November 28, 2014

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The Companies (Amendment) Act 2014 (Amendment Act) was passed by Parliament in October 2014 and will take effect in 2 phases. This article highlights key changes in the first phase. Commencing from 1 July 2015:

• Employment termination compensation to executive directors no longer requires shareholder approval if payment does not exceed total emoluments in immediately preceding year, termination is in accordance with an existing agreement with director, and payment particulars have been disclosed to shareholders.
• Auditors of SGX-listed companies and their subsidiaries must obtain ACRA’s consent for premature resignation, i.e. before the end of the appointment term. Reasons for premature resignation must be sent to every shareholder of the company. The same applies for premature resignation from other “public interest companies” (as defined in the Companies Regulation)
• Companies are exempted from statutory audit if they fulfil two of the following criteria
  for each of the two immediately preceding financial years:
  (a) revenue does not exceed $10 million
  (b) gross assets do not exceed $10 million
  (c) 50 employees or less.
  A similar exemption applies to groups if they meet these requirements on a consolidated basis.
• Private companies are allowed to provide financial assistance in relation to acquisition of shares in the company itself, or the holding company. Previously there were prohibitions on such financial assistance.
• Public companies and their subsidiaries are allowed to provide the above financial assistance, but only under limited circumstances. For example, financial assistance is permitted if such assistance does not prejudice the interests of the company, its shareholders, and its creditors, and certain prescribed conditions are met.
• Directors’ reports in financial statements have been replaced with new directors’ statements that must contain the information set out in the new Twelfth Schedule of the Companies Act.
• Companies are allowed to keep company records in hard copy or in electronic form. Where the company maintains records in electronic form, reasonable precautions are required to ensure proper maintenance and authenticity of records, and to guard against falsification. The company must provide for the manner of authenticating/ verifying the electronic records.
• Nominating directors can be authorized to disclose information to their nominating shareholders on the basis of a general mandate by the board of directors, provided that such disclosure does not prejudice the company. Previously, a specific mandate with prescribed authorization details is required.
• Shareholders of listed Singapore-incorporated companies can apply to court for leave to commence legal action in the name of, and on behalf of the listed company under s.216A (statutory derivative action). Previously this action was only available to non-listed companies.
• Share capital can be used to pay expenses (including brokerage or commission) incurred directly to issue new shares, provided that such payments are not treated as reduction of share capital.

The changes may have potentially wide-ranging effects, and affected companies should consider consulting external advisors when in doubt. More information on the amendments are available on the ACRA website www.acra.gov.sg.