held or properties possessed by such CEO.
Resignation of auditors
The Amendment Act also allows for an auditor of a company to resign in situations where the company refuses to hold a general meeting, or to appoint a director. However, where such company is a company listed on the SGX-ST, the auditors are required to seek the Accounting and Corporate Regulatory Authority ("ACRA")'s consent, and concurrently notify the company concerned of the reasons for their resignation if such resignation is before the end of their appointed term. This ensures that listed companies, whose shareholders include the public, will not be left in the lurch unfairly without auditors, while at the same time, alert ACRA to any potential breaches by the company under the Companies Act.
Register of members
Currently, companies have to maintain a physical register of members which is prima facie evidence of any matters inserted therein. As such, the publicly accessible records filed with ACRA may not be an accurate reflection of the actual shareholdings of the company. Pursuant to the Amendment Act, private companies will no longer be required to keep a register of members. Instead, ACRA will maintain the register of members of private companies in electronic form, which shall be used as the conclusive register of members. Any allotment or transfer of shares shall not be effective unless and until the electronic register of members is updated. This increases transparency of company's shareholdings, and removes the duplication that currently exists in the shareholding records of companies.
Any rectification of the electronic register must be effected through ACRA and companies will no longer be able to manually rectify any mistake in its shareholding register.
Following from the introduction of the electronic register as the accurate reflection of the registered shareholding of the company, the Amendment Act also provides for other situations, such as share buybacks, redemptions and consolidations, to specify that such corporate actions shall be effective upon updating of the electronic register of members with ACRA.
In order to promote greater efficiency and better administration of companies, the Amendment Act introduces simpler procedures and rules on electronic transmission by companies. Notice or documents may now be given, sent or served to members by way of electronic communications with the consent of such members, and as long as the specified modes of electronic transmission are set out in the constitution. A member is implied to have consented if the constitution of the company (a) provides for the use of electronic communications, (b) specifies the manner in which electronic communications is to be used, and (c) provides that the member shall agree to receive such notice or document by way of such electronic communications and shall not have a right to elect to receive a physical copy of such notice or document. If the constitution provides instead that the member will be given an opportunity to elect within a specified period of time whether to receive such notice or document by way of electronic communications or as a physical copy, the member shall be deemed to have consented if he fails to make an election within such specified period.