Corporate Compliance Requirements – Compliance with ACRA

 

Requirement for Register of Registrable Controllers (RORC)

Companies, foreign companies and limited liability partnerships (LLPs) (unless exempted) are expected by ACRA to maintain information on beneficial ownership in the form of a Registry of Registered Controllers (RORC) and upon request, to make this information accessible to public authorities.

Who can be a “Controller” of a Company?

1. A beneficiary / controller with a “substantial interest” is defined as a natural or legal person who has the following:
   • a holding of more than 25% of the shares
   • shares representing more than 25% of the total voting rights of the company
2. A beneficial owner/controller who exercises significant control over an entity that:
   • has the right to appoint or remove directors who hold the majority of the voting rights at meetings of the directors;
   • holds more than 25% of the voting rights in matters to be decided by a vote of the members of the corporation; or
   • has significant influence or control over the company or has the right to do so.

 

Requirement for Businesses to Maintain a Registry of Nominee Directors

Companies are required to maintain a register of directors nominated by them, which contains details of the nominee directors of the corporation.

A director is a nominee director if he or she has the formal or informal duty to act upon the instructions, directions or wishes of another person.

 

Statutory Requirements for Annual General Meeting (AGM) and the Submission of Annual Returns (AR) for Private Companies ending on or after 31 August 2020

1. Scheduling of the AGMs and filing of ARs

1. Participation in the Annual General Meeting
   • for listed companies: hold general meetings within 4 months of the fiscal year
   • for any other company: hold the Annual General Meeting within 6 months of the fiscal year
2. Filing of Annual Returns
   • for companies with share capital that maintain a register of branches outside Singapore: filing of Annual Returns within 6 months (if listed) or 8 months (if unlisted) after the financial year
   • for other companies: file Annual Returns within 5 months (if listed) or 7 months (if unlisted) after the fiscal year
   • the Annual Return can only be filed:
     • after a general meeting has been held;
     • after the mailing of the financial statements, if the corporation is not required to hold a general meeting; or
     • after the fiscal year, when the corporation does not have to send the financial reports.

2. Exemption for private companies to hold AGMs subject to specified safeguards

Private companies are exempt from the obligation to hold a general meeting if they send their annual financial statements to shareholders within 5 months of the fiscal year.

1. A shareholder who wishes to request the holding of a general meeting must notify the company holding the general meeting at least 14 days before the last day of the 6th month following the financial year.
2. The directors must hold a general meeting within 6 months of the financial year if a member of the company gives notice. The company may apply to the Registrar for an extension of the time to hold the meeting.
3. Private companies are required to hold a general meeting to prepare annual accounts if a shareholder or an auditor requests within 14 days of the annual accounts being sent.

Dormant companies exempt from sending financial statements will not be required to hold an AGM, subject to the safeguards referred to above.

3. In order to prevent companies from arbitrarily changing their FYE, the following safeguards are put in place:

1. Companies must inform the Registrar of their FYE at the time of incorporation and of any subsequent changes;
2. Companies must apply to the Registrar for permission to change their financial year:
   • if the change in the financial year results in the financial year exceeding 18 months; or
   • if the financial year has been changed within the last five years; and
3. Only the current and previous fiscal year (provided that the statutory period for holding the meeting, filing the annual report and sending the financial statements has not expired) may be changed; and
4. Unless otherwise approved by the Registrar, the fiscal year of a corporation shall not exceed 18 months in the year of its incorporation.
5. Corporations with an unusually long fiscal year (not 12 months) must notify ACRA by fiscal year change notification if they wish to avoid having to apply each year for fiscal year change approval.
6. Existing companies shall have as the date of their fiscal year any date previously notified to the Registrar. In the absence of such notification, the anniversary of the date of incorporation shall be deemed by law to be their FYE. Companies may change their FYE by notifying ACRA before or after the new FYE laws come into effect.

 

Statutory requirements for AGM and filing of AR for Private Companies ending before 31 August 2020

Every company in Singapore is required to hold its Annual General Meeting (AGM) once per calendar year and its financial statements must be submitted to the AGM for shareholder approval.

