Ignorance of Compliance Matters in Singapore could end up with business owners in Court, as ACRA clamps down on errant companies that fail to hold their Annual General Meetings (“AGM”)
In the pursuit of success, many business owners overlook meeting the annual regulatory compliance requirements for their companies. What they fail to foresee are the multiple complications that can arise from being unprepared and unaware of the importance of meeting these statutory obligations, which may eventually result in anxiety, panic and disruption to business operations.
What are Annual General Meetings?
Post-incorporation, a newly incorporated company will have to hold its AGM within 18 months from the date of its incorporation. A business owner can double check your company’s date of incorporation via several means:
- Business Profile; or
- Certificate of Incorporation
Typically, items (1) and (2) are great to always have on hand, as they may be required by banks, financial institutions, joint venture partners etc. to certify that the business is up and running.
Subsequent to the company’s first AGM, its subsequent AGMs should be held at least once every calendar year, or 15 months from the date of a company’s previous AGM, whichever is earlier. All companies and foreign branches incorporated in Singapore will have to comply with this requirement on an annual basis.
How do I prepare for an AGM?
For companies that have already engaged a corporate secretarial service provider on a retainer basis, do check if your agreement with this service provider includes preparation of annual compliance documentation for holding the company’s AGM.
Typically, the documentation required for most companies would include the following:
- Directors’ Resolutions in Writing
- Notice to convene AGM
- Attendance List (if applicable)
- Minutes of AGM
There are several reasons why the documentation for a company’s AGM may vary. For example, a company that has several shareholders as compared to a company that is wholly owned by another parent company will have slightly different documentation.
One key thing to note is that how a company’s AGM is held is governed by its Memorandum & Articles of Association (“M&AA”) and the Companies’ Act – though the modern M&AA will usually allow for meetings to be held electronically or overseas, some ancient M&AAs will not accommodate for such situations. Hence, new business owners who have acquired an existing company may need to review the M&AA and consider making amendments to it, ahead of when their AGMs should be held.
However, if your company has not engaged a professional corporate service provider, you may need to either (i) consider engaging one on an ad-hoc basis to prepare AGM documents; or (ii) consider engaging a service provider on a retainer basis; (iii) or ask an employee who is experienced and qualified to prepare these documents. Do note that it is not encouraged that the company prepares its own documentation; as such documentation will be reviewed by auditors during their statutory audits. Even if the company is exempt, it should still ensure that its books and records are kept in an orderly fashion, to avoid complications for business owners at a later date.
What is the estimated time required to prepare for an AGM?
As part of the AGM, the following matters will be tabled to be discussed:
- Approval of company’s audited or unaudited accounts
- Payment of expenses to the directors (if applicable)
- Re-election of retiring directors (if applicable)
- Re-appointment of auditors
The matters to be discussed are usually stated in the company’s M&AA. Most modern M&AAs may not require directors to stand for re-election.
Given the above, the item of discussion that would require the longest preparation time would be the approval of the company’s audited or unaudited accounts. Depending on the complexity of the company’s business operations and volume of transactions throughout the year, companies can anticipate how long their auditors would take to audit their records. In most instances, companies would usually engage an audit firm to prepare their unaudited accounts in accordance with the Singapore Financial Reporting Standards (“SFRS”) format, unless their own employees are already qualified to do so.
In addition, the Companies’ Act requires directors to approve audited accounts at least 14 days before the date of the AGM. Hence, a company will have to estimate the time required for the audit to be completed and ensure that there is adequate time between the finalisation of the accounts and the date of the AGM.
Generally, it is recommended that the company trigger its auditors to start the audit within one month after its financial year end; and for the preparation of its AGM documents to be completed at least two weeks before the company’s AGM is due. Of course, this may differ from company to company, depending on its own unique circumstances. For example, if a company has directors or shareholders located overseas, they may wish to arrange for items to be completed and finalised earlier.
How do I notify ACRA that my company has held its AGM?
Ironically, some companies that diligently ensure they hold their AGM fail to follow up properly and ensure that ACRA is duly informed that the company has complied with its annual compliance regulatory obligations.
In the event when ACRA finds that a company has defaulted, the company and its officers will be held responsible by ACRA, which may impose composition fines and issue court summonses to the company and its officers. Naturally, the imposition of fines or issuance of court summonses will result in some alarm and anxiety, particularly for directors, who will be charged in their personal capacity and may subsequently be disqualified from acting as a director for other companies. Hence, it would be most prudent for companies to ensure that they comply with this requirement, as it is not worth the hassle, or inconvenience experienced.
ACRA’s table of penalties is listed below:
| Current enforcement action for non-compliance under s175/s197/s201 of CA | New enforcement action for non-compliance under s175/s197/s201 of CA |
|---|---|
| Penalties when AR is filed online (applicable up to 30 Nov 2015) Based on information provided in the AR, the following may be imposed:
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Penalties when AR is filed online (effective from 1 Dec 2015) Based on information provided in the AR, the following may be imposed:
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Enforcement Actions (applicable up to 1 Nov 2015)
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Enforcement Actions (effective from 2 Nov 2015)
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A company notifies ACRA that it has held its AGM through an electronic submission known as the Annual Return through ACRA’s electronic portal known as Bizfile. To access Bizfile, one would be need to have a SingPass and have a professional number or an officer of the company.
For companies that are not exempt, another essential component of the Annual Return submission is the requirement to submit their financial statements in XBRL format. This is a new format promoted by ACRA; and may pose a challenge for those who have not prepared financial statements in this format before.
What if my company cannot hold its AGM in time?
Based on all the information provided above, business owners should be able to anticipate if they may require an extension of time to hold their AGM. Do note that while it is possible to request for an extension of time for the company’s AGM, it is not possible to do so for the company’s Annual Return, which should be submitted one month from the date of the company’s AGM. Hence, if the company does foresee that it may have to accommodate for delays in preparing its XBRL due to unfamiliarity with the software, it may also wish to request for an extension of time for its AGM.
The application for extension of time will have to be done via the Bizfile portal; and there are two separate extensions to apply for, namely, Section 175 and Section 201 of the Companies’ Act. Depending on the circumstances, your company may only need to make an application under one Section. A professional corporate services provider would typically be able to advise the company on how it should proceed to do so.
Do note that the cost of extension is standard, at S$50.00 per month, up to a maximum of two months. Therefore, even though the option for an extension of time is available, companies should note that the maximum extension that can be obtained is only two months.
Besides the holding of the company’s AGM and submission of its Annual Return, companies also will be required to file their income tax return with the Inland Revenue Authