12 June 2023
On 8 June 2023, the Companies, Business Trusts and Other Bodies (Miscellaneous Amendments) Act 2023 (“Amendment Act”) was gazetted. The Amendment Act makes four key sets of amendments to the Companies Act 1967 (“CA”).
The first set of amendments, which also applies to the Business Trusts Act 2004 (“BTA”) and the Variable Capital Companies Act 2018 (“VCCA”), permanently provides companies, business trusts (“BTs”) and variable capital companies (“VCCs”) with the option to conduct fully virtual or hybrid meetings.
The remaining three sets of amendments are aimed at promoting a more pro-business environment while upholding market confidence and safeguarding public interest. These are: (1) changes to the computation of the threshold for compulsory acquisition of shares under section 215, (2) amendments to provisions relating to disqualification of persons as directors under section 155A, and (3) updates to the penalties imposed on directors of companies for the failure to prepare and table financial statements in compliance with the prescribed accounting standards in Singapore.
The set of amendments which provides for meetings using virtual meeting technology will come into operation on 1 July 2023, the same day that the Covid-19 (Temporary Measures) (Alternative Arrangements for Meetings for Companies, Variable Capital Companies, Business Trusts, Unit Trusts and Debenture Holders) Order 2020 published under the Covid-19 (Temporary Measures) Act 2020, which enabled companies, BTs and VCCs to convene, hold or conduct meetings through electronic means, will cease. These amendments will continue enabling the holding of virtual or hybrid meetings, in addition to the physical meetings which companies, BTs and VCCs are already able to hold under existing legislation.
The other three sets of amendments will come into operation on a date the Minister appoints by notification in the Gazette (no effective date has as yet been appointed by the Minister).
Fully virtual or hybrid meetings
The Accounting and Corporate Regulatory Authority (“ACRA”), the Ministry of Finance (“MOF”) and the Monetary Authority of Singapore (“MAS”) conducted a public consultation on a draft form of the Companies, Business Trusts and Other Bodies (Miscellaneous Amendments) Bill (“Bill”) in February 2023 and issued their responses to the consultation feedback on 13 April 2023. For more information on the draft Bill, please refer to our article titled “ACRA, MOF and MAS issue consultation paper on legislative amendments to enable conduct of general meetings by electronic means”.
The Bill, tabled in Parliament on 18 April 2023, was passed on 9 May 2023.
The Amendment Act facilitates the use of electronic media and technology, by providing entities with the flexibility of holding hybrid or virtual meetings, while ensuring that shareholders’ rights are upheld. As explained by the Second Minister for Finance, Indranee Rajah, at the second reading of the Bill on 9 May 2023, current legislation provides for “general, board and other types of meetings to be conducted, but do not explicitly specify the mode of conduct - for instance whether these meetings may be held physically, virtually or in a hybrid manner”.
The new section 173J in the CA provides for the holding of meetings using virtual meeting technology, whether wholly or partly. “Virtual meeting technology” is defined in section 4(1) to mean “any technology that allows a person to participate in a meeting without being physically present at the place of meeting”.
Following feedback, the types of meetings which section 173J applies to, has been expanded:
Section 173J applies to:
The proposed section 173J applies to:
The new section 173J sets out how specific references in the CA (e.g. “any person (including any member of a company) attending a meeting” or “any person (including any member of a company) present or personally present at a meeting”) are to be read where the meeting in question is held wholly or partly using virtual meeting technology. Drafting refinements following feedback include (a) addressing proxies and representatives of members, (b) granting greater flexibility to the power to prescribe the method to verify or authenticate the identity of persons attending the meeting in relation to voting on a show of hands at a meeting, and (c) removing the references to “at” in the context of, inter alia, making a document available for inspection on a website during the meeting, so that it is clearer how the corresponding CA provisions would apply to a fully virtual or hybrid meeting.
In addition, following feedback, section 173J makes it clear that the amendments will override the constitution of a company, unless:
- (for a company incorporated before 1 July 2023) the company alters its constitution on or after 1 July 2023 to exclude or modify the application of the amendments; or
- (for a company incorporated on or after 1 July 2023) the company chooses to adopt a constitution that excludes or modifies the application of the amendments, or, at any time after its incorporation, alters its constitution to exclude or modify the application of the amendments.
Section 173J also makes clear that subject to the constitution of the company, nothing in the CA prohibits a meeting of the board of directors of a company, or a committee consisting of one or more directors of the company, from being held wholly or partly using virtual meeting technology.
These enabling provisions mean that companies’ constitutions and the regulations issued by the respective regulators, will ultimately determine if fully virtual or hybrid meetings are allowed and how they are to be conducted.
Companies can choose to continue with physical meetings, if they prefer.
Due to the use of technology, some virtual or hybrid meetings may encounter technical issues that may be beyond the control of the companies. Such technological disruptions, technological malfunctions or technological outages, in and of themselves, will not cause a meeting to be invalidated. However, a safeguard is provided in the amended section 392 of the CA for shareholders to apply to the court if these technical issues result in substantial injustice. This is consistent with the approach adopted for other types of procedural irregularities that occur during company proceedings.
BTs and VCCs
The Amendment Act also sets out similar amendments to the BTA and the VCCA to enable BTs and VCCs to conduct fully virtual or hybrid meetings.
Specifically, for BTs, the Amendment Act enacts a new section 52R in the BTA to provide for the holding of meetings using virtual meeting technology, whether wholly or partly. The new section 52R applies to any general meeting of the unitholders (including an AGM and an EGM) and any meeting of any class of unitholders. Following feedback, the new section 52R also applies to a meeting ordered by the court under section 61 of the BTA, if the court directs.
Similarly, for VCCs, the Amendment Act enacts a new section 76A in the VCCA to provide for the holding of meetings using virtual meeting technology, whether wholly or partly. The new section 76A applies to any general meeting (including an AGM and an EGM) and any meeting of any class of members. The new section 76A also applies to any meeting ordered by the court under section 182 of the CA as applied by section 80 of the VCCA, if the court directs.
Similar to the CA amendments, following feedback, the Amendment Act provides greater clarity on how the amendments to the BTA and VCCA would apply to override a BT’s trust deed or a VCC’s constitution, including the situation where a BT that is registered or a VCC that is incorporated on or after 1 July 2023 wishes to adopt a trust deed or constitution (as the case may be) that excludes or modifies the application of the amendments.
The Amendment Act also incorporates drafting refinements similar to those in the CA clarifying how references in the BTA and the VCCA that are applicable to a meeting of unitholders of a BT or a meeting of a VCC (as the case may be) may be applied in the context of a meeting held using virtual meeting technology.
Issuers listed on Singapore Exchange Securities Trading Limited
Following the introduction of the Bill, on 19 April 2023, Singapore Exchange Regulation (“SGX RegCo”) amended Practice Note 7.5 (General Meetings) of the Mainboard Rules and Practice Note 7E (General Meetings) of the Catalist Rules (collectively, “Practice Notes”) to provide further guidance on the conduct of general meetings for issuers primary-listed on Singapore Exchange Securities Trading Limited, including issuers that are real estate investment trusts and BTs. The amended Practice Notes apply to all general meetings held by listed issuers on or after 1 July 2023 (both fully physical meetings and hybrid meetings), regardless of when the notice of general meeting is disseminated. Some of the new requirements under the Practice Notes mirror those set out in the current joint guidance by ACRA, MAS and SGX RegCo providing guidance on the conduct of general meetings amid the Covid-19 situation which continue to apply to general meetings which are held on or before 30 June 2023.
Key amendments to the Practice Notes include provisions relating to the conduct of general meetings (including the format of the meeting), clarifying the participation rights of shareholders in relation to hybrid meetings, notices of general meetings (including the contents of such notices) and dissemination of documents, allowing written questions from shareholders in advance of general meetings (and issuers’ responses thereto), real-time remote electronic voting and communication in relation to hybrid meetings, and minutes of general meetings.