The Singapore Companies Act (Cap.50) requires each company to hold an annual general meeting:

• once per calendar year; and
• within 15 months of the date of the last General Meeting; or
• within 6 months after the end of the financial year, if earlier.

Exception: Newly founded companies are allowed to hold the first general meeting within 18 months of the date of foundation.

 

Annual General Meeting (AGM)

An AGM must be held physically anywhere in the world where the shareholders meet.

The following matters are to be discussed at an AGM:

• Approval of the report/audit report of the directors
• Approval of the fees, remuneration and emoluments of the directors
• Re-elect the director(s) (if applicable)
• For the renewal of the term of office of the statutory auditors
• Explain any dividends
• To transact any other business

Requirement for Accounts

When a shareholders’ meeting is held, the directors of the corporation are required to provide the shareholders with the relevant documents, such as the financial statements of the corporation prepared in accordance with Singaporean accounting standards, consisting of:

• Statement of the Directors
• Independent Auditors’ Report (if required)
• Balance Sheet
• Profit and Loss statement
• Statement of Changes in Equity
• Cash Flow Statement
• Corresponding notes to the Financial Statements

Note: Section 201 of the Companies Act states that annual accounts may not be prepared more than six months after the date of the meeting.

Requirements of Audited Accounts:

Criteria for exemption from audit:

For a company whose financial year begins before 1 July 2015:

• the company has no shareholders;
• the total number of individual shareholders must be less than 20; and
• the company’s annual turnover must be less than $5 million.

For a corporation with a fiscal year beginning on or after July 1, 2015, the corporation must have qualified as a small business for the last 2 consecutive fiscal years.

A corporation will be considered a small business if (a) it is a private corporation in that fiscal year and (b) it meets at least 2 of the following 3 criteria in the last 2 consecutive fiscal years:

1. its total annual revenues do not exceed $10 million;
2. its total assets do not exceed $10 million;
3. the number of employees does not exceed 50.

For a company that is part of a group of companies to benefit from the exemption from auditing:

1. the entity must qualify as a small company; and
2. the whole group must be a “small group”.

For a group to be a small group, it must meet at least 2 of the 3 quantitative criteria on a consolidated basis for the 2 financial years immediately following each other. An entity that meets the above requirements may prepare unaudited financial statements, commonly referred to as “unaudited financial statements”.

Note: A company is considered dormant during a period in which no accounting transactions take place. Dormant companies can be exempted from the obligation to prepare audited financial statements, but must continue to prepare unaudited financial statements.

 

Dormant Company

As of January 3, 2016, a dormant, unlisted company (which is not a subsidiary of a listed company) is exempt from the obligation to prepare financial statements if:

1. the entity meets the test for tangible assets; and
2. the entity has been inactive since its inception or since the end of the previous financial year.

The test for tangible assets is that the total assets of the corporation must not exceed US$500,000 at any time during the fiscal year. In the case of a parent company, the total consolidated assets of the Group may not exceed USD 500,000 at any time during the fiscal year.

Listed companies and their subsidiaries, as well as unlisted companies that do not meet the physical assets test, are required to prepare financial reports, but these reports are unaudited. This remains unchanged from the current situation.

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Requirements for an Annual Return

Under the Companies Act, all locally incorporated companies are required to file their annual returns.

The following company information is required for filing annual returns:

• Name and registration number
• Registered address
• Main activities
• Type of company during the year
• Summary of share capital and shares
• Recorded expenditure
• Information about company managers
• Information about shareholders
• Dates of the annual reports, the General Meeting and the annual accounts
• Balance sheets (XBRL format), if required

 

Filing Financial Statements in XBRL format

Your Company would be required to file its financial statements in XBRL format during the filing of the annual return, if your company is:

• Insolvent (total assets – total liabilities = negative value)
• It has at least one shareholder in the company for the year and is not dormant.

All companies are required to keep proper accounting book records for 5 years. See flexible bookkeeping packages here.

