Knowledge Highlights 18 January 2023
MOF and ACRA issue responses to key feedback on proposed amendments to Companies Act 1967
Knowledge Highlights 22 February 2023
On 6 February 2023, the Ministry of Finance (“MOF”) and the Accounting and Corporate Regulatory Authority (“ACRA”) issued their responses to key feedback received on proposed amendments to the Companies Act 1967 (“CA”) with respect to:
- facilitating digital general meetings and digital board meetings;
- clarifying the application of existing digitalisation provisions to documents under the CA;
- other areas concerning digitalisation; and
- review of the threshold for the compulsory acquisition of shares under section 215 of the CA.
The public consultation ran from 20 July 2020 to 17 August 2020. Feedback was sought on proposals arising from ACRA’s review of the CA and the recommendations of the Companies Act Working Group (“CAWG”), a committee comprising industry stakeholders set up by ACRA.
MOF/ACRA will publish a summary of the feedback received on the remaining proposals, together with their responses, in due course.
Facilitating digital general meetings and digital board meetings
MOF/ACRA have accepted with modification the CAWG’s proposal to introduce an enabling provision in the CA that clarifies that unless the constitution provides otherwise, a company may hold general meetings digitally and in more than one location, and to amend certain specific provisions in the CA to address any ambiguity as to how shareholders’ rights may apply to digital meetings. Following feedback, the proposal will be modified to explicitly specify that companies that hold digital general meetings must use technology that enables members to attend, listen, speak and vote at the meeting, and to specify that companies may hold digital general meetings unless expressly prohibited by their constitution. Additional safeguards and requirements may be introduced subsequently via subsidiary legislation.
MOF/ACRA have also accepted proposals to:
- extend the existing right under section 392(3) to apply to court to declare proceedings at a general meeting void to general meetings held using digital means;
- introduce an enabling provision in the CA to provide that nothing in the CA prohibits board meetings from being held digitally; and
- amend the CA to make it mandatory for all companies to accept proxy instructions given by electronic means instead of leaving this to be stipulated in the company’s constitution.
As to the suggestion to publish guidance on how digital general meetings are to be held, MOF/ACRA note that Singapore Exchange Regulation, the Singapore Institute of Directors and the Chartered Secretaries Institute of Singapore have jointly developed and published standards for service providers that provide the systems that enable the holding of virtual and hybrid general meetings, which companies may use as a guide when considering how to hold such meetings. ACRA will monitor and study the feedback after implementation of the amendments and will consider issuing further guidance, if necessary.
Clarifying the application of existing digitalisation provisions to documents under the CA
MOF/ACRA have accepted the CAWG’s proposals to:
- amend sections 387B (relating to documents sent to members, officers or auditors using electronic communications) and 387C (relating to documents sent to members using electronic communications) to apply to all documents that the CA requires or permits companies or directors to send to members, officers or auditors;
- amend sections 395 and 396A (relating to keeping and inspection of company records in electronic form) to apply to all documents that the CA requires companies and foreign companies to keep or make available for inspection;
- amend the CA so that a document may be sent using a mode of electronic communication (including via publication on a website) by (a) companies or directors to persons who are not members, officers or auditors of the company; (b) members, officers, or auditors to companies or directors; and (c) persons who are not members, officers, or auditors to companies or directors, where in each case there is an agreement between the parties for the document to be sent using that mode of electronic communication
(for the avoidance of doubt, an agreement may be constituted between the company and its members by a company’s constitution such that if the constitution provides that all members may send a document to the company through a particular mode of electronic communications, the members may send a document using that mode of electronic communications to the company); and
- retain the current sections 387A to 387C in respect of the electronic transmission of notice and documents by a company or its directors to members, officers or auditors of the company.
MOF/ACRA note that these proposals will provide greater clarity to the industry on the use of electronic communications and will provide greater clarity on what constitutes an agreement between parties (for example, a company and its members) for a document to be sent using electronic communications.
Other areas concerning digitalisation
MOF/ACRA agree with the CAWG’s proposal that the CA should not be amended to address the sending of documents by foreign companies using digital means, as it may potentially contradict foreign law.
MOF/ACRA will further study the CAWG’s proposals not to amend the CA to address:
- whether and how court-ordered meetings under section 210 may be held digitally;
- digital common seals;
- certain things made by companies, directors, members, auditors or accounting entities (e.g. debentures, certificates, declarations, reports); and
- the sending of documents between certain persons (e.g. transferees, auditors, officers, Minister),
as they have received numerous suggestions on these areas and will need to further study whether and how amendments should be made to the CA to address the issues in greater detail, as they have implications on other sections of the CA.
Review of the threshold for the compulsory acquisition of shares under section 215
The CAWG had proposed that shares held or acquired by the following persons should also be excluded from the computation of the 90% threshold for compulsory acquisition under section 215:
- a person who is accustomed or is under an obligation whether formal or informal to act in accordance with the directions, instructions or wishes of the transferee in respect of the transferor company;
- a body corporate controlled by the transferee;
- a person who is, or is a nominee of, a party to a share acquisition agreement with the transferee;
- the transferee’s close relatives (i.e. spouse; children, including adopted children and step-children; parents; and siblings);
- a person whose directions, instructions or wishes the transferee is accustomed or is under an obligation whether formal or informal to act in accordance with, in respect of the transferor company; and
- a body corporate controlled by a person described in (e).
MOF/ACRA have accepted the proposal with modification and following the public’s feedback, will modify the threshold to establish control of a body corporate to 50%, instead of the 30% threshold that was originally proposed. This will be in line with similar concepts in the CA and the Singapore Code on Take-Overs and Mergers.
MOF/ACRA will not proceed with the proposal to exclude a person who is (or is a nominee of) a party to a share acquisition agreement with a transferee, such that shares held by such a person should not count towards the threshold for compulsory share acquisition. This is in view of the feedback provided on the ambiguity and the lack of clarity of the relevant concepts of a share acquisition agreement and a party to such an agreement, in the context of section 215.
For more information on the consultation paper released on 20 July 2020, please read our article titled “ACRA seeks feedback on wide-ranging proposed amendments to Companies Act”.
The following materials are available on the ACRA website www.acra.gov.sg:
- Press release: Summary of Responses to Public Consultation on Proposed Amendments to the Companies Act
- Annex: MOF and ACRA’s responses to key feedback on the proposed amendments to the Companies Act
Knowledge Highlights 25 January 2023