Non-Compliant In Annual FIling of Accounts

Parliamentary Question by Mrs Lina Chiam:

To ask the Deputy Prime Minister and Minister for Finance,

(a) from 2010 to 2015, how many listed companies and non-listed private firms have been found to be non-compliant in their annual filing of accounts;

(b) what are the reasons for their failure to file their returns punctually; and

(c) whether the Ministry will consider making it compulsory for these companies to hire corporate service providers or professional secretarial firms to train their first-time directors on the basic and key statutory requirements of the Companies Act and to improve their corporate governance.

Reply by Deputy Prime Minister and Minister for Finance Tharman Shanmugaratnam:

Under section 197 of the Companies Act, every locally-incorporated company is required to file its Annual Return with the Accounting and Corporate Regulatory Authority (ACRA) within one month after its annual general meeting. ACRA sends out letters and emails to companies to remind them to hold their annual general meetings and file their Annual Returns.  About nine in ten live companies comply.  

If a company fails to file its accounts in its Annual Return submission when required to do so^[1], it will be treated as non-compliant in filing its Annual Return. The following table shows the number and percentage of companies on ACRA’s register that were non-compliant from 2010 to 30 June 2015^[2]. 9.5% of companies were non-compliant as at end-June 2015, down from  11.3% about five years ago.  

As at 30 June 2015, two listed companies were non-compliant in filing their Annual Returns. This constitutes less than half of one percent of all listed companies^[3]. 

The most common reason cited by companies for not filing Annual Returns punctually is oversight or ignorance on the part of the director. Other reasons include: (i) internal disputes among the directors and/or shareholders of the company; (ii) inability to locate the managing directors of the company, with the remaining directors lacking the information required to file the Annual Return; and (iii) inability of the director responsible for filing the Annual Return to do so for medical reasons.

Mandating non-compliant companies to hire corporate service providers or professional secretarial firms to train first-time directors will increase business costs without necessarily addressing the reasons for non-compliance. ACRA’s approach has instead sought to raise awareness in a targeted way. In November 2014, ACRA launched the Directors’ Compliance Programme to train first-time offending directors who have failed to file the Annual Return. The training focuses on general director duties and common statutory requirements under the Companies Act, and is offered in lieu of prosecution. To date, about 1,500 directors have been trained under the programme. ACRA seeks to train up to 9,000 directors in FY2015.

For new and aspiring business owners, ACRA conducts outreach talks to help them understand the requirements for starting a business and their statutory obligations. Over 3,000 individuals have attended these talks since the latest series of talks started in 2013. ACRA has also published a handbook to help directors understand their statutory obligations^[4]. 

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^[1] Not all companies are required to file their accounts as part of their Annual Returns. The filing requirements, according to the type of company, can be found at: https://www.acra.gov.sg/components/wireframes/howToGuidesChapters.aspx?pageid=1226#1229.

^[2] The figures in the table indicate the companies’ compliance rate as at a point in time. Companies will remain in the non-compliant count until they are struck off or subsequently file their Annual Returns. If companies subsequently file their Annual Returns after their due date, they will be treated as compliant.

^[3] The breakdown for listed and non-listed companies is not available for previous years.

^[4] The guidebook can be found at the following link: https://www.acra.gov.sg/uploadedFiles/Content/Publications/Guides/ACRA_DH_interactive_final.pdf