Ministry of Finance's Response to Feedback Received on Draft Companies (Amendment) Bill

Date: 04 September 2014

The Ministry of Finance (MOF) and the Accounting and Corporate Regulatory Authority (ACRA) have completed our review of feedback received during the two rounds of public consultation on the draft Companies (Amendment) Bill. The Bill will implement the recommendations of the Steering Committee for the Review of the Companies Act^[1] which have been accepted by the Government, as well as proposed changes relating to foreign companies^[2] and other aspects of the Companies Act. The changes aim to reduce regulatory burden on companies, provide greater business flexibility and improve the corporate governance landscape in Singapore.

Key revisions to the Bill following public consultation held in May 2013

2. In the first round of public consultation, feedback was sought on the proposed legislative amendments to implement the recommendations of the Steering Committee, as well as any operational and implementation issues that might arise from these amendments. Most feedback sought clarity or gave suggestions on the implementation, application and definitions of terms relating to the legislative amendments. Based on the feedback received, we have made some revisions (at Annex 1) to the draft Bill. The key changes are as follows:

(a) Extending the existing prohibition on companies on giving a loan, guarantee or security under section 163 to a limited liability partnership (LLP) (i.e.section 163 will prohibit a company from giving a loan, guarantee or security to another company or LLP if the directors of the lending company own orcontrol 20% or more of the total voting power or interest of the borrowing company or LLP);

(b) Not requiring a Chief Executive Officer of a non-listed company to disclose interests in: (i) securities of related corporations; and (ii) participatory interests^[3] made available by the non-listed company or its related corporations;

(c) Not allowing a company to opt out of the multiple proxies regime^[4];

(d) Replacing the term “total gross assets” with “total assets” in the new small company criteria; and

(e) Requiring share ownership and any change in share ownership of private companies to be filed on a real-time basis, instead of within a 14-day period.

MOF’s response following public consultation held in October 2013

3. In the second round of public consultation, the public was asked to comment on proposed legislative amendments relating to foreign companies, new powers for the Registrar of Companies to debar directors and company secretaries of non-compliant companies, as well as three new areas under review - namely, preferential payments to an employee of an insolvent company, transitional arrangement for bearers of share warrants and share buyback limit. After considering the feedback received, we will:

(a) change the limit on preferential payment to an employee of an insolvent company from “five months’ salary of the employee or $7,500, whichever is lower” to “five months’ salary or five times the salary cap for non-workmen^[5] referred to in Part IV of the Employment Act, whichever is lower”;

(b) phase out outstanding share warrants^[6] issued before 29 December 1967 under section 66 of the Companies Act. This is in line with the government’s policy to disallow the issuance of bearer equity instruments (which include share warrants) due to their risks in facilitating untracked transfer of financial assets. Given that more than 40 years have passed, it is timely to end this arrangement and abolish outstanding share warrants completely. Bearers of these warrants will be given a final two-year period from the time the amendment is effected to surrender the warrants for cancellation and have their names entered in the register of members. Companies will cancel outstanding share warrants that are not surrendered for cancellation after the two-year period; and

(c) maintain the share buyback limit in the Companies Act at 20%.

4. In the course of public consultations, feedback on new issues and areas not under the scope of review by the Steering Committee or by MOF/ACRA were received. These will need further consideration in future reviews of the Companies Act.

5. A summary of the feedback received and MOF’s response for both rounds of public consultation are at Annexes 2 and 3. A summary of feedback on the three new areas consulted during the second round of public consultation is at Annex 4. Annex 5 shows a list of new issues that were raised by respondents during the public consultation.

6. MOF and ACRA would like to thank all respondents for their comments. MOF will table the Companies (Amendment) Bill in Parliament this year.

Annexes:

• Annex 1 : Key revisions to the Bill following public consultation (32 KB)

• Annex 2 : Summary of feedback received on part one of the Companies (Amendment) Bill (Revised on 12 Sep 2014) (264 KB)

• Annex 3 : Summary of feedback received on part two of the Companies (Amendment) Bill (Revised on 12 Sep 2014 (83 KB)

• Annex 4 : Summary of feedback received on three new areas (63 KB)

• Annex 5 : Summary of feedback received on new issues (50 KB)

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[1] A copy of MOF’s decision on the Steering Committee’s recommendations can be downloaded at /portals/0/data/cmsresource/SC_RCA_Final/AnnexA_SC_RCA.pdf.

[2] A copy of the proposed changes to the regulatory framework for foreign companies can be downloaded at /portals/0/data/cmsresource/public%20consultation/2013/COACT2013_2/AnnexA_COACT2.pdf.

[3] Under section 164(13) of the Companies Act, participatory interest refers to a unit in a collective investment scheme. In Singapore, local and foreign unit trusts or funds are regulated as collective investment schemes.

[4] Under the new multiple proxies regime, indirect investors, including CPF investors, can be appointed as proxies to participate in shareholders’ meetings.

[5] Based on the $2,500 salary cap for non-workmen in the Employment Act, the new limit will be $12,500.

[6] Under section 66 of the Companies Act, a company is prohibited from issuing any share warrant which entitles the bearer of the warrant to the shares specified in the warrant.