In 2020, the Singapore Parliament passed the Companies (Amendment) Act, which introduces significant changes to the Companies Act. The amendments are aimed at enhancing corporate governance, promoting transparency, and ensuring greater accountability. In this article, we will explore the key changes brought about by the new legislation and their implications for business owners and directors.
Director’s Duties
One of the most significant changes introduced by the amendments is the enhancement of directors’ duties. The Companies (Amendment) Act 2020 has updated the duties of directors to include a more stringent “fiduciary duty” requiring them to act in the best interests of the company. This means that directors must now exercise their powers in a way that is in the best interests of the company, rather than just acting in their own interests.
The amendments also require directors to disclose any potential conflicts of interest and to obtain the requisite approval from the company before entering into any transactions that may benefit themselves or their associates. This is aimed at preventing self-dealing and promoting transparency in corporate decision-making.
Corporate Governance
The Companies (Amendment) Act 2020 has also introduced new corporate governance requirements to promote greater transparency and accountability. One of the key changes is the introduction of a new concept called “corporate governance guidelines.” These guidelines provide a framework for companies to follow in their corporate governance practices, ensuring that they are in line with international best practices.
The amendments also require companies to disclose certain information, such as the remuneration of directors and key management personnel, as well as the company’s governance structures and policies. This increased transparency is aimed at promoting greater accountability and trust in the corporate sector.
Corporate Veil Piercing
The Companies (Amendment) Act 2020 has also introduced changes to the concept of “corporate veil piercing.” This refers to the legal doctrine that a company is a separate legal entity from its shareholders, and that the personal assets of the shareholders are generally not liable for the company’s debts and obligations. However, in certain circumstances, courts may “pierce the corporate veil” to hold individual shareholders or directors personally liable for the company’s actions.
The amendments have updated the rules governing corporate veil piercing, making it easier for courts to lift the corporate veil in cases where it is deemed necessary to do so. This change is aimed at curbing corporate abuse and ensuring that those responsible for corporate wrongdoing are held accountable.
Conclusion
The Companies (Amendment) Act 2020 is a significant step towards promoting good corporate governance and accountability in Singapore. The changes introduced by the amendments will have far-reaching implications for business owners and directors, who must now be more mindful of their duties, the company’s governance structures, and the potential for corporate veil piercing. As the new legislation takes effect, it is essential for companies to adapt to these changes and ensure that their practices are in line with the updated requirements.
FAQs
- What are the key changes introduced by the Companies (Amendment) Act 2020?
- Enhanced directors’ duties, including a fiduciary duty to act in the best interests of the company
- New corporate governance requirements, including the introduction of corporate governance guidelines
- Changes to corporate veil piercing, making it easier for courts to lift the corporate veil in certain circumstances
- What is the purpose of the Companies (Amendment) Act 2020?
- To promote good corporate governance and accountability in Singapore
- To enhance transparency and trust in the corporate sector
- To curb corporate abuse and ensure that those responsible for corporate wrongdoing are held accountable
- What are the consequences of non-compliance with the Companies (Amendment) Act 2020?
- Financial penalties and fines
- Reputational damage and loss of public trust
- Potential criminal charges and imprisonment for individuals
