The Companies (Amendment) Bill was introduced in Parliament yesterday (28 February 2017) to amend the Companies Act (the Act) on several significant matters.
Anti-Money Laundering (AML), terrorism financing and tax evasion
First, Anti-Money Laundering (AML), terrorism financing and tax evasion. In the light of the Financial Action Taskforce’s 4th report and in view of the upcoming peer review of Singapore at the Global Forum on Transparency and Exchange of Information for Tax Purposes, the Act will be amended to:
- require companies to obtain and maintain information on the ultimate beneficial ownership of shares in the companies, and to make the information available to law enforcement authorities upon request;
- require foreign companies registered in Singapore to maintain registers of beneficial owners / controllers and public registers of shareholders;
- require liquidators to retain records of wound up companies for 5 years instead of 2;
- remove the options for companies to destroy records early if they are wound up by their members, partners or creditors;
- require officers or managers of struck off companies to retain accounting records and registers of beneficial owners (controllers) for 5 years;
- void the issuance and transfer of bearer shares and share warrants by foreign companies registered in Singapore; and
- require nominee directors or managers to disclose their nominee status and nominators to their companies.
This will facilitate in preventing money launderers, tax evaders or persons involved in terrorism financing from hiding behind the corporate veil. Similar amendments are made in respect of trusts and trustees under the Trustees Act and Limited Liability Partnerships (LLP) under the LLP Act.
Foreign Company Transfer of Registration
Second, the Act is being amended to introduce a regime where a foreign company can transfer its corporate registration to Singapore by registering as a company limited by shares (private limited, public limited) here.
AGMs and Annual Returns
Third, timelines for holding Annual General Meetings (AGM) and filing Annual Returns (AR) have been simplified to reduce regulatory burdens for companies. AGM timelines are pegged to the end of the financial year. Now listed companies and non-listed companies should hold their AGMs no later than the last day of the 4th month or 6th month after FYE respectively
Also, all private companies will be exempted from holding AGMs subject to specified safeguards. AGMs may be dispensed with if the company is dormant or if it’s a private limited company and the company’s financial statements (and other relevant AGM documents) have been circulated to members of the company.
The Act is also being amended to facilitate corporate restructuring and salvage in insolvency. This is especially pertinent given the weakening economy and increasing number of ailing companies. These are also in accordance with recommendations made in the report of the Insolvency Law Review Committee (4 October 2013) and the report of the Committee to Strengthen Singapore as an International Centre for Debt Restructuring (20 April 2016). Amendments include:
- allowing the Court to make an order protecting a company certain legal actions or proceedings to be taken against against the company (a moratorium) if the company has made or undertakes to make an application for Scheme of Arrangement under s 210(1)(a) or new s 211I / s 211B;
- allowing the Court to order a similar moratorium in favour of its subsidiary, holding company or ultimate holding company in a new s 211C;
- empower the Court to order that certain debts arising from rescue financing obtained by the company (including one under judicial management) are given priority over the claims of other creditors or are to be secured by a security interest in a new s 211E / s 227HA;
- allowing the Court to approve a compromise or an arrangement between a company and its creditors despite the requisite majority under s 210(3AB) not being met in respect of every class of creditors, provided that the dissenting classes of creditors will not be unfairly prejudiced by the compromise or arrangement in a new s 211H;
- introducing a new process by which the Court can approve a compromise or arrangement without a meeting of the creditors in a new s 211I;
- allowing the Court to make a judicial management order for any corporation liable to be wound up under the Act, in a new s 227AA;
- modifying the insolvency requirements needed to be met for a judicial management order.
New provisions are introduced to facilitate cross-border insolvency such as to:
- permit a foreign company to be wound up only if it has a substantial connection with Singapore and provisions are made on the matters which the Court may rely on when determining this (s 351);
- adopt the UNCITRAL Model Law on Cross-Border Insolvency in a new Division 6 of Part X and new Tenth Schedule;
- abolish the ring-fencing of assets of a foreign company in a winding up, save in certain specified exceptions.
The bills also seek to remove the legal requirement for companies and limited liability partnerships (LLPs) to use common seals. Companies and LLPs can choose to retain the use of common seals based on business needs.