Amendments Introduced to the Singapore Companies Act Take Effect 1 July

The Companies, Business Trusts and Other Bodies (Miscellaneous Amendments) Act 2023 (the Amendment Act) will take effect on 1 July 2023 and introduce four key amendments to the Companies Act 1967 of Singapore (the CA). The primary objective behind these amendments is to foster a more favourable business environment while simultaneously upholding market confidence and safeguarding public interests.

The following sets out a summary of the four key amendments:

1. Refinements to the Compulsory Share Acquisition Framework

Pursuant to Section 215 of the CA, a person (an offeror) has the right to compulsorily acquire all the shares of a company (including those held by dissenting shareholders in a scheme or contract involving the transfer of those shares). To exercise this right, the offeror is required to achieve a 90% acceptance threshold for the relevant scheme or contract, with certain exclusions (i.e., shares held by a nominee or a related corporation of the offeror are excluded from computing the 90% acceptance threshold). [1]

This allows for individual offerors to bypass the exclusions and include their shares in the computation of the 90% acceptance threshold by making their offers through special-purpose vehicles that are established for the sole purpose of the takeover.

The CA amendments address this issue by expanding the exclusions in the computation of the 90% acceptance threshold. Shareholdings held by close relatives, corporate entities controlled by the offeror, the ultimate controller, [2] and individuals or corporate entities controlled by the ultimate controller will now be excluded from the computation of the 90% acceptance threshold.

The CA amendments, which will apply prospectively to offers (including revised offers) made on or after 1 July 2023, seek to ensure that the minority shareholders are afforded sufficient protection while rectifying the inconsistency in the CA pertaining to offers made by individuals and body corporates.

2. Changes Regarding the Disqualification of Persons as Directors

In relation to the disqualification of persons as directors, the Amendment Act amends Section 155A of the CA in the following manner:

• Allows for a disqualified director to apply to the Registrar of Companies as appointed under the CA (the Registrar) for permission to act as a director of a company, in addition to the existing right to seek leave from the General Division of the High Court of Singapore (the High Court) for permission. This alternative option will allow a disqualified director to shorten the application process;
• Changes the length of the disqualification period for first-time disqualified directors from five years to three years. Repeat disqualified directors will still be subject to the five-year disqualification period; and
• Clarifies the intention of the disqualification provision under Section 155A(1), where directors will be disqualified so long as they have at least three companies struck off by the Registrar.

3. Update on the Penalties Imposed on Directors of Companies

The Amendment Act also increases the penalties imposed for the failure to prepare and table financial statements in compliance with the Accounting Standards [3] to the following:

• For offences where there is no intent to defraud, the maximum penalty will be raised to $250,000; and
• For offences where there is intent to defraud, the maximum penalty will be raised to $250,000 or three years’ imprisonment or both.

4. Provisions to Facilitate the Conduct of Fully Virtual or Hybrid Meetings

In facilitating digitalisation, a new Section 173J will be inserted into the CA, which specifies that companies would be allowed to conduct their meetings, including general meetings, in a physical, hybrid, or fully virtual manner (unless they specifically choose not to by adding a prohibition in their constitutional documents).

In the event of any technological disruptions, malfunctions, or outages, such issues will not, in and of themselves, cause a meeting to be invalidated. Shareholders may apply to the High Court if such technical issues result in substantial injustice, similar to the approach taken for procedural irregularities that occur during company proceedings.

With the expiration of the temporary COVID-19 legislation for virtual meetings by 1 July 2023, the Amendment Act offers essential clarity for companies operating in the post-pandemic landscape. By providing specific provisions and requirements, companies gain clarity and assurance regarding the permissible formats and procedures for conducting meetings, which enables them to plan and execute meetings effectively while adhering to legal requirements.

Consistent with the amendments that have been made to the CA, amendments have been made to the Business Trusts Act 2004, the Variable Capital Companies Act 2018, and the Singapore Labour Foundation Act 1977 to permanently provide business trusts, variable capital companies, and the Singapore Labour Foundation with the option to conduct fully virtual or hybrid meetings.