Directors' Responsibilities and Important Legal Requirements under ACRA Administered Acts - Kung Yong Jin Head, Enforcement Department Accounting ...
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Directors’ Responsibilities and
Important Legal Requirements
under ACRA Administered Acts
Kung Yong Jin
Head, Enforcement Department
Accounting and Corporate Regulatory Authority
22 September 2014
Scope of Presentation
Important obligations under the:
Companies Act (CA)
Business Registration (BR) Act
Limited Partnerships (LP) Act
Limited Liability Partnerships (LLP) Act
ACRA’s initiatives to encourage voluntary
compliance by companies
2
Who is a Director?
He who manages and directs the business of the company
section 157A(1) of the Companies Act (CA)
Section 4(1) of Companies Act defines a “director” to include:
“any person occupying the position of director of a corporation by
whatever name called and includes a person in accordance with
whose directions or instructions the directors of a corporation are
accustomed to act and an alternate or substitute director”.
i.e. Nominal Director, Shadow Director, Nominee Director, Independent
Director etc are treated equally in law.
3
Some Requirements for Directors
Not bankrupt or
Company must have
An individual at disqualified
at least one director
ordinarily resident in least 18 years old (unless permission
Singapore granted by the Court or
(s 145(2), CA)
Official Assignee)
(s 145(1), CA)
(s 148(1), CA)
Ordinarily resident usual place of residence is in
Singapore, i.e. usually a Singapore citizen or PR, Workpass
holder who has a local residential address.
Disqualification e.g. undischarged bankrupts, convicted
for offences involving fraud/dishonesty, disqualified by
order of court
4
Director’s Duties
Derived from common law and Companies Act
Companies Act Common Law
Found in statutes Found in court cases
Breach results in criminal Breach results in civil liability
prosecution and/or civil action
Company cannot stop regulator Company can ratify breaches
from prosecuting for breach
5Directors’ Statutory Duties
(Duties under Companies Act)
S.157(1) A director shall at all times act honestly
and use reasonable diligence in the discharge of
the duties of his office.
(2) [a director] shall not make improper use of
any information acquired by virtue of his position as
an officer or agent of the company to gain… an
advantage for himself …. or to cause detriment to
the company.
6“S.157(1) – A director shall at all times act
honestly and use reasonable diligence in the
discharge of the duties of his office.”
What is to “act honestly”?
One example: Avoid Conflict of Interest
A director must not make a profit for himself by
using:
a) company’s property or money
b) company’s information he has acquired as
director, or
c) his position as director“S.157(1) – A director shall at all times act
honestly and use reasonable diligence in the
discharge of the duties of his office.”
What is “reasonable diligence”?
Ans: Not Negligent
(i.e. He must not be negligent when performing his
directors’ duties)
eg. Lim Weng Kee v PP [2002] 4 SLR 327
Lim was MD of 3 pawnshops. Allowed a lady to redeem jewellery
before her cheque had been cleared. Cheque later dishonoured.
Court found Lim had breached s157(1). Fined $4,000 on each of
3 charges.
“The law hence stands as thus: the civil standard of care and diligence
expected of a director is objective, namely, whether he has exercised the
same degree of care and diligence as a reasonable director found in his
position. This standard is not fixed but a continuum depending on various
factors such as the individual’s role in the company, the type of decision
being made, the size and the business of the company.” 8
– former CJ Yong Pung How“S.157(2) - [a director] shall not make improper
use of any information acquired by virtue of his
position as an officer or agent of the company to
gain … an advantage for himself … or to cause
detriment to the company.
What is making “improper use” of information?
Good example is insider trading
Will also include “avoid conflict of interest”
discussed above
9Some Other Statutory Duties
of Directors
Appoint a company secretary within 6 months - s171
Keep proper accounting records – s199
Hold annual general meetings (AGM) – s175
Once every calendar year, not more than 15 months after
last AGM
First AGM must be within 18 months of incorporation
Lay financial statements at the AGM – s201
Listed company – accounts made up to a date within 4
months before AGM
Non-listed company – accounts made up to a date within
6 months before AGM
Lodge Annual Return with ACRA within 1 month after
AGM – s197 10Common Breaches under the
Companies Act
Not laying financial Not filing Annual Return
Not holding AGM statements at AGM after AGM
(s 175 CA)*
(s 201 CA)** (s 197 CA)*
Not informing ACRA
Not notifying ACRA of
when a company’s
changes in company
registered office
officers
address has changed
(s 173 CA)*
(s 143 CA)*
* Maximum fine of $5,000 and a default penalty if found guilty.
