All companies in Singapore are governed by the Singapore Companies Act (Cap 50 of the 1994 Revised Edition of the Singapore Statutes). Specific types of companies may also be regulated by other statutes e.g. Finance Companies Act (Cap 108). The Singapore Companies Act:
- Provides for the formation (and ultimately termination) of companies
- Confers on companies some special features (for example, limited liability)
- Regulates the relationships between participants in companies
- Facilitates dealings between companies and outsiders
The purpose of this guide is to provide a brief overview of the recent amendments to Singapore Companies Act. For information on how to setup a private limited company in Singapore, see Singapore company registration guide.
Highlights of recent amendments to Singapore Companies Act
The Companies (Amendment) Act 2005
Singapore Companies Amendment Act 2005 came into effect on 30 January 2006. The Companies Act (Cap 50) was amended to adopt several changes recommended in the final report of the Company Legislation and Regulatory Framework Committee (CLRFC’) that was published on 22 October 2002. The key amendments arising from the Amendment Act include:
- The abolition of the concepts of ‘par value’ and ‘authorised capital’;
- Reforming the capital maintenance regime, including:
- The introduction of an alternative capital reduction process which does not require court sanction;
- The liberalising of financial assistance restrictions (to allow financial assistance to be provided in additional circumstances);
- The reform of the share buyback regime;and
- The enabling of redemption of preference shares;
- The introduction of the concept of treasury shares (new sections 76H to 76K allow a company to hold re-purchased shares in treasury instead of cancelling them); and
- Liberalising the amalgamation process for companies (new sections 215A to 215J allow amalgamation of companies, including holding companies and their subsidiaries, without a court order).
The Companies (Amendment) Act 2004
- Raising of capital by Private Companies. As per the amendment, private companies can raise capital through private and exempted offerings without the need to convert to public companies. However companies will still have to comply with Securities and Futures Act for offerings made to the public.
- Company Registration Numbers. All companies are required to include their company registration number on all business letters, statements of account, invoices official notes and publications and the Bill puts this recommendation into effect.
- One Director / Shareholder Companies. All companies can be incorporated by any one person and continue to exist by one person. There is however a legal requirement that the sole director must be locally resident in Singapore. For such companies, the director and the company secretary cannot be the same person. In the event there is no director left to manage such a company, the shareholders will be personally liable for the debts incurred by the company at any time 6 months after the office of director becomes vacant.
- Display of Company Name. The statutory requirement for every company to display its name outside its office will be removed. Since it is easy to locate a company by referring to it’s registered office address, there is no compelling reason to impose a mandatory requirement that all companies must display a signboard, which only adds to business costs. In addition, this also facilitates the setting up of home-based businesses under the new Home Office Scheme.
- Non-Compliance Penalties. All companies in Singapore are required to prepare their financial statements in accordance with the prescribed accounting standards. With effect from Jan 2003, when there is non-compliance, a fine of up to S$50 000 may be imposed. The fine will be increased to S$100 000 and the offender may also be imprisoned for up to 3 years if the offence is committed with an intent to defraud. This is to send a strong signal that the Government takes a serious view of such offences.
The Companies (Amendment) Act 2003
The following amendments were introduced with a focus on reducing costs for small businesses.
- Removal of statutory audit for dormant and small exempt private companies.
- Removal of statutory requirement for professionally qualified company secretaries for private companies.
- Permitting "paper meetings".
- Dispensing with the Annual General Meeting with the unanimous consent of all members of the company.
The Companies (Amendment) Act 2002
- All companies to comply with the prescribed accounting standards.
- The Council on Corporate Disclosure and Governance to prescribe accounting standards for Singapore companies was set up.
The Companies (Amendment) Act 2001
The main focus of 2001 amendments was on the disclosure requirements in the Singapore Companies Act for offers to the public of shares and debentures.
- There was a major policy shift from merit based regulation to a disclosure based regulatory regime.
- Time for public listed companies to present their annual reports was shortened.
- Share buy back provisions were liberalised to extend to preference shares, redeemable and non redeemable.
Applicability of Singapore Companies Act
Formation of a company refers to the process of legally forming a private or public company under the Singapore Companies Act. Other business entity types that can be setup in Singapore include sole proprietorship and partnership; however, these business entities are not regulated by the Companies Act.
Both local as well as foreign individuals may incorporate a company in Singapore. Broadly speaking, there are 3 main types of limited liability companies in Singapore:
- Private Limited Liability Company. Most of the companies in Singapore are of this type.
- Public Limited Liability Company. Public companies are large well-established companies that usually trade on Singapore Stock Exchange.
- Public Company Limited by Guarantee: Used primarily for setting up a non-profit organization in Singapore
Singapore Companies Act - Historical Roots
Company law in Singapore has a long pedigree. The Indian Companies Act 1866 was the first legislation applicable to the Straits Settlements - comprising Penang, Singapore and Malacca. However, the Straits Settlements was detached from India in 1867 and in 1889 the Indian Companies Act ceased to have effect on the Straits Settlements. Instead, there came about, The Companies Ordinance 1889. This was repealed and replaced in the years to come - 1915, 1923 and 1940 respectively. It was finally replaced with the Malaysian Companies Act 1965. This Act was based on the Companies Act 1961 of Victoria, Australia.
With Singapore gaining Independence from Malaysia in 1965, the Singapore Companies Act 1967 eventually came about. This Act was identical to the Malaysian Companies Act 1965. However, the Act has been amended several times since then. Singapore being a former British colony has its legal framework rooted in English common law. Hence Singapore company law has references to English, Malaysian and Australian jurisdictions.
