New Requirements for Singapore Companies: A Guide to the Amendments to the Companies Act and How They Affect Your Business
The Companies (Amendment) Act 2020, which came into force on 3rd January 2021, has introduced significant changes to the Companies Act, aiming to enhance corporate governance, improve transparency, and strengthen accountability. As a business owner or director of a Singapore-registered company, it is essential to understand the implications of these amendments on your business.
**Key Changes and Their Impact**
1. **Board Diversity and Composition**: The amendments introduce new requirements for board composition, including:
* At least one-third of the board must comprise independent directors.
* The CEO or Managing Director cannot hold more than 10% of the company’s shares.
* At least one-third of the board must comprise independent non-executive directors.
* The board must include at least one female director.
These changes promote better decision-making, diversity, and accountability.
2. **Disclosure of Directors’ Interests**: Companies are now required to disclose directors’ interests in the company’s shares, subsidiaries, and related parties. This increased transparency ensures that directors’ personal interests do not conflict with the company’s.
3. **Auditor Rotation**: The amendments require that audit firms rotate every 5-7 years to reduce the risk of audit failure and improve audit quality.
4. **Enhanced Audit Committee**: The audit committee’s role has been strengthened, with specific responsibilities for:
* Reviewing and approving audit plans and fees.
* Overseeing the external auditor’s appointment and removal.
* Reporting to the board on audit matters.
5. **Whistleblower Protection**: The amendments establish a whistleblowing framework to protect employees who report suspected breaches of law or company policies.
6. **Enhanced Filing Requirements**: Companies must now file additional information, including:
* Board composition and director details.
* Director’s interests and shareholdings.
* Auditor’s report and audit committee’s report.
**Implementation and Compliance**
To comply with these new requirements, companies must:
1. Review and update their constitutional documents (e.g., articles of association).
2. Ensure that their board composition meets the new requirements.
3. Update their directors’ and shareholders’ details.
4. Implement procedures for whistleblower protection.
5. Familiarize themselves with the new filing requirements.
**Timeline for Implementation**
Companies have until 3rd January 2023 to comply with the new requirements. It is recommended that businesses take immediate action to ensure compliance, as failure to do so may result in penalties or legal action.
**Conclusion**
The amendments to the Companies Act are designed to promote stronger corporate governance, improved transparency, and enhanced accountability. While these changes may require significant adjustments, they will ultimately benefit businesses by reducing risks, improving decision-making, and increasing stakeholders’ confidence. As a responsible business owner or director, it is essential to understand the implications of these amendments and take proactive steps to ensure compliance.
**Frequently Asked Questions (FAQs)**
Q: What is the deadline for implementing the new requirements?
A: Companies have until 3rd January 2023 to comply with the new requirements.
Q: Who is responsible for ensuring compliance?
A: It is the responsibility of the company’s board of directors and management to ensure compliance.
Q: What are the consequences of non-compliance?
A: Failure to comply may result in penalties or legal action.
Q: How can I seek guidance on implementing the new requirements?
A: You can consult with your company’s legal advisors, accountants, or professional services providers for guidance.
Q: Are there any resources available to help me understand the new requirements?
A: The Singapore Companies Act and the Accounting and Corporate Regulatory Authority (ACRA) provide detailed guidance and resources on the new requirements.
By understanding the changes introduced by the Companies (Amendment) Act 2020, businesses can proactively adapt to the new environment and reap the benefits of enhanced corporate governance, improved transparency, and increased accountability.