** Maximum fine of $10,000 or up to 2 years’ jail if found guilty.
11Timelines to Hold AGM and Lay
Accounts at AGM (a worked example)
Scenario. An unlisted co. (X) has financial year (FY) ending
31 Dec 2013. X’s last AGM was 1 Sep 2013.
Under s175, X must hold its AGM by 1 Dec 2014 (15
months).
Under s201, X must lay its FY 2013 accounts at its AGM by
30 Jun 2014 (6 months).
Result: X must hold its AGM by 30 Jun 2014
(i.e. to comply with both s175 and s201)
But X can apply for extension up to 60 days to hold its
AGM. Hence, X can hold its AGM and lay its FY 2013
accounts by 29 Aug 2014.
NB. X must apply for extension before 30 Jun 2014.
12Important Obligations under the
Business Registration (BR) Act
Register/Renew your registration before doing business
[section 27(a), BR Act] unless you are exempted
Print the following on all your invoices, letterheads:
Registered business name
ACRA issued registration no. (UEN) [regulation 11, BR
Regulations]
Notify ACRA within 14 days if:
Any change in information registered with us changes (eg. new
partners added, existing partners retired, moved your principal
place of business) [section 14(1), BR Act]
You have ceased to carry on business [section 15(1), BR Act]
13Important Obligations for General
Partners under the Limited
Partnerships (LP) Act
Notify ACRA within 14 days if:
Any change in information registered with us changes (eg. new
partners added, existing partners retired, moved your principal
place of business) [section 18(1), LP Act]
the LP has been dissolved [section 19(2), LP Act]
Print the following on all the LP’s invoices, letterheads:
Registered name
ACRA’s registration no. (UEN) [section 26(1), LP Act]
14Important obligations under the
Limited Liability Partnerships
(LLP) Act
Appoint at least one manager who is (i) a natural person,
(ii) at least 18 years old, and (iii) ordinarily resident in
Singapore [section 23(2), LLP Act]
Manager to notify ACRA within 14 days of any changes in
information registered with ACRA [section 28(1), LLP Act]
Manager to file Annual Declaration (whether LLP is solvent
or not)
within 15 months after registration, and
subsequently once every calendar but not more than 15
months apart [section 24(2), LLP Act]
15ACRA’s Initiatives to Encourage
Voluntary Compliance
16Outline of ACRA’s Initiatives to
Encourage Voluntary Compliance
by Companies
Produced Guidebook for Directors titled “ACRA & I : Being An
effective Director”
Colour-coded Compliance Rating for locally incorporated
companies
Awarding Certificate of Compliance
End of Financial Year (FY) Reminder for Private/Unlisted
Companies
ACRA On The Go Mobile Application
Directors Proficiency Programme for Directors who lack
knowledge on regulatory compliance
e-Training for Directors
Confidential 17ACRA & I:
Being an Effective Director
Published on 28 July 2011
Soft copy available online via
ACRA’s homepage at
www.acra.gov.sg under the
heading “Publications”
Sale of hardcopy of Handbook
at ACRA Counter ($15 a copy)
18ACRA & I:
Being an Effective Director
Production of Guidebook for Directors
Increasing Awareness via Public Education
Part of the suite of initiatives aimed at promoting optimal voluntary
compliance and reducing high enforcement cost downstream
Create compliance awareness targeted at those who may not be aware
of their duties
Focus on statutory requirements under the Companies’ Act to address
common offences identified by ACRA
Target Audience
Newly appointed and lay person directors
Aspiring directors and people interested in understanding the role and
responsibilities of directors – to prepare them before they take on the
roles of directors
People providing secretarial and advisory services to companies – to
equip them with the necessary knowledge on compliance matters to
serve the directors better
19ACRA & I:
Being an Effective Director
Main areas covered in the guidebook
• Office of a Director
• Financial Statements
• Annual General Meeting and Annual Returns
• Other Corporate Disclosures (e.g. registered office address,
appointment/cessation, particulars of company officers, etc.)
