In April 2015, ACRA announced that the amendments to the Companies Act will be implemented in two phases due to a delay. This newsletter sets out and explains the key amendments that will be implemented in each phase.
The over 200 amendments to the Companies Act will be implemented in two phases due to technical difficulties faced by ACRA. About 40% of the amendments will take effect in the first phase on 1 July 2015, while the remaining 60% is expected to come into effect in the first quarter of 2016. The effective date for phase two of the implementation will be announced about two months before the changes are due to take effect.
Selected key legislative amendments to be effected in Phase 1 (1 July 2015)
No shareholders' approval required for compensation
paid to executive director for termination of employment, subject
The amendments set out three conditions that have to be satisfied such that shareholders' approval is not required:
- Amount that is paid out is not more than director's total emoluments for the one year immediately preceding that director's termination of employment;
- Termination of employment is based on an existing agreement between the company and the director; and
- Particulars of payment are disclosed to shareholders before payment is made.
No more prohibition against financial assistance by private companies + New exceptions to financial assistance provisions
The financial assistance prohibition will no longer apply to private companies, but will still apply to a public company or its subsidiary. In relation to a public company or its subsidiary, the amendments have introduced new exceptions to financial assistance:
- Where the giving of assistance does not materially prejudice interests of company or shareholders or company's ability to pay its creditors (subject to the company satisfying certain prescribed conditions);
- Distributions made in the course of the company's winding up;
- Allotment of bonus shares;
- Redemption of redeemable shares of a company in accordance with its constitution.
More companies qualify for audit
The amendments introduced the concept of a "small company" that is exempted from audit. A "small company" is a private company that fulfills at least two of the following three quantitative criteria:
- Total annual revenue of not more than $10 million;
- Total assets of not more than $10 million;
- Number of employees not more than 50.
A company has to qualify as a small company in each of the previous two financial years in order to qualify for audit exemption in a particular financial year. This is expected to benefit 25,000 companies.
Selected key legislative amendments to be effected in Phase 2 (Q1 2016)
No maximum age limit for directors
This requirement will be done away with.
CEOs now have a statutory duty to disclose
Before the amendments, only the directors were under a statutory duty to disclose conflicts of interest in transactions and shareholdings in the company and related corporations. With the amendments, the duty of disclosure has been extended to the chief executive officers of companies.
Introduction of a new debarment regime
Any director or company secretary of a company may be debarred by the Registrar if:
- The company has failed to lodge any documents at least three months after the prescribed deadlines.
Effect of debarment:
- A debarred person cannot take on anynewappointment as a director or company secretary, but may continue with existing appointments.
The debarment will be lifted by the Registrar when:
- The default has been rectified or on other prescribed grounds.
Memorandum and articles to be merged into a single
document called the constitution
A person desiring to incorporate a company must submit the constitution of the company to ACRA. Existing companies do not need to take any steps or incur any costs to merge their current memorandum and articles. The law will deem these to be merged to form the constitution of the company.
Alternate address can be shown on public records
With the change, individuals can use an alternate address at which he can be located, instead of his residential address, for ACRA's public records.
Originally published on May 5, 2015
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.