Companies, Business Trusts and Other Bodies (Miscellaneous Amendments) Act 2023 in force on 1 July 2023: Providing for fully virtual or hybrid meetings, revised threshold computation for compulsory acquisition of shares, and other amendments

27 June 2023

The Companies, Business Trusts and Other Bodies (Miscellaneous Amendments) Act 2023 (“Amendment Act”) will take effect on 1 July 2023. The Amendment Act makes four key sets of amendments to the Companies Act 1967 (“CA”).

The first set of amendments, which also applies to the Business Trusts Act 2004 (“BTA”) and the Variable Capital Companies Act 2018 (“VCCA”), permanently provides companies, business trusts (“BTs”) and variable capital companies (“VCCs”) with the option to conduct fully virtual or hybrid meetings.

The remaining three sets of amendments are aimed at promoting a more pro-business environment while upholding market confidence and safeguarding public interest. These are: (1) changes to the computation of the threshold for the compulsory acquisition of shares under section 215 of the CA, (2) amendments to provisions relating to disqualification of persons as directors under section 155A of the CA, and (3) updates to the penalties imposed on directors of companies for failing to prepare and table financial statements in compliance with the prescribed accounting standards in Singapore.

Fully virtual or hybrid meetings

Background

The Covid-19 (Temporary Measures) (Alternative Arrangements for Meetings for Companies, Variable Capital Companies, Business Trusts, Unit Trusts and Debenture Holders) Order 2020, which enables companies, BTs and VCCs to convene, hold or conduct meetings through electronic means, will cease on 1 July 2023. The Amendment Act will continue enabling the holding of virtual or hybrid meetings, in addition to the physical meetings which companies, BTs and VCCs are already able to hold under existing legislation.

A public consultation on a draft form of the Companies, Business Trusts and Other Bodies (Miscellaneous Amendments) Bill (“Bill”) was conducted by the Accounting and Corporate Regulatory Authority (“ACRA”), the Ministry of Finance and the Monetary Authority of Singapore in February 2023. Their responses to the consultation feedback were issued on 13 April 2023. The Bill was tabled in Parliament on 18 April 2023 and passed on 9 May 2023.

Companies

The Amendment Act facilitates the use of electronic media and technology, by providing entities with the flexibility of holding hybrid or virtual meetings, while ensuring that shareholders’ rights are upheld. As explained by the Second Minister for Finance, Indranee Rajah, at the second reading of the Bill on 9 May 2023, current laws provide for “general, board and other types of meetings to be conducted, but do not explicitly specify the mode of conduct - for instance whether these meetings may be held physically, virtually or in a hybrid manner”.

The new section 173J in the CA provides for the holding of meetings using virtual meeting technology, whether wholly or partly. “Virtual meeting technology” is defined in section 4(1) to mean “any technology that allows a person to participate in a meeting without being physically present at the place of meeting”.

Section 173J applies to an annual general meeting, an extraordinary general meeting, a statutory meeting, a general meeting of an amalgamating company mentioned in section 215C or 215D as well as a meeting of a class of members. The new section 173J also applies to a meeting ordered by the court under section 182 and a meeting of creditors, members of a company, holders of units of shares of a company, or a class of such persons, ordered by the court under section 210, if the court directs. 

Section 173J sets out how specific references in the CA (e.g. “any person (including any member of a company) attending a meeting”) are to be read where the meeting in question is held wholly or partly using virtual meeting technology.

The amendments will override the constitution of a company, unless:

  • (for a company incorporated before 1 July 2023) the company alters its constitution on or after 1 July 2023 to exclude or modify the application of the amendments; or
  • (for a company incorporated on or after 1 July 2023) the company chooses to adopt a constitution that excludes or modifies the application of the amendments, or, at any time after its incorporation, alters its constitution to exclude or modify the application of the amendments.

Section 173J also makes clear that subject to the constitution of the company, nothing in the CA prohibits a meeting of the board of directors of a company, or a committee consisting of one or more directors of the company, from being held wholly or partly using virtual meeting technology.

These enabling provisions mean that companies’ constitutions and the regulations issued by the respective regulators will ultimately determine if fully virtual or hybrid meetings are allowed and how they are to be conducted. Companies can choose to continue with physical meetings, if they prefer.

Due to the use of technology, some virtual or hybrid meetings may encounter technical issues that may be beyond the control of the companies. Such technological disruptions, technological malfunctions or technological outages, in and of themselves, will not cause a meeting to be invalidated. However, a safeguard is provided in the amended section 392 of the CA for shareholders
to apply to the court if these technical issues result in substantial injustice.

BTs and VCCs

The Amendment Act sets out similar amendments to the BTA and the VCCA to enable BTs and VCCs to conduct fully virtual or hybrid meetings.

Issuers listed on Singapore Exchange Securities Trading Limited

Following the introduction of the Bill, on 19 April 2023, Singapore Exchange Regulation amended Practice Note 7.5 (General Meetings) of the Mainboard Rules and Practice Note 7E (General Meetings) of the Catalist Rules (collectively, “Practice Notes”) to provide further guidance on the conduct of general meetings for issuers primary-listed on Singapore Exchange Securities Trading Limited, including issuers that are real estate investment trusts and BTs. The amended Practice Notes apply to all general meetings held by listed issuers on or after 1 July 2023 (both fully physical meetings and hybrid meetings), regardless of when the notice of general meeting is disseminated.

Key amendments to the Practice Notes include provisions relating to the conduct of general meetings (including the format of the meeting), clarifying the participation rights of shareholders in relation to hybrid meetings, notices of general meetings (including the contents of such notices) and dissemination of documents, allowing written questions from shareholders in advance of general meetings (and issuers’ responses thereto), real-time remote electronic voting and communication in relation to hybrid meetings, and minutes of general meetings.

The Practice Notes make clear that, unless prohibited by relevant laws and regulations in the jurisdiction of the issuer’s incorporation, an issuer may hold either (a) fully physical meetings in Singapore, or (b) hybrid meetings at a physical place in Singapore and using technology that allows a person to participate in that meeting without being physically present at the place of meeting. The issuer shall not hold wholly virtual general meetings. Issuers who hold general meetings outside Singapore without allowing shareholders in Singapore to participate virtually, should hold information meetings for the shareholders at a physical place in Singapore.

Threshold for compulsory acquisition of shares under section 215 of CA

The Amendment Act inserts a new subsection (9A) in section 215 of the CA. Under section 215(1), where a scheme or contract involving the transfer of all of the shares or all of the shares in any particular class in a company (“transferor company”) to a person (“transferee”) has, within four months after the making of the offer in that behalf by the transferee, been approved as to the shares or as to each class of shares whose transfer is involved by the holders of not less than 90% of the total number of those shares (excluding treasury shares) or of the shares of that class (other than shares already held at the date of the offer by the transferee, and excluding any shares in the transferor company held as treasury shares), the transferee may thereafter give notice to any dissenting shareholder that it desires to acquire the dissenting shareholder’s shares.

The effect of the new subsection (9A) is to increase the number of shares that are to be treated as held or acquired by the transferee for the purposes of section 215 and therefore does not count towards meeting the compulsory acquisition threshold.

Specifically, in respect of an offer made on or after 1 July 2023, shares held by the following persons are added to the number of shares that are to be treated as held or acquired by the transferee:

  • a person who is accustomed or is under an obligation whether formal or informal to act in accordance with the directions, instructions or wishes of the transferee in respect of the transferor company;
  • the transferee’s spouse, parent, brother, sister, son, adopted son, stepson, daughter, adopted daughter or stepdaughter;
  • a person whose directions, instructions or wishes the transferee is accustomed or is under an obligation whether formal or informal to act in accordance with, in respect of the transferor company;
  • a body corporate that is controlled by the transferee or a person mentioned in paragraph (a), (b) or (c) above.

For the purposes of paragraph (d), a body corporate is controlled by a transferee or person mentioned in paragraph (a), (b) or (c) if:

  • the transferee or person (as the case may be) is entitled to exercise or control the exercise of not less than 50% of the voting power in the body corporate or such percentage of the voting power in the body corporate as may be prescribed, whichever is lower; or
  • the body corporate is, or a majority of its directors are, accustomed or under an obligation whether formal or informal to act in accordance with the directions, instructions or wishes of the transferee or the person (as the case may be).

Disqualification of persons as directors under section 155A of CA

The Amendment Act also amends section 155A of the CA, which disqualifies a person from acting as a director of any company or a foreign company for a period of five years if he or she was a director in at least three companies which were struck off the register by the Registrar of Companies (“Registrar”) under section 344 of the CA within a period of five years.

Under the Amendment Act, a disqualified director will be allowed to apply to the Registrar, instead of the court, for permission to act as a director of a company, thus shortening the process and making it cheaper for a disqualified director to do so. The application may be granted by the Registrar if the Registrar thinks fit to do so, having regard to the considerations prescribed in the Companies (Amendment No. 2) Regulations 2023.

Further, the amendments reduce the disqualification period under section 155A from five years to three years for first-time disqualified directors, to better reflect the culpability of a disqualified director, while keeping that for repeat disqualified directors at five years.

Finally, the amendments clarify the policy intent of the disqualification provision under section 155A(1), which is that directors are disqualified so long as they have at least three companies struck off by the Registrar.

Increased penalties for failure to prepare and table financial statements in compliance with the prescribed accounting standards in Singapore

The Amendment Act updates the penalties imposed on directors of companies for the failure to prepare and table financial statements in compliance with the prescribed accounting standards in Singapore. The maximum penalty for offences relating to not having true and fair financial statements that comply with the accounting standards will be increased to:

  • S$250,000 where there is no intent to defraud; and
  • S$250,000 and three years’ imprisonment where there is intent to defraud.

Reference materials

The following materials are available on Singapore Statutes Online sso.agc.gov.sg and the ACRA website www.acra.gov.sg:

The following materials are available on the Singapore Exchange website www.sgx.com: