Common Statutory Breaches
- A company director has to comply with a number of statutory obligations. These obligations apply to all directors regardless of whether a director claims to be non-executive or is a nominee.
- The AGM provides shareholders with the opportunity to question the directors on the management and financial performance of the company. This is facilitated by requiring the directors to lay the company’s accounts at the AGM and provide these accounts to all shareholders not less than 14 days before the AGM.
- The AR provides critical information that helps the company’s stakeholders to make informed decisions. It is also an opportunity to update company information with ACRA so that company information is current and accurate. The format of the AR is prescribed under the Companies Act. The AR is an electronic form lodged with ACRA through its online filing system – Bizfile+ and contains important particulars of the company such as the name of the directors, its shareholders, the date to which the accounts of the company are made up and the date of the AGM at which those accounts were laid before the company.
- In view of the importance of holding AGMs and filing AR, ACRA has a system to pro-actively monitor these statutory breaches and has taken steps to instill compliance with these statutory obligations that are often breached by companies and/or their directors:
For FYE ending on or after 31 Aug 2018
a. failure by company and its directors to hold an AGM within the stipulated timeline. Listed companies are to hold the AGM within 4 months after its Financial Year End (FYE), while any other company is to hold their AGM within 6 months after FYE - section 175 Companies Act
b. failure by company and its directors to file an AR within the stipulated timeline. Listed companies are to file their AR within 5 months after FYE, and for all other companies, within 7 months after FYE. For companies having a share capital and keeping a branch register outside Singapore, Annual Returns must be filed within 6 months after FYE in the case of listed companies or within 8 months after FYE in the case of companies that are not listed – section 197 Companies Act.
For FYE ending before 31 Aug 2018
c. failure by company and its directors to hold an AGM within the stipulated timeline. Listed companies are to hold their AGM once in every calendar year and not more than 15 months after holding the last preceding AGM. All other companies are to hold their AGM once in every calendar year and not more than 15 months (18 months for new companies from the date of their incorporation) after holding the last preceding AGM - Section 175 Companies Act
d. failure by directors to lay updated financial statements of their companies at their AGM within the stipulated timeline. Listed companies must lay financial statements made up to a date not more than 4 months before the date of their AGM, while all other companies are to lay their financial statements made up to a date not more than 6 months before the date of their AGM - section 201 Companies Act.
e. failure by companies and directors to file their AR within the stipulated timeline. Listed and any other companies must file their AR within 30 days after the date of their AGM - section 197 Companies Act.
ACRA’s 3”E”'s approach
- ACRA has deployed a 3’E”'s enforcement strategy to address these 2 common breaches.
- Education - Company directors who would like to know more about their statutory duties and obligations can refer to the Directors Training Programme (www.biztrg.sg) that is offered by ACRA free of charge.
- Enforcement – tougher enforcement action will be taken against egregious cases (e.g. multiple breaches or repeat offenders). If the offenders do not agree to pay the composition sums, they will be charged for the offences. Deterrent court fines will be sought if appropriate.
- Eradication – ACRA will initiate the striking off of companies that are not carrying on business or not in operation.
- Companies and every director that breach their statutory obligations may be a composition sum in lieu of facing prosecution. ACRA may prosecute the directors in court if they do not accept the offer of composition.
- ACRA may also not offer composition after a summons is issued. ACRA will serve the summons to the director at his residential address by registered post. The summons will indicate the date, time and which Court that the director has to appear before. If the director fails to attend court, a warrant for his arrest will be issued by the court. The director must attend court even if he has made representations to ACRA.
Prosecution and seeking higher court fines
- For egregious cases that are prosecuted in court, ACRA will not offer composition, especially if the offender has pleaded guilty to not holding the AGM and not filing the AR before or compounded multiple breaches before.