MOF, ACRA consult on proposed enhancements to Singapore’s regime on transparency and beneficial ownership of companies and LLPs
30 August 2021
On 2 July 2021, the Ministry of Finance (“MOF”) and the Accounting and Corporate Regulatory Authority (“ACRA”) launched a public consultation seeking feedback on proposed changes to the Companies Act (“CA”) and the Limited Liability Partnerships Act (“LLP Act”) relating to transparency and beneficial ownership of companies and limited liability partnerships (“LLPs”). The proposed changes are set out in the draft Corporate Registers (Miscellaneous Amendments) Bill. The consultation closed on 30 July 2021.
Background
In 2017, the CA and LLP Act were amended to improve the transparency of ownership and control of companies and LLPs, boosting Singapore’s ongoing efforts to maintain high corporate governance standards and a strong reputation as a trusted financial hub. The legislative changes required (1) local companies, foreign companies and LLPs to keep registers of controllers, (2) local companies to keep registers of nominee directors, and (3) foreign companies to keep registers of members.
Following a review of the framework, MOF and ACRA propose further enhancements to Singapore’s regime on transparency and beneficial ownership of legal persons. The amendments are aimed at reducing opportunities for the misuse of corporate entities for illicit purposes and are in line with the international standards set by the Financial Action Task Force for combating money laundering, terrorism financing and other threats to the integrity of the international financial system.
1. Require local companies, foreign companies and LLPs to enter particulars of individual(s) with executive control in their registers of controllers if no individual or legal entity having significant interest in or significant control over the entity has been identified
Currently, local companies, foreign companies and LLPs are not required to enter any particulars into their registers of controllers if no registrable controller has been identified.
Individual(s) with executive control taken to be registrable controller(s)
To enhance the transparency of ownership and control of local companies, foreign companies and LLPs, MOF/ACRA propose to amend the relevant legislation to provide that where a local company, foreign company or LLP knows or has reasonable grounds to believe that it (1) has no registrable controller, or (2) has a registrable controller but has not been able to identify the registrable controller, individual(s) with executive control of the entity are taken to be registrable controller(s) of the entity and the entity must enter in its register of controllers:
(a) a note (“Note”) stating that:
(i) the entity knows or has reasonable grounds to believe that the entity has no registrable controller or has a registrable controller but has not been able to identify the registrable controller; and
(ii) the individual(s) with executive control are taken to be the registrable controller(s) of the entity; and
(b) the prescribed particulars of the individual(s) mentioned in (a)(ii) (“Prescribed Particulars”).
The individual(s) with executive control are:
- in the case of a local company or a foreign company, each director with executive control and each chief executive officer; and
- in the case of an LLP, each partner with executive control.
The entity must enter the Note and Prescribed Particulars in its register of controllers within two business days after the date on which the entity (1) knows, or has reasonable grounds to believe that the company or foreign company has no registrable controller; or (2) having taken the reasonable steps required by section 386AG(1) of the CA or section 32G(1) of the LLP Act, forms the opinion that it is unable to identify the registrable controller.
In addition, the entity must update its register of controllers to reflect any changes in Prescribed Particulars within two business days after the date on which the entity knows, or has reasonable grounds to believe, that any change to the particulars has occurred.
Where entity subsequently enters particulars of registrable controller
If the entity subsequently enters the particulars of a registrable controller in its register of controllers under section 386AF(9) of the CA or section 32F(6) of the LLP Act, the individual(s) with executive control will no longer be taken to be the registrable controller(s) of the company or LLP from the date on which the particulars of the registrable controller are entered into the register.
At the same time, the entity must enter in its register of controllers a note stating (1) that the individual(s) with executive control are no longer taken to be registrable controller(s), and (2) the date on which the particulars of the registrable controller were entered into its register of controllers under section 386AF(9) of the CA or section 32F(6) of the LLP Act.
Individuals with executive control need not notify
Individuals with executive control, however, need not (1) notify their company or LLP that they should be taken to be registrable controllers if no individual or legal entity having significant interest in or significant control over their company or LLP has been identified, or (2) provide their particulars and any changes in their particulars to their company or LLP for the purpose of their company’s or LLP’s compliance with the proposed amendments.
These individuals would already be known to the company or LLP.
Penalties
Failure to comply with the above requirements is an offence, punishable with a maximum fine of S$5,000.
2. Require local companies and foreign companies to keep non-public registers of nominee shareholders
Local and foreign companies are currently not required to keep a register of their nominee shareholders.
To enhance the transparency of ownership and control of local and foreign companies, MOF/ACRA propose to require local and foreign companies to keep non-public registers of nominee shareholders in the prescribed form and at the prescribed place.
MOF/ACRA propose to define a “nominee shareholder” as a shareholder who (1) is accustomed or under an obligation whether formal or informal to vote, in respect of shares in the company or foreign company of which the shareholder is the registered holder, in accordance with the directions, instructions or wishes of any other person, and (2) receives dividends, in respect of shares in the company or foreign company of which the shareholder is the registered holder, on behalf of any other person.
Nominee shareholders are required to inform their companies of the fact that they are nominee shareholders and provide the prescribed particulars of their nominators within prescribed timelines.
Persons who cease to be nominee shareholders must inform their companies that they have ceased to be nominee shareholders within 30 days after the cessation. Nominee shareholders must also inform their companies of any change to the particulars provided to the company within 30 days after the change.
Companies are to update their registers of nominee shareholders within seven calendar days after receiving the information/particulars (including changes) from their nominee shareholders. Subject to section 386AM of the CA, a local or foreign company must not disclose, or make available for inspection, the register of nominee shareholders or any particulars contained in the register of nominee shareholders to any member of the public.
Failure to comply with the above requirements is an offence, punishable with a maximum fine of S$5,000. The proposed penalty is aligned with that for offences relating to the register of controllers and register of nominee directors.
3. Clarify that local companies should update their register of nominee directors within seven calendar days after receiving information and particulars from the directors
The CA requires a local company to keep a register of nominee directors. A director must (1) inform his or her company of the fact that he or she is or has ceased to be a nominee director, and (2) provide the prescribed particulars of his or her nominator to the company, including any changes to the nominator’s particulars. However, the CA is silent on whether and when companies should update their registers of nominee directors upon receiving the information and particulars from their directors. To provide clarity on the timeline for updating the register, MOF/ACRA propose to require local companies to update their registers of nominee directors within seven calendar days after receiving the information and particulars from their directors.
4. Specify a 14-day timeframe for foreign companies to update their register of members
The CA requires foreign companies to keep a register of their members. However, the CA is silent on the timeframe for foreign companies to update their registers of members where there is a change in the particulars contained in the register. To provide clarity on the timeline for updating the register, MOF/ACRA propose to expressly require foreign companies to update their registers of members within 14 days after any change in the particulars contained in the register.
Reference materials
The following materials are available on the Reach website www.reach.gov.sg: