On 21 February 2019, the Singapore state courts fined a company director a record amount of $113,400 for 54 charges. The director Tan Hang Song was previously found guilty on 14 November 2018 under sections 175 and 197 of the Companies Act. The charges alleged that the company director knowingly and willfully permitted nine companies to default in filing annual returns and holding the annual general meeting.
Mr. Tan had entered a plea of not guilty. The case was heard over two days by the state courts. After reviewing the evidence, Tan was found guilty of all offenses that were alleged by the government. In addition to the monetary fine, for a period of five years, Mr. Tan has been disqualified from acting as a director of any Singapore company.
It is a statutory requirement of the Singapore law that a company must file annual returns and hold an annual general meeting. Why is this the case?
- The annual general meeting allows the shareholders to obtain information about the state of the company and express their views to the directors;
- The annual general meeting also provides an understanding of the current financial position of the company to the shareholders;
- Filing the annual return ensures public disclosure of the status of the company.
The Accounting and Corporate Regulatory Authority (ACRA) is the national regulator of business entities, public accountants, and corporate service providers in Singapore. In recent years, ACRA has heightened its scrutiny of non-compliance with the Companies Act. The case against Mr. Tan was a record fine. However, in 2018 alone, 12 other company directors were also prosecuted by ACRA.
All the defendants who are convicted of three or more related offenses under the Companies Act are automatically disqualified to act as directors in Singapore. Once disqualified, the ex-director cannot take part in the management of any company.
The previous record fine for a breach of the Companies act was S$57,004. This case was heard by the state courts in July 2018. In it, Lawrence Fong Kok Liong was charged for failing to hold the annual general meeting, and failing to file annual returns for 19 companies. He had previously been convicted for a similar offense in 2014.
While Singapore offers one of the most business-friendly environments in the world, a Singapore-based company (how to register a Singapore company?) must be cognizant of the regulatory and compliance requirements and comply with them assiduously. These requirements include:
- The company must have a registered office. The office should be accessible to the public on each business day for three hours during regular business hours. All correspondence and communication with the government will be sent to this address. You may use a virtual office service to satisfy this requirement; that can be a more affordable option, rather than leasing a physical office.
- The company must have at least one director who is resident in Singapore.
- The company must appoint a company secretary who is resident in Singapore.
- The company must appoint a data protection officer.
- On the required documents the company must display its name and unique entity number (EUN).
- To improve corporate governance and transparency, the company must maintain specific company registers. These registers include:
- Register of directors, chief executive officers and secretaries
- Register of substantial shareholders
- Register of controllers
- Register of nominee directors
- The company must comply with Singapore accounting laws.
- The company must file its annual returns with ACRA.
- The company must hold an annual general meeting each year.
- The company must register for the goods and services tax (GST) if it reasonably expects the taxable turnover to be in excess of $1 million dollars.
- The company must comply with employment regulations.
- The directors of a company must comply with disclosure requirements regarding any conflicts.
- The company must maintain the appropriate licenses and approvals for its business, if applicable.
Penalties for Non-Compliance
The following are some of the common non-compliance mistakes that a Singapore company can make.
- Failing to maintain statutory records
- Failing to notify the ACRA about company changes
- Not holding an annual general meeting
- Not filing the annual returns with the ACRA
- Making false or misleading statements in government filings
To learn more about non-compliance risks, please see this article.
Company Director’s Duties
By law, the management of a company is the responsibility of its board of directors. Therefore, the Singapore Companies Act imposes several important duties on a company director. These include:
- Duty to disclose any conflict of interest in transactions
- Duty to act honestly and use reasonable diligence
- Duty to exercise power in good faith for the company’s interests
- Duties of skill, care, and diligence
The duties, and powers of a Singapore company director are very well articulated in the Singapore Companies Law and every company director must be familiar with these obligations. Furthermore, if you are using a nominee director service to satisfy the Singapore residency requirement, you should ensure that you are working with a reputable Corporate Services firm that does not cut corners while following the law.
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