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From Ince Gordon Dadds

Singapore Parliament passes the Companies (Amendment) Act 2017

24.03.2017

Singapore

Significant amendments to the Companies Act (Cap. 50 of Singapore) (“Companies Act”)  will come into effect on 31 March 2017 pursuant to the passing of the Companies (Amendment) Act 2017 on 10 March 2017. The amendments are targeted at ensuring that Singapore’s corporate governance system remains robust and up to date, in light of the increasingly sophisticated nature of financial crimes. It also aligns Singapore with more stringent international standards for combating money laundering and terrorism financing. In addition, there are also new provisions to support the sustainability of businesses by making considerable changes to the current debt restructuring regime. 

We set out a summary of these changes below.

Facilitating entry into Singapore and increased transparency of control of companies

Inward re-domiciliation 

Companies re-domicile for various business reasons such as a change in the original country’s operating conditions or to be closer to their main operational base.  Incorporating a new company will mean its experience, contracts, history and reputation are likely to be extinguished. 

Re-domiciliation permits a foreign company to transfer its registration from its original jurisdiction to Singapore and hence allows it to retain its corporate identity, branding and history. A foreign corporate entity which re-domiciles to Singapore becomes a Singapore company and must comply with the Companies Act. 

Register of Controllers

The amended Companies Act will demand foreign companies and LLPs registered in Singapore to maintain a public register of beneficial owners, known as the Register of Controllers. A beneficial owner or a controller can be an individual or a legal entity that has more than 25% interest in or control over a company. Companies should have proper and adequate procedures in place to identify, obtain and update information on their ultimate beneficial owners or controllers, which include sending notices to potential individuals who are aware of these details.

Register of Nominee Directors

Locally incorporated companies will be required to keep a Register of Nominee Directors. The amended Companies Act imposes a duty to disclose on a nominee director to:

(i)  inform the company of that fact; 
(ii)  provide prescribed particulars of the person for whom the director is a nominee; and 
(iii)  inform the company of changes in the director’s particulars or status as nominee. 

This mitigates the risks of nominees being facilitators of money laundering and terrorist financing. 

Increased insolvency protection 

The amended Companies Act creates bespoke procedures which accord greater flexibility for restructuring of companies. This reduces the risk of liquidation and allows the company to continue as a going concern, benefiting owners of businesses, employees and the economy as a whole.

Schemes of Arrangement 

There will be enhanced moratoriums for restructuring which allow for automatic moratoriums and moratoriums with in personam worldwide effect. These moratoriums can be extended to (i) prevent creditors from taking action overseas (if the creditor has a presence in Singapore) and (ii) related entities of the debtor. This buys the troubled company extra time to come up with an effective restructuring proposal.

Rescue financing provisions will also allow new financing that is raised to support the debtor during a restructuring to be granted super priority over other creditor claims. The grant of super priority over existing security will be subject to safeguards to ensure that existing secured creditors are not unfairly prejudiced. 

Previously, the Court can only sanction a scheme if the requisite majority approval has been obtained from all classes of creditors. However, there will now be cram-down provisions which allow for a scheme to be approved even if a class of creditors oppose the scheme, subject to the test of unfair prejudice to the dissenting creditors.  

Judicial Management

There are new provisions to allow the Court to make a judicial management order when a company “is likely to become unable to pay its debts” as opposed to the existing threshold which is “will be unable to pay its debts”.  Judicial management process can therefore be initiated at a much earlier stage, enhancing the likelihood of success that the company be saved from liquidation.   

For more discussion of the above, please contact your usual Ince contact.

Article authors:

Felicia Tan, Bill Ricquier