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Singapore – Key Issues For Your Business In 2015: Banking.

10  March, 2015

 

 

Abolition Of Financial Assistance For Private Companies


The Companies (Amendment) Act 2014 (“CA Amendment Act”) was passed on 8 October 2014 and the changes are targeted to come into effect in Q2 of 2015.


Following the amendments to the Companies Act (“CA”), private companies which are not subsidiaries of public companies will no longer be affected by financial assistance restrictions. Public companies and their subsidiaries will still be subject to the general prohibition, although a new exception, where the giving of financial assistance does not materially prejudice the interest of the company or its shareholders, or the company’s ability to pay its creditors, will be introduced. In addition, solvency statements for short form whitewash will no longer have to be made by way of statutory declaration. These changes are clearly to be welcomed as they provide a good balance as regards risk management.


Financial Transactions Involving Directors And Entities Connected With Directors


Sections 162 and 163 of the CA restrict a company, subject to certain statutorily provided exceptions, form making loans to, or entering into any guarantees or providing any security in connection with any loan to a director or any company in which the directors have at least a 20% interest.


To discourage creative structuring, these sections will be expanded to cover quasi-loans, credit transactions and related agreements. For potential lenders and borrowers, the most interesting change to Section 163 is the incorporation of a new exception. Where there was previously no option if a transaction did not fall within any of the permitted exceptions, an important new exception of having prior shareholders’ approval (subject to any interested directors and their family members abstaining from voting) will be created. These are clearly necessary changes to allow for business efficacy and yet maintaining proper governance.

 

Rajah & Tann

 

For further information, please contact:

 

Angela Lim, Partner, Rajah & Tann

angela.lim@rajahtann.com

 

Rajah & Tann Banking & Finance Practice Profile in Singapore

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