Changes proposed to the Companies Act will facilitate the conduct of digital meetings, electronic communications and transmission of documents, and also update regulatory requirements such as the working of the compulsory acquisition regime to enhance minority protection.
To ensure that Singapore’s corporate laws and regulatory framework remain relevant and competitive, a Companies Act Working Group was set up in 2018 by the Accounting and Corporate Regulatory Authority (ACRA) to review various areas of the Companies Act.
ACRA and the Ministry of Finance published their responses to feedback from a public consultation conducted in 2020, paving the way for legislative changes to be tabled and considered in Parliament.
Some of the key changes proposed are:
- Provisions to facilitate the conduct of digital general and board meetings. Companies would be allowed to conduct digital meetings, unless they specifically choose not to by adding a prohibition in their constitutional documents. When holding digital general meetings, companies would be required to use technology that enables members to attend, listen, speak and vote at the meeting. Additional safeguards and requirements may be introduced subsequently via subsidiary legislation, which is likely to be inspired by or adapted from current how-to guidance for system service providers that enable the holding of digital general meetings, published by Singapore Exchange Regulation, the Singapore Institute of Directors and the Chartered Secretaries Institute of Singapore.
- Clarifying and refining existing provisions on electronic transmission of documents and communications. Supporting the digitalisation drive, various related provisions were proposed, considered and accepted. Clarification would be provided on the operation of provisions allowing the electronic transmission of notices and documents to members, officers or auditors. The same will be done for the electronic safekeeping and storage of documentation, including for the purposes of inspection. Companies would be required to accept proxy instructions given by electronic means.
- Reviewing the threshold for the statutory right of compulsory acquisition of shares. Section 215 of the Companies Act sets out the right for a person (an “offeror”) to compulsorily acquire all the shares of a company (including those held by dissenting shareholders in a scheme or contract involving the transfer of those shares). To exercise this right, the offeror needs to achieve a 90% acceptance threshold for the relevant scheme or contract, with certain exclusions (notably shares held by a nominee or a related corporation of the offeror are excluded from computing the 90% acceptance threshold). The exclusions are now proposed to be expanded, and would exclude shareholdings held by close relatives, corporate entities controlled by the offeror, the ultimate controller, as well as individuals or corporate entities controlled by the ultimate controller.
Of the proposed changes outlined above, the amendments to the statutory right of compulsory acquisition is garnering significant attention. If passed by Parliament, the proposed amendments would pose greater difficulty for an individual seeking to exercise the right by setting up a special purpose vehicle to serve as the offeror. The shareholdings of this individual would be excluded under the proposed amendments, but would not be excluded under the current regime, in effect raising the bar for the right of compulsory acquisition to be exercised. While the new regime is anticipated to have a dampening effect on the use of the statutory right of compulsory acquisition (particularly for privatisation exercises), it would be a step forward towards a more equitable position for minority shareholders.
The next step for this round of legislative changes is the tabling in Parliament, and if successfully passed, the amendments would be brought into force on a date to be notified in the government gazette.