In Singapore’s bid to create a more efficient and transparent corporate regulatory framework for its growth as an international hub for both businesses and investors, a Steering Committee to Review the Companies Act was formed in 2007 to undertake a fundamental review of Singapore’s Companies Act (the “Act”).
The Steering Committee, chaired by the Attorney General Professor Walter Woon, has to explore ways in which the Act can be kept fluid in order to maintain its relevance in today’s rapidly changing business environment. At the same time, it must ensure that the new Act conveys the intent of corporate legislation and the rules in clear, concise and unambiguous language. Some issues which are currently under the scrutiny of the Steering Committee include, inter alia:
• Codification of Directors’ Duties
Section 157 of the Act contains a statutory statement of a director’s duties which is non-exhaustive. In contrast, the UK Companies Act spells out specifically the duties of directors. While the UK approach clarifies the law on directors’ fiduciary duties and helps directors to better understand their role, it has been criticised for not having the flexibility to accommodate developments and evolving practices in the business environment. Instead of codifying all the directors’ duties in the Act, the Steering Committee will be exploring the option of providing greater clarity to directors via practice directions or guidance notes.
• Removing Restrictions on Financial Assistance
The prohibition on a company providing financial assistance for the acquisition of its own shares or those of its holding company, as set out in Section 76 of the Act, exists to protect creditors and shareholders of the company against possible misuse and depletion of the company’s assets. This section is known to be complex, and has resulted in uncertainty and difficulty in its application. In view that several countries, such as the UK and Australia, have liberalised the restriction, the Steering Committee will be considering if Singapore should follow suit.
• Appointment of Multiple Proxies
The Act provides that a member is entitled to appoint a maximum of two proxies to attend and vote at a general meeting, unless the articles of association for that company states otherwise. While having two proxies may be sufficient under most normal circumstances (of individual shareholders), it may not be so for fund managers or institutional investors who hold shares through a nominee company or custodian bank. The Steering Committee will be considering whether the Act should be amended to allow a nominee company or custodian bank to appoint more than two proxies to attend the general meeting of a company.
The Steering Committee is currently in the process of distilling feedback and deliberations on the Act into a series of consultation documents. It will be issuing a public consultation paper next year on its recommendations for the public to provide their views and comments.
For readers who are interested to learn more on the above, you may wish to access the relevant websites (http://app.mof.gov.sg/news_speeches/speechdetails.asp?speechid=278 and http://app.mof.gov.sg/news_speeches/speechdetails.asp?speechid=303).
Written by
Ms Tan Chin Yee and
Ms Wong Joy Ling
By Ms Tan Chin Yee
Legal Associate, Corporate Practice
Ph: (65) 6322-2238
Fax: (65) 6534-0833
E-mail: tanchinyee@loopartners.com.sg
Ms Wong Joy Ling
Foreign Counsel,
Legal Associate, Corporate Practice
Ph: (65) 6322-2234
Fax: (65) 6534-0833
E-mail: wongjoyling@loopartners.com.sg
Loo & Partners LLP
88 Amoy Street, Level Three
Singapore 069907