Changes to Companies Act of Singapore
As part of ongoing efforts to keep Singapore both business-friendly and competitive, legislative changes relating to Annual General Meetings (AGMs) and Annual Returns (ARs) timelines will take effect on 31 August 2018. The legislative amendments to the Companies (Amendment) Act will take effect for companies with financial year ending on or after 31 August 2018.
What are the changes?
Timeline for holding AGMs and filing ARs aligned to the Financial Year End (FYE)
To provide great clarity for companies and reduce the compliance burden, timelines for holding AGMs and the filing of annual returns will be aligned with company's FYE.
- Holding of AGM
The current situation states that companies must hold the first AGM within 18 months of incorporation, and subsequent AGMs yearly at intervals of not more than 15 months. The AGM must be held within 4 months (listed companies) or 6 months (other companies) from FYE, or within 15 months from the last AGM. In addition, the financial statements tabled at AGM must be made up to a date within 4 months (for listed company) or 6 months (for any other company) before the AGM date. After the changes to the Companies Act, listed companies must hold the AGM within 4 months after the FYE, while all the other companies within 6 months after the FYE.
For example; under the current rule, if FYE is 31 December 2018 and the last AGM date is 15 January 2018, the AGM due date of a company is 15 April 2019. Under the revised rule, the AGM due date will be 30 June 2019.
- Filing of Annual Return (AR)
The current situation states that companies must file their AR within 30 days after the AGM. After the changes to the Companies Act, companies must file their AR within 5 months (for listed company) or 7 months (other companies) after the FYE. The AR can be filed only (i) after the AGM is held, (ii) after the financial statement is sent if the company do not need to hold the AGM, or (iii) after the FYE for private dormant relevant company that is exempted from preparing the financial statements.
Using the above example, the AR filing due date under the current rule is 15 May 2019, while under the revised rule the due date will be 31 July 2019.
Restrictions on changing the FYE
To prevent companies from arbitrarily changing their FYE, the following safeguards will be put in place;
- Notification to ACRA
The current situation states that companies must notify ACRA of their FYE before filing the ARs. After the changes to the Companies Act, companies must notify the Registrar of their FYE upon incorporation and of any subsequent change. Before 31 August 2018, existing companies must update their FYE with ACRA, otherwise (i) the last FYE of existing companies will be deemed to be their next FYE going forward, (ii) the FYE of newly incorporated companies currently without FYE will be deemed to be 12 months from date of incorporation.
- Approval from ACRA
The current situation states that the approval from ACRA is not required for changes of the FYE. After the change to the Companies Act, companies must apply to ACRA for approval to change their FYE if (i) the change results in a financial year longer than 18 months, or (ii) the FYE has been changed within the last 5 years. By default, the duration of a financial year cannot be more than 18 months. Only the FYE of the current and the immediate previous financial year may be changed, provided that the statutory deadlines for holding AGM, filing of AR and sending financial statements have not passed.
- Important information for newly Incorporated companies that have yet to file Annual Returns
Companies incorporated before 31 August 2018 will have their FYE deemed by law to be the anniversary of the date previously notified to the Registrar as their FYE date. In the absence of such notification before 31 August 2018, the anniversary of the date of incorporation will be deemed by law to be their FYE. Companies can change their FYE by notifying ACRA before or after 31 August 2018 .
Holding AGMs for Private Companies
The current situation states that private companies do not need to hold the AGM if all members approved a resolution via EGM to dispense with the holding of AGMs. After the changes to the Companies Act, the situation remains unchanged. In addition, private companies will be exempt from holding AGMs if they send their financial statements within 5 months after the FYE, and if (i) there is no member request for AGM within 14 days before the last day of the 6th month after the FYE, and (ii) there is no member or auditor request for AGM within 14 days after the financial statements are sent out. Should such request be received, the company is obliged to hold the AGM within 6 months after the FYE (Extension of time to hold AGM may be applied with the ACRA).
However, the obligation to file ARs remains and the Board is, in any case, still required to pass a resolution to approve the financial statements to declare and to note the compliance of the conditions or provisions of the Companies Act, and to retain documentary evidence of the sending of the financial statements for the financial year under review. Private dormant relevant companies exempted from sending financial statements will not need to hold AGM, as per the same conditions mentioned above.
Two important remarks are that (i) If the dispensation resolution ceases to be in force, AGM must be held if at least 3 months remain to the AGM due date, and (ii) a private company which sends out its financial statements within 5 months after FYE, it may proceed to file its annual return with ACRA. If the company subsequently receives a valid request from a member to hold AGM and does holds an AGM, it must lodge a notice with the Registrar of the date of the AGM held.
Simplified process for solvent EPCs and Private Dormant Relevant Companies to file AR
To reduce the administrative burden for companies after the changes to the Companies Act, ACRA has simplified the process of filing annual returns for solvent exempt private companies and private dormant relevant companies. These companies will be able to file their annual returns with greater ease as ACRA will pre-fill most of the information in the AR form, but only if they (i) do not prepare audited financial statements, and (ii) are not required to file financial statements with ACRA. Companies may choose to file Simplified Annual Returns in BizFile+ portal or using the ACRA-On-The-Go mobile app from 31 August 2018.