The Ministry of Finance (MOF) in Singapore has completed the review of the Companies Act and duly accepted 192 and modified 17 recommendations of the Steering Committee, the largest amendment of the Act since it’s enactment in 1967. The remaining 8 out of the initial 217 recommendations were rejected.
Why the changes?
To maintain Singapore’s Competitiveness as a Business Hub
- Reduce the burden on Companies
- Improve Corporate Governance
- Decrease the regulatory burden
- Reduce Compliance Costs
- Increase Flexibility for Companies
- Improve the positions of various stakeholder groups
- Increase in transparency
- To keep up with International Standards implaced in other jurisdictions
What it means?
Companies can now issue non-voting shares and shares carrying multiple votes. Thus providing a greater safety net in raising capital ad to meeting the needs of potential investors.
Small and Medium enterprises face a reduction in compliance costs which means the possibility that 10% of companies, roughly around 25,000 will be exempt from audit. Thus introducing a definition of small companies as stated below:
- A small company will be defined as a private firm if it meets two out of the following three criteria:(a) total annual revenue of not more than S$10m;
(b) total gross assets of not more than S$10m; and
(c) number of employees of not more than 50.
One of the many recommendations accepted involves letting public companies issue shares with different voting rights to keep pace with changes in jurisdictions in countries like the US, UK and Australia.
Mr. Tharman stated that safeguards to protect the rights of minority will be important as by saying “We will require shareholders to approve the issuance of shares with different voting rights via a special resolution, and will continue to require that holders of non-voting shares have equal voting rights on resolutions to wind up the company,”
Introduction of multiple proxies to increase greater shareholder activism and thus improve corporate governance
Further changes will also be put in place to further boost transparency and corporate governance standards by including extending statutory duty on disclosure of conflict of interests for directors to CEOs, requiring public companies to disclose why their auditors resign in the event of premature resignation and requiring auditors to seek Accounting and Corporate Regulatory Authority’s (ACRA) consent for premature resignation.
These are some of the amendments made and the other recommendations will duly amend the companies act. The Ministry of Finance will seek public feedback early next year upon the drafting of the amended bill.