 

Application for Time Extension

If your company needs more time to meet the requirements to hold the General Meeting or filing of Annual Returns, you can apply for an extension to ACRA 2 months before the deadlines.

 

Late AGM or Annual Return may result in High Penalty Fee, Summon and/or Arrest Warrant

ACRA has taken a big step forward to ensure that the issue of AGM and AR violations is resolved. It has increased the fine to $300 for each violation regardless of the duration of the violation, increased the settlement offer to $300 for late filing of the AGM and AR under S175 and S197 respectively, and, most importantly, prohibited a person from acting as a director of a Singapore company for a violation of a relevant requirement of the Companies Act for an uninterrupted period of 3 months or longer.

The following are 3 main statutory criteria which companies and directors are liable to breach:

Companies Act Section	Statutory Requirements	Breach by
Section 175	Requirement for companies to hold AGM	Both company and director
Section 197	Lodgment of Annual Return via Bizfile online	Both company and director
Section 201(1)	Laying of financial statements at the AGM	Director

 

ACRA imposes a high penalty and summons for late filing of AGM:

• a flat penalty of $300 for late filing of AR, regardless of the duration of the default;
• a total of $300 (s175 of the Companies Act) for holding the AGM late;
• a total of $300 for the layout of out-of-date AGM financial statements (S201 of the Companies Act)

Failure to hold the AGM and to file AR will result in action by the Executive, including the offer of settlement amounts. With Timcole as your corporate secretary, you will never miss a filing deadline anymore. Corporate secretarial services packages from $288/year.

In the event that ACRA decides to take executive action for failure to hold an Annual General Meeting and/or to file AR, a three-step composition rule will be imposed to encourage early termination and deter non-compliance by the directors.

Prosecutorial action

ACRA will consider prosecuting the directors in court if:

1. They do not register and participate in the DCP if ACRA offers them the opportunity to participate in the DCP in writing (only first-time offenders are eligible); or
2. They fail to compound (when offered a chance to compound); or
3. The circumstances of the case are such that the composition is not appropriate, e.g. in the case of multiple or unruly infringements.

If a director attempts to aggravate his violation(s) after a summons has been issued, ACRA cannot allow him to aggravate the situation.

After a summons is issued, ACRA will mail the summons to the Director at his or her home address. The summons will include the State Court number and the date and time when the director must appear in court. If the director does not appear in court, the court will issue an arrest warrant against him. The director must appear in court, even if he has written to ACRA to verify the summons.

Other enforcement actions

• Disqualification of directors

A director who has cancelled at least 3 of his companies within a period of 5 years will be disqualified as a director or officer of a company for a period of 5 years from the date of cancellation of the last of the three companies from the date of cancellation of the third company.

For the avoidance of doubt, the cancellation of the three companies refers only to the cancellation initiated by the Registrar and does not include voluntary cancellation requests.

• Debarment of the director or secretary of the company

A director or company secretary who fails to comply with an essential requirement of the Companies Act for an uninterrupted period of three months or more may be subject to a removal order by the Registrar preventing him from making further appointments as director or company secretary of other companies.

 

Certificate of Compliance

Companies that meet the three requirements of Sections 175, 197 and 201 of the Act can obtain a Certificate of Compliance. Companies that do not meet any or all of the requirements are not eligible for the certificate.

 

Company Seal

A company seal (sometimes called a corporate seal) is an official seal used by a company. Company seals were primarily used by companies in common law jurisdictions, although most countries have now abolished the use of seals.

Under the Companies Act, companies in Singapore are no longer required to use the seal when signing documents such as deeds or other documents such as share certificates. Companies can execute documents by having them signed by authorized persons of the companies as follows:

Authorized persons for companies:

• a director and a company’s secretary; or
• two company directors; or
• a company director in the presence of a witness attesting to the signature.

For existing companies that wish to waive the use of their company seal, the company formation must be changed to remove the obligation to use the company seal.

Do you need help filing your AGM, AR and XBRL in Singapore? Timcole can help you.

To read on about IRAS Corporate Compliance, click here.