• Company Resolutions
• Capital Maintenance and Shares
• Fiduciary Duties
• Corporate Governance
• Role of Secretary
• Closing a Company
• FAQs, Templates and Filing Guides with Screenshots
• Case Studies with Learning Points
20Colour-coded Compliance Rating
Information provided on ACRA’s website under the header
“Compliance Rating and Certificate”.
Compliant companies will be given a green tick and be eligible for a
Certificate of Compliance, while non-compliant ones will have a red
cross rating.
Colour codes:
Compliance rating information is only applicable to Local “Live”
companies.
: Annual General Meeting, Annual Return and accounts up-to-date
: Annual General Meeting, Annual Return or accounts late
- : Not applicable / Company status is not “Live”
21Examples of
compliance rating
against entity name
on Bizfile
22Colour-coded Compliance Rating
The Colour-coded Compliance Rating was introduced and
implemented on 24 April 2010 to:
provide recognition to companies that are in compliance
and to enable them to use their good track record for
brand equity purposes – prompt disclosure and good
compliance translate to good corporate governance.
serve as an incentive for those not in compliance to
strive to do better and be on time in their next AGM and
annual filing.
provide for better transparency to the relevant
companies’ stakeholders such as shareholders, creditors,
financial institutions. This may also assist them in making
better informed decisions when dealing with the company.
23Certificate of Compliance
Implemented together with the Colour-coded Compliance
Rating initiative on 24 April 2010.
Conferred on companies that are in compliance (i.e with
a green tick rating) to recognise their efforts to comply
with the statutory requirements of holding Annual
General Meeting (AGM) on time with up-to-date financial
statements and timely filing of Annual Returns (AR)
within the prescribed period.
A fee of $15 is payable for the Certificate.
Validation service to validate certificate is available on
BizFile for free.
24Sample
25End of FY Reminder
Leverage on IT to provide better targeted advice to
directors or companies depending on their status and
compliance records:
Type A
Type A – to alert compliant companies to start
preparing financial statements for timely holding of
AGM and filing of AR. Type B
Type B – to advise compliant companies which declared
dormant in last AR lodged to consider striking off if
company has no intention to resume business activities Type C1
in the future.
Type C1 & C2 – to remind companies which are in
arrears of filing AR or no AR has been lodged since
incorporation to rectify the defaults.
Type C2
Reminders are sent immediately after end of FY, so that
small companies can file their AR early to avoid peak filing
periods.
26
Implemented in July 2011.ACRA On The Go
AGM Calculator in “ACRA On The Go” iPhone
App
Implemented in April 2011.
Provides an indication of the last possible
date for the user to consider for the next AGM.
Calculation based on the type of company,
the last AGM date, current accounts date, and
in the case of new companies which have not
held any AGM, the date of incorporation.
Helps companies to better plan when to hold
their AGMs so as to meet the legal
requirements.
Confidential 27Training for Directors
Inaugurated on 25 September 2012 (MOU signed with ISCA, SAICSA, & SID)
Participants: Targeted at directors of smaller private companies who want to increase knowledge
on their statutory duties and responsibilities.
Duration: ¾ day (9.00am to 4.00pm)
Training Schedule in 2013: January, April, July, October
4 Modules focused on essential statutory requirements for
compliance through case studies, mock e-filing:
ACRA: Compliance from a Regulator’s Perspective
SID: Office of a Director, Duties and Liabilities of
Directors, Corporate Governance
ISCA: Understanding Financial Statements, Keeping Accounting and Other Records
SAICSA: Common Statutory Requirements under the Companies Act, Resolutions,
Filing Annual Returns, Role of Company Secretary
Enhanced programme will be launched in 4th Quarter 2014 to reach out
to more directors.
Confidential 28One Final Word…
29 Please do NOT reveal your SingPass
password/details to anyone
Treat it like your bank ATM PIN number
Possible consequences:
You may be registered as a partner, director etc. without
your knowledge
You will take on the liability of being a partner, director
etc. without knowing it
30THANK YOU
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