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Feb 18, 2009 Govt plans changes to Companies Act Some large private firms may face more regulatory and disclosure requirements By Lee Su Shyan SOME large private companies that have been flying under the radar may soon have to disclose more details about themselves, under key legal changes being considered. Finance Minister Tharman Shanmugaratnam told directors and head honchos yesterday that Singapore has been looking at updating the regulatory framework contained in the Companies Act. At yesterday's 10th anniversary dinner of the Singapore Institute of Directors, Mr Tharman said that a robust regulatory framework will help Singapore become the most attractive place in Asia and globally in which to do business. He referred to a steering committee set up in 2007 to do a fundamental review of the Companies Act and three of the areas it is looking at. Firstly, it is considering introducing a new definition for 'small company'. The definition could be based on the level of sales, assets and number of employees. There is no legal definition of a 'small company' in Singapore now, but there is one referring to an 'exempt private company'. This generally refers to smaller companies now but its definition - firms with no more than 20 shareholders who are individuals - means that large companies are sometimes included. For example, property developer Far East Organization, which is not a listed company, is an exempt private company. It does not need to file its accounts with the Accounting and Corporate Regulatory Authority. But that could change if the 'small company' definition is introduced. Such a move would be similar to existing practices in Britain, Australia and New Zealand. Shook Lin & Bok partner Robson Lee said: 'If the SME (small and medium-sized enterprise) is very small, say a husband-and-wife company, we don't want to deploy resources to regulate them. 'Once they are bigger and are better equipped to deal with regulations, then they should comply with more rules and disclose more, which is appropriate as larger companies have many dealings with third parties.' Mr Tharman said another aspect under review is whether to specify a detailed list of directors' duties. The Companies Act now says that 'a director shall at all times act honestly and use reasonable diligence in the discharge of the duties of his office'. A more detailed list of directors' duties could bring benefits. Mr Tharman said that 'on the positive side, this helps directors to better understand the law on their fiduciary duties'. But 'critics are concerned that such an approach may not allow sufficient flexibility to keep pace with development and evolving practices. Companies would adopt a box-ticking approach', added Mr Tharman. In Britain, which has the most extensive list, the duties include promoting the success of the company, exercising independent judgment, exercising reasonable skill and not accepting benefits from third parties. Lawyer Derek Loh, who also sits on the boards of listed companies, said: 'There are merits to codification but it is important to make sure that it does not stifle enterprise or commercial decisions.' Another independent director said that codification could bring a never-ending list of duties. 'Codification may lead to excessive regulation and people will just run to refer to the rulebook. And it is important to update the code on a regular basis,' he added. Still, codification may make it easier to prosecute directors as it may be clearer whether he has done the right or wrong thing. Liberalising the use of a company's funds is another area under review. At present, to protect creditors for example, there are restrictions on someone taking over a company and using the cash in the company's kitty to fund his move. This issue of financial assistance was in the spotlight in 2006 when former MP Lew Syn Pau was charged for his role in helping Broadway Industrial lend money to a person to buy its shares. He was later acquitted. Mr Tharman said that the steering committee will be weighing the pluses and minuses of such moves before it issues a consultation paper for comments. sushyan@sph.com.sg Copyright © 2007 Singapore Press Holdings. All rights reserved. Privacy Statement & Condition of Access |