Companies, Business Trusts and Other Bodies (Miscellaneous Amendments) Act 2023: Provisions on compulsory acquisition of shares, disqualification of directors and penalties imposed on directors to take effect on 1 July 2023

16 June 2023

The following key amendments in the Companies, Business Trusts and Other Bodies (Miscellaneous Amendments) Act 2023 (“Amendment Act”) will take effect on 1 July 2023: (1) changes to the computation of the threshold for compulsory acquisition of shares under section 215 of the Companies Act 1967 (“CA”), (2) amendments to provisions relating to disqualification of persons as directors under section 155A of the CA, and (3) updates to the penalties imposed on directors of companies for failing to prepare and table financial statements in compliance with the prescribed accounting standards in Singapore.

As explained by the Second Minister for Finance, Indranee Rajah, at the second reading of the Companies, Business Trusts and Other Bodies (Miscellaneous Amendments) Bill on 9 May 2023, these amendments are aimed at promoting a more pro-business environment while upholding market confidence and safeguarding public interest.

The commencement date of these amendments is set out in the Companies, Business Trusts and Other Bodies (Miscellaneous Amendments) Act 2023 (Commencement) Notification 2023, which was published on 12 June 2023.

The Amendment Act also contains provisions which permanently provide companies, business trusts and variable capital companies with the option to conduct fully virtual or hybrid meetings. These provisions will also take effect on 1 July 2023. For more information on these provisions, please refer to our article titled “Companies, Business Trusts and Other Bodies (Miscellaneous Amendments) Act 2023: Providing for fully virtual or hybrid meetings, revised threshold computation for compulsory acquisition of shares, and other amendments”.

Threshold for compulsory acquisition of shares under section 215 of the CA

The Amendment Act inserts a new subsection (9A) in section 215 of the CA. Under section 215(1), where a scheme or contract involving the transfer of all of the shares or all of the shares in any particular class in a company (“transferor company”) to a person (“transferee”) has, within four months after the making of the offer in that behalf by the transferee, been approved as to the shares or as to each class of shares whose transfer is involved by the holders of not less than 90% of the total number of those shares (excluding treasury shares) or of the shares of that class (other than shares already held at the date of the offer by the transferee, and excluding any shares in the transferor company held as treasury shares), the transferee may thereafter give notice to any dissenting shareholder that it desires to acquire the dissenting shareholder’s shares.

The effect of the new subsection (9A) is to increase the number of shares that are to be treated as held or acquired by the transferee for the purposes of section 215 and therefore does not count towards meeting the compulsory acquisition threshold.

Specifically, in respect of an offer made on or after 1 July 2023, shares held by the following persons are added to the number of shares that are to be treated as held or acquired by the transferee:

(a)  a person who is accustomed or is under an obligation whether formal or informal to act in accordance with the directions, instructions or wishes of the transferee in respect of the transferor company;

(b)  the transferee’s spouse, parent, brother, sister, son, adopted son, stepson, daughter, adopted daughter or stepdaughter;

(c)  a person whose directions, instructions or wishes the transferee is accustomed or is under an obligation whether formal or informal to act in accordance with, in respect of the transferor company;

(d)  a body corporate that is controlled by the transferee or a person mentioned in paragraph (a), (b) or (c) above.

For the purposes of paragraph (d), a body corporate is controlled by a transferee or person mentioned in paragraph (a), (b) or (c) if:

  • the transferee or person (as the case may be) is entitled to exercise or control the exercise of not less than 50% of the voting power in the body corporate or such percentage of the voting power in the body corporate as may be prescribed, whichever is lower; or
  • the body corporate is, or a majority of its directors are, accustomed or under an obligation whether formal or informal to act in accordance with the directions, instructions or wishes of the transferee or the person (as the case may be).

Disqualification of persons as directors under section 155A of the CA

The Amendment Act also amends section 155A of the CA, which disqualifies a person from acting as a director of any company or a foreign company for a period of five years if he or she was a director in at least three companies which were struck off the register by the Registrar of Companies (“Registrar”) under section 344 of the CA within a period of five years (“relevant companies”).

First, under the Amendment Act, a disqualified director will be allowed to apply to the Registrar, instead of the court, for permission to act as a director of a company, thus shortening the process and making it cheaper for a disqualified director to do so. The application may be granted by the Registrar if the Registrar thinks fit to do so, having regard to the following considerations prescribed in the Companies (Amendment No. 2) Regulations 2023:

  • the existence of any exculpatory reasons for the applicant’s failure to procure (i) the winding up of the relevant companies, or (ii) the striking of the names of the relevant companies off the register;
  • the necessity of the applicant to act as a director of, or to take part in or be concerned in the management of, the company or foreign company to which Division 2 of Part 11 of the CA applies, in respect of which the application is being made (“subject company”);
  • the applicant’s capacity to ensure that the subject company will comply with the subject company’s obligations under the CA;
  • the likelihood of the applicant procuring the winding up of the subject company, or the striking of the name of the subject company off the register, if the subject company does not carry on business or is not in operation;
  • any other considerations that the Registrar considers relevant in a particular case.

Secondly, the amendments reduce the disqualification period under section 155A from five years to three years for first-time disqualified directors, to better reflect the culpability of a disqualified director, while keeping that for repeat disqualified directors at five years.

Finally, the amendments clarify the policy intent of the disqualification provision under section 155A(1), which is that directors are disqualified so long as they have at least three companies struck off by the Registrar.

Increased penalties for failure to prepare and table financial statements in compliance with the prescribed accounting standards in Singapore 

The Amendment Act updates the penalties imposed on directors of companies for the failure to prepare and table financial statements in compliance with the prescribed accounting standards in Singapore. The maximum penalty for offences relating to not having true and fair financial statements that comply with the accounting standards will be increased to:

  • S$250,000 where there is no intent to defraud; and
  • S$250,000 and three years’ imprisonment where there is intent to defraud.

Reference materials

The following materials are available on Singapore Statutes Online sso.agc.gov.sg and the website of the Accounting and Corporate Regulatory Authority www.acra.gov.sg: