Corporate Service Providers Bill and Companies and Limited Liability Partnerships (Miscellaneous Amendments) Bill tabled following consultation on regulatory enhancements

13 June 2024

On 7 May 2024, the Corporate Service Providers Bill (“CSP Bill”) and the Companies and Limited Liability Partnerships (Miscellaneous Amendments) Bill (“CLLPMA Bill”) (collectively, “Bills”) were tabled for first reading in Parliament.

The CSP Bill will enhance the regulatory regime for the corporate service provider (“CSP”) sector, and the CLLPMA Bill will enhance the transparency of beneficial ownership of companies and limited liability partnerships (“LLPs”). The Bills seek to ensure that the regime for the CSP sector and beneficial ownership in Singapore are in line with the standards of the Financial Action Task Force (“FATF”).

The changes in the Bills will come into operation on a date to be appointed by notification in the Gazette.

Background

On 12 March 2024, the Ministry of Finance (“MOF”) and the Accounting and Corporate Regulatory Authority (“ACRA”) launched a public consultation seeking feedback on a draft version of the Bills. More information on the consultation is set out in our article “MOF and ACRA consult on draft Corporate Service Providers Bill and proposed legislative amendments to enhance the regulation of corporate service providers and beneficial ownership transparency of companies and LLPs”.

MOF’s and ACRA’s responses to the feedback received were published on 2 May 2024.

This article outlines key features of the Bills and MOF’s and ACRA’s responses to feedback from the consultation.

Corporate Service Providers Bill

Registration as CSPs to include companies and other entities that do not file transactions with ACRA 

Noting that feedback received was supportive, MOF and ACRA have proceeded with the proposed clause in the CSP Bill which requires companies and other business entities that carry on a business in Singapore of providing any corporate service, to be registered as registered CSPs, even if they do not file transactions on behalf of their customers with ACRA. A CSP is required to appoint at least one registered qualified individual (“RQI”) in order to be registered as a registered CSP, and a qualified individual who wishes to be an RQI must be registered as such.

While MOF and ACRA noted that some respondents sought clarifications of the scope of the definition of “corporate service”, no substantial changes were made in the tabled CSP Bill. ACRA will also publish guidance on the types of business entities that have to be registered as CSPs.

Registration as CSPs to include companies and other entities that carry out any designated activity in relation to the provision of any accounting service 

Noting that feedback received was supportive, MOF and ACRA have proceeded with the proposed clause in the CSP Bill which requires companies and other business entities that carry on a business in Singapore of carrying out any designated activity in relation to the provision of any accounting service to be registered as registered CSPs.

MOF and ACRA clarified that not all accounting service providers would be required to register as CSPs. Such business entities only need to be registered as such if they are carrying on a business in and from Singapore of providing any activity designated by the FATF, in relation to the provision of any accounting service. ACRA will provide guidance on the types of business entities which are accounting service providers that have to be registered as CSPs.

Criminal liability for breaches of requirements for detecting and preventing money laundering, financing of proliferation of weapons of mass destruction, and terrorism financing

MOF and ACRA have proceeded with the proposed clauses that impose criminal liability on registered CSPs (up to S$100,000 for each breach) and their senior management (up to S$100,000 for each breach) for breaches of requirements for detecting and preventing money laundering, the financing of proliferation of weapons of mass destruction, and terrorism financing.

CSPs to be satisfied that nominee directors are fit and proper and new requirements for persons to act as nominee directors

MOF and ACRA have proceeded with their proposal to prohibit a registered CSP from arranging for a person to act as a nominee director of a company unless he is satisfied that the person is fit and proper. In determining whether the person is fit and proper, the registered CSP must take reasonable steps to satisfy himself that the person is not disqualified from acting as a director of a company under any written law, and must consider other factors to be prescribed in the subsidiary legislation. In addition, a person must not, by way of business, act as a nominee director of a company unless his acting as a nominee director of the company is arranged by a registered CSP. The requirements do not apply to a person who will be acting as a nominee director of an affiliated company.

MOF and ACRA made the following clarifications in their response:

  • The amendment will not apply retrospectively. Clause 38 of the CSP Bill has been refined to reflect this.
  • The requirement for a registered CSP to be satisfied that the person whom it arranges to act as a nominee director is fit and proper has to be complied with at the time of arrangement for each company. The fit and proper factors will be provided in subsidiary legislation and guidance to be issued by ACRA. Once an individual has been appointed as a nominee director, the company must ensure that their directors (nominee or otherwise) remain fit and proper. Directors who commit offences under the Companies Act 1967 (“Companies Act”) will be subject to penalties.
  • The definition of “affiliated company” in the tabled CSP Bill has been refined to be consistent with the existing definition in the Companies Act. The new definition of “affiliated company” is “(a) a company that employs the person; or (b) a company which by virtue of section 6 [of the Companies Act] is deemed to be related to a corporation that employs the person”.

Companies and Limited Liability Partnerships (Miscellaneous Amendments) Bill

Disclosure of nominee status of directors and shareholders and identities of their nominators to ACRA

Noting that feedback received was supportive, MOF and ACRA have proceeded with their proposed amendment to (a) require companies and foreign companies to file all information kept in their registers of nominee directors and nominee shareholders with ACRA; and (b) for ACRA to maintain such information. Upon disclosure to ACRA, the nominee status of the director/shareholder will be made publicly available, including adding the nominee status to business profile extractions. Only public agencies may access the prescribed information maintained by ACRA for the administration or enforcement of any written law.

In relation to the amount of time that would be provided to a company to file the information held in its register of nominee directors and shareholders in the central registers of nominee directors and shareholders maintained by ACRA, ACRA will notify companies in advance on the timelines and process for filing all the information in their registers of nominee directors and shareholders with ACRA.

Definition of nominee shareholders to be amended to be in alignment with updated FATF standards

Noting that feedback received was supportive, MOF and ACRA have proceeded with their proposed amendment to the definition of “nominee shareholders”. The amendment aligns Singapore’s beneficial ownership regime with the FATF standards and prevents relevant individuals from being inadvertently excluded from the register of nominee shareholders requirements.

MOF and ACRA clarified that intermediate holding companies in a group structure may be considered nominee shareholders if they fall within the amended definition, which applies to both legal persons and individuals.

Reference materials

The following materials are available on the Parliament of Singapore website www.parliament.gov.sg, MOF website www.mof.gov.sg, and ACRA website www.acra.gov.sg: