Government to rewrite Companies Act

Find out how this affects companies, especially the SMEs.

In a release yesterday, The Ministry of Finance announced that it has accepted 192 and modified 17 recommendations of the Steering Committee for the Review of the Companies Act.

MOF agrees with the Steering Committee that it is timely to rewrite the Act given the various amendments that have been made over the years. To allow the business community and practitioners sufficient time to adapt to the changes in the Act, MOF will implement the changes and rewrite of the Act in two phases. In the first phase, MOF will amend the Act to implement the Steering Committee’s recommendations which have been accepted by the Ministry. After the changes have been implemented, in the second phase, MOF will undertake a rewrite of the Act to rationalise the provisions and improve the clarity.

According to MOF, this is the largest number of changes to the Act since it was enacted in 1967. "The wide ranging changes are expected to reduce regulatory burden and compliance costs, provide greater flexibility for companies, and improve corporate governance," it said.

Here's more from MOF:

It will bring benefits to various stakeholder groups such as companies, small-and-medium enterprises (SMEs), retail investors and company directors, including the following:

• Impact on Companies: Companies will be allowed to issue non-voting shares and shares carrying multiple votes if their Articles allow it and subject to certain safeguards. This will give companies greater flexibility in raising capital, and meet different investor preferences.

• Impact on SMEs: A new small company concept will be introduced for determining the requirement for statutory audit. SMEs can look forward to lower compliance costs. An approximate additional 10% of companies or about 25,000 more companies can enjoy exemption from audit.

• Impact on Retail Investors: A multiple-proxies regime will be introduced to allow indirect investors and CPF investors to attend and vote at shareholders’ meetings. This will provide for more active participation at general meetings by the beneficial owners of the company, and help strengthen the culture of corporate governance.