ACRA seeks feedback on wide-ranging proposed amendments to Companies Act: Allen & Gledhill

7 August 2020

On 20 July 2020, the Accounting and Corporate Regulatory Authority (“ACRA”) launched a public consultation on wide-ranging proposed amendments to the Companies Act (“CA”) and invited feedback on the proposed changes, which were the recommendations of the Companies Act Working Group (“CAWG”). The consultation closed on 17 August 2020.

The CAWG was set up in January 2018 to review several areas of the CA in an effort to ensure Singapore’s corporate laws and regulatory framework stay competitive. The recommendations of the CAWG took into consideration the evolving business environment including developments in the use of technology by companies, and striking a balance between an effective and efficient regulatory framework and the compliance burden on companies.

Altogether, the CAWG reviewed 56 issues and recommended 36 legislative reforms covering areas such as facilitating digitalisation (including the dematerialisation of physical share certificates and digital meetings), types of companies and financial reporting, matters relating to directors and company secretaries, safeguarding shareholders’ interests, and share capital and financial assistance.

ACRA also conducted a review of other requirements in the CA with a view to streamlining the filing process and updating regulatory requirements.

Allen & Gledhill Partner Andrew M. Lim is a member of the CAWG.

Some of the proposed amendments to the CA are as follows:

Facilitating digitalisation
- Introduce enabling provision stating that companies are not required to have physical share certificates in order to show evidence of ownership. A dematerialised version of share certificate or entry in the register of members should suffice to show evidence of ownership.
- Introduce enabling provision to clarify that unless the constitution provides otherwise, a company may hold general meetings digitally and in more than one location. In the case of listed companies, Singapore Exchange (“SGX”) should decide whether and what other rules should be prescribed under the SGX Listing Rules with respect to the holding of digital general meetings. The existing right under section 392(3) to apply to court to invalidate a proceeding (including a general meeting) should also apply to general meetings held using digital means.
Types of companies and financial reporting
- Introduce new concept of “publicly accountable company” for financial reporting purposes.
- Introduce concept of micro non-publicly accountable companies which are allowed to prepare reduced/simplified financial statements. A “micro” company refers to a company whose total annual revenue and total assets are each not more than S$500,000 for last two consecutive financial years.
Matters relating to directors and company secretaries
- Remove prohibition against a sole director of a company acting or appointing himself or herself as company secretary. A sole director could competently act both as a director and company secretary. Removing prohibition would not necessarily compromise the proper maintenance of statutory registers and records.
Safeguarding shareholders’ interests
- Amend section 74 to mandate that a variation or abrogation of class rights must be approved by at least 75% of the class-rights holders, unless otherwise provided in company’s constitution. To retain provision which allows shareholders holding 5% of the total number of issued shares of that class to apply to the court to object to proposed variation or abrogation of class rights.
- Shares held or acquired by the certain persons to be excluded from the computation of the 90% threshold for compulsory acquisition under section 215.
Share capital and financial assistance
- Amend section 76(8)(ga) to clarify that expenses of initial public offerings would not constitute financial assistance, regardless of whether new securities or existing securities are being offered.