The Practice Notes make clear that, unless prohibited by relevant laws and regulations in the jurisdiction of the issuer’s incorporation, an issuer may hold either (a) fully physical meetings in Singapore, or (b) hybrid meetings at a physical place in Singapore and using technology that allows a person to participate in that meeting without being physically present at the place of meeting. The issuer shall not hold wholly virtual general meetings. Issuers who hold general meetings outside Singapore without allowing shareholders in Singapore to participate virtually, should hold information meetings for the shareholders at a physical place in Singapore.
Threshold for compulsory acquisition of shares under section 215 of the CA
The Amendment Act inserts a new subsection (9A) in section 215. Under section 215(1), where a scheme or contract involving the transfer of all of the shares or all of the shares in any particular class in a company (“transferor company”) to a person (“transferee”) has, within four months after the making of the offer in that behalf by the transferee, been approved as to the shares or as to each class of shares whose transfer is involved by the holders of not less than 90% of the total number of those shares (excluding treasury shares) or of the shares of that class (other than shares already held at the date of the offer by the transferee, and excluding any shares in the transferor company held as treasury shares), the transferee may thereafter give notice to any dissenting shareholder that it desires to acquire the dissenting shareholder’s shares.
The effect of the new subsection (9A) is to increase the number of shares that are to be treated as held or acquired by the transferee for the purposes of section 215 and therefore does not count towards meeting the compulsory acquisition threshold.
Specifically, in respect of an offer made on or after the date of commencement of section 215(9A), shares held by the following persons are added to the number of shares that are to be treated as held or acquired by the transferee:
(a) 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;
(b) the transferee’s spouse, parent, brother, sister, son, adopted son, stepson, daughter, adopted daughter or stepdaughter;
(c) 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;
(d) a body corporate that is controlled by the transferee or a person mentioned in paragraph (a), (b) or (c) above.
For the purposes of paragraph (d), a body corporate is controlled by a transferee or person mentioned in paragraph (a), (b) or (c) if:
- the transferee or person (as the case may be) is entitled to exercise or control the exercise of not less than 50% of the voting power in the body corporate or such percentage of the voting power in the body corporate as may be prescribed, whichever is lower; or
- the body corporate is, or a majority of its directors are, accustomed or under an obligation whether formal or informal to act in accordance with the directions, instructions or wishes of the transferee or the person (as the case may be).
Disqualified directors allowed to apply to the Registrar for permission to act
The Amendment Act amends the provisions relating to the disqualification of persons as directors under section 155A of the CA by:
- allowing a disqualified director to apply to the Registrar of Companies (“Registrar”), instead of the court, for permission to act as a director of a company, thus shortening the process and making it cheaper for a disqualified director to do so;
- reducing the disqualification period under section 155A from five years to three years for first-time disqualified directors, to better reflect the culpability of a disqualified director, while keeping that for repeat disqualified directors at five years; and
- clarifying the policy intent of the disqualification provision under section 155A(1), which is that directors are disqualified so long as they have at least three companies struck off by the Registrar.
Increased penalties for failure to prepare and table financial statements in compliance with the prescribed accounting standards in Singapore
The Amendment Act updates the penalties imposed on directors of companies for the failure to prepare and table financial statements in compliance with the prescribed accounting standards in Singapore. The maximum penalty for offences relating to not having true and fair financial statements that comply with the accounting standards will be increased to:
- S$250,000 where there is no intent to defraud; and
- S$250,000 and three years’ imprisonment where there is intent to defraud.
- Companies, Business Trusts and Other Bodies (Miscellaneous Amendments) Act 2023
- Companies, Business Trusts and Other Bodies (Miscellaneous Amendments) Bill
- Second reading speech on the Companies, Business Trusts and Other Bodies (Miscellaneous Amendments) Bill
- Summary of Responses to Consultation Feedback on the Conduct of Virtual and Hybrid Meetings
- Amendments to Practice Note 7.5 of Mainboard Rules on General Meetings
- Amendments to Practice Note 7E of Catalist Rules on General Meetings