29 October, 2014
Legal News & Analysis – Asia Pacific – Singapore – Corporate/M&A
On 8 October 2014, the Companies (Amendment) Bill No. 25 of 2014 (“Amendment Bill”) was as passed by the Singapore Parliament. The Amendment Bill introduces wide-ranging amendments to the Singapore Companies Act (“CA”) which are aimed at (i) reducing regulatory burden on companies; (ii) providing greater business flexibility and (iii) improving the corporate governance landscape in Singapore. The Amendment Bill is also noteworthy for the fact that it introduces the largest number of amendments to the CA in a single amendment bill since the enactment of the CA in 1967.
The amendments in the Amendment Bill are due to come into operation on a date to be appointed by notification in the Singapore Government Gazette. It is expected that most of these amendments will come into force by the end of 2014.
We set out below some of the key amendments introduced by the Amendment Bill.
Overview Of Key Amendments
Conversion Of Classes Of Shares (Section 40 Amendment Bill / Section 74A CA)
A company the share capital of which is divided into different classes of shares may now authorize in its constitution the conversion of one class of shares into another class of shares.
A public company may convert one class of shares (A) to another class of shares (B) by special resolution only if the constitution of the public company permits B to be issued, and sets out the rights attached to B. A private company may carry out such conversion by lodging a notice of conversion with the Registrar.
Multiple Proxies Regime (Section 97 Amendment Bill / Section 181 CA)
Companies in Singapore will now be required to allow indirect investors who hold shares through a nominee company, custodian bank or through CPF agent banks to appoint more than two proxies to attend and vote at shareholder meetings. A company will not be allowed to opt out of this multiple proxies regime.
Issuance Of Shares With Different Voting Rights (Section 33 Amendment Bill / Section 64A CA)
The current restriction in the CA restricting companies to one vote per equity share will be removed. This will allow public companies to issue shares with different voting rights, providing them with greater flexibility in capital management.
Financial Assistance Permitted Under Certain Circumstances (Section 41 Amendment Bill / Section 76(9BA) CA)
Section 76 of the CA currently prohibits any company incorporated under the Act from providing financial assistance for the acquisition of its own shares, or the shares of its holding company. The primary rationale for the prohibition is to protect creditors and to preserve the capital of a company.
This provision will be amended to limit the prohibition only to public companies and their subsidiaries. An exception to this prohibition will also be introduced to allow the provision of financial assistance, so long as the provision of such assistance does not materially prejudice the interests of the company or its shareholders, or the company’s ability to pay its creditors. To do so, the board of directors will be required to pass a resolution that (i) the company should give the assistance; (ii) the terms and conditions of the assistance are fair and reasonable to the company and; (iii) set out the full grounds of the directors’ conclusions.
CEOs Of Non-Listed Companies Required To Disclose Interests In Securities Of Company And Conflict Of Interests (Section 77 Amendment Bill / Section 156 CA)
The statutory duty of disclosure of conflicts of interest in transactions and shareholdings in the company is presently only a requirement for directors. Following the amendment, a CEO of a non-listed company incorporated in Singapore (who is not also a director) will be required to disclose his (and his family members’) interests in securities of the company (but not of the company’s related corporations) and conflict of interests in transactions/proposed transactions with the company or arising from any offices held or properties possessed by him.
Share Buyback Limit Maintained At 20% (Section 76B CA)
The share buyback limit provided for in the CA will be maintained at 20%.
Reduction Of The Minimum Number Of Authorised Representatives Of Foreign Companies (Section 158 Amendment Bill / Section 370 CA)
Instead of the current minimum number of two representatives, the CA will now require a foreign company to appoint at least one authorised representative. This change is intended to streamline registration requirements and reduce the regulatory burden on foreign companies.
Electronic Transmission Of Notices And Documents (Section 169 Amendment Bill / Section 387C CA)
Notices of meetings and other documents may, following the amendments, be sent to members electronically in the manner to be prescribed in the CA, as long as the specified modes of electronic transmission are set out in the companies’ constitution.
Conclusion
The latest amendments to the CA are welcome, and further cement Singapore’s commitment to evolving and improving the business and regulatory landscape in Singapore.
For further information, please contact:
Nicola Yeomans, Partner, Herbert Smith Freehills
Kwok Hon Yee, Herbert Smith Freehills
Emmanuel Chua, Herbert Smith Freehills
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