Service providers who used to face grouses or challenges when asked for details on companies’ shareholders and ultimate beneficial owners would now have an easily understandable and frequently-quoted legislation to point to when asking for details on controllers and nominee directors.
The Companies (Amendment) Bill was passed by Parliament on 10 March 2017, and subsequently the Accounting and Corporate Regulatory Authority (ACRA) announced that the changes to the Companies Act would be implemented in phases. The first phase will be implemented on 31 March 2017, and the remaining two phases would take effect later in 2017 and early 2018 respectively.
The objective for the latest revisions has been to ensure that our corporate regulatory regime continues to stay robust and support Singapore’s growth as a global hub for businesses and investors while ensuring that corporate entities are not used for any illicit purposes or to facilitate flow of illegal funds.
This article sets out the key legislative changes that will impact companies and will take effect from 31 March 2017, for your guidance and incorporate our comments on some of the changes. The changes that would take effect in subsequent phases are not covered below.
|Position with effect from 31 March 2017
|A. Requirement to retain and use a common seal would be removed-> Companies are no longer required to use the common seal in the execution of documents as a deed or other documents such as share certificates.
|Companies can choose not to purchase the common seal or keep custody over common seals – thus reducing the costs of acquiring and maintaining a seal. Companies may however choose to retain a seal if dealing with foreign jurisdictions that require execution of a document under a seal.Documents that used to be executed by seal would be effective if signed by authorised persons (without any requirement to affix the common seal on the document). Such authorised persons would be the same as the current position – either a director or the company secretary; two directors of a company; or a director of a company in the presence of a witness who attests the signature.
|B. Requirement to maintain register of nominee directors and nominators and containing the particulars of the nominators-> Companies would require nominee directors to disclose their nominee status and nominators to their companies. This would be a private register to be produced to regulatory authorities when requested.
|This requirement would help to determine the true status of a local director if companies are being set up in Singapore by foreign entities or individuals – it should however be noted that a nominee director should be fully aware of the business and activities of the company so as to discharge one’s duties as a director effectively.
|C. Requirement to maintain a register of controllers• All companies incorporated in Singapore and foreign companies would be required to maintain registers of registrable controllers.
• A Controller is defined as an individual or a legal entity that has a “significant interest” in or “significant control” over the company.
“Significant interest”A controller who has significant interest in a company may include any of the following:
• For companies with share capital:
o An individual who has interest in more than 25% of the shares or shares with more than 25% of total voting power in the company
• For companies without share capital:
o An individual who has the right to shares in more than 25% of the capital or profits of the company
A controller who has significant control on a company is a person who:
Companies newly incorporated on or after 31 Mar 2017 will have a transitional period of 30 days to set up the register.
|The objective behind the new register of controllers is to make the ownership and control of corporate entities more transparent and reduce opportunities for the misuse of corporate entities for illicit purposes. As it is now, banks and corporate service providers are already required to identify the ultimate controller of an entity under existing AML/KYC requirements.This new requirement would be helpful in providing a statutory basis for gathering information in order to maintain a register of controllers of corporate entities when such entities are being incorporated.
• A corporate service provider (providing corporate secretarial or filing agent services) would be required to determine definitively the existence and particulars of controllers and to record the responses in the register of controllers.
• Information collected on the beneficial ownership of companies during the client due diligence phase can be used to be entered into the register.
• The registers should be readily available if public agencies request access to the registers, otherwise, the register of controllers would be a confidential register (not available to the public). The information in the registers would be helpful in administering or enforcing anti-money laundering-related legislation in Singapore.
• Companies can discharge their duties by sending notices to the relevant parties and recording their particulars, as well as sending further notices to any other parties that have been revealed as potential controllers. Notices can be sent and replies may be received, in electronic or hard copy format. The company would then not be liable should recipients of these notices fail to respond or provide inaccurate responses.
• Companies are required to (i) keep the information in their registers up-to-date and (ii) correct inaccuracies in said information.
• This is likely to mean that a company must minimally send a notice to every registrable controller whose particulars are contained in the register of registrable controllers at least once annually.
|D. Requirement to maintain public register of members for foreign companies
• Foreign companies will be required to keep a public register of members. This is similar to the current requirement for public companies to maintain their registers of members.
|• Further information would be required to be collected when establishing branches in Singapore in order to maintain this register of members (in addition to a register of controllers). However in contrast to a register of controllers, the register of members would be available for public review if required.
• Requirement for a liquidator to retain records of wound up companies for five years instead of two
• Requirement for officers/partners/managers of struck off companies to retain accounting records and registers of beneficial owners for five years
As evident above, most significant changes to take effect from 31 March 2017 are requirements to maintain new registers of nominee directors and registrable controllers in order to determine the ‘true’ beneficial ownership and control of business entities. These changes are anticipated to enhance Singapore’s global reputation as a trusted and clean financial hub where illicit flow of funds through setting up of entities in Singapore is strictly prohibited.
While the new requirements would increase obligations on companies to maintain new registers and service providers to request additional information from clients, one can at least point to the legislation and its objectives when making the requests for such information and record the responses (or lack thereof) accordingly.
Source: Dentons Rodyk