The Accounting and Corporate Regulatory Authority ("ACRA") has issued a public consultation on proposed amendments to the Singapore Companies Act ("CA"). The public consultation exercise will run from 20 July 2020 to 17 August 2020.
Proposed amendments by the Companies Act Working Group ("CAWG")
The CAWG was set up by ACRA to undertake a focused review of the CA. The proposed amendments reflect the need to ensure Singapore's corporate laws and regulatory framework stay competitive.
Some key recommendations by the CAWG are as follows:
- Dematerialisation of shares and facilitating digitalisation.
Under section 123(1) of the CA, a share certificate is prima facie evidence of the title of the shareholder to the shares. It is not unusual for the loss of a share certificate to be uncovered only in the course of a transaction involving share sale, swaps or splits.
CAWG recommended that an enabling provision should be introduced to the CA to dematerialise physical share certificates, which makes sense as ACRA has with effect from 3 Jan 2016 kept and maintained an electronic register of members ("EROM") of private limited companies.
Further, CAWG recommended that amendments should be made to the CA to facilitate general meetings and board meetings of a company to be held digitally.
The CAWG also recommended certain amendments for the broader application of digitalisation provisions to documents under the CA. This includes amendments to the CA to, amongst others, make it mandatory for companies to accept proxy instructions by electronic means, and allow for a wider scope of documents to be transmitted by electronic means.
- Review of company types
The concept of a "publicly accountable company" should be introduced for the purposes of financial reporting. This aims to tailor the financial reporting obligations in the CA to a broader group of stakeholders (i.e. shareholders and creditors) based on the public interest or accountability of companies.
The CAWG also recommended the concept of a "micro" company be introduced, which is a company that has its total annual revenue and total assets being not more than s$500,000 for the previous two consecutive years. A "micro" non-publicly accountable company should be allowed to prepare reduced/ simplified financial statements, rather than full sets of financial statements, to reduce business costs.
- Refining financial reporting criteria
The CAWG recommended retaining the existing requirements that all companies must file financial statements except for (a) dormant relevant companies and (b) certain prescribed companies. Further, the CAWG recommended that all filed financial statements should be made available to the public except for filed documents relating to Gazetted exempt private companies that are wholly owned by the Singapore Government under section 12(2A) of the CA.
Proposed amendments from other review
In addition to the proposed amendments by the CAWG, ACRA has also reviewed existing regulatory processes and requirements and proposed further legislative changes to the CA. The key proposed amendments are as follows:
- Streamline and clarify financial reporting requirements
ACRA recommended granting the Registrar and the Minister the power to exempt a company from complying with the requirements in the Accounting Standards  and require the company to comply with other accounting standards.
Further, foreign companies should be allowed to lodge financial statements prepared in accordance with accounting standards substantially similar to the Accounting Standards, or financial statements prepared in accordance with applicable accounting standards in its jurisdiction of incorporation. Foreign companies with insignificant operations in Singapore should also be able to lodge unaudited branch accounts, instead of audited financial statements of the Singapore branch. These amendments aim to reduce compliance costs for foreign companies.
- Remove outdated requirements and clarifying provisions under the CA
ACRA recommended removing the requirement for public companies limited by shares to hold statutory meetings and their directors to forward a statutory report to members prior to the meeting. ACRA further recommended that the Registrar should have the power to update changes in appointments of directors and secretaries, which will help to enhance accuracy of the information maintained on the registers.
It is important that Singapore's corporate regime is constantly updated to keep abreast with legislative developments in other jurisdictions and global economic developments.
With technological advancements and the increasing digitalisation of companies and processes, the CAWG's proposed amendments to the CA to facilitate digitalisation are a commendable step forward to ensure currency of the CA and increase business efficiency. The necessity of these proposed amendments are now particularly relevant in light of the current COVID-19 pandemic where physical meetings and delivery of documents become difficult and electronic communications and meetings are increasingly becoming the norm.
Further, the key proposed amendments mark a welcome change to the CA, which aim to strike a balance between more a more effective regulatory framework and reducing the compliance burden on companies, which will hopefully increase the ease of doing business in Singapore and support Singapore's competitiveness as a global business hub.
Further details on the proposed changes to the CA can be found here.
This article is produced by our Singapore office, Bird & Bird ATMD LLP, and does not constitute legal advice. It is intended to provide general information only. Please contact our lawyers if you have any specific queries.
 The Accounting Standards are prescribed by the Accounting Standards Council, and comprise Singapore Financial Reporting Standards (International), Singapore Financial Reporting Standards (“SFRS”), and SFRS for Small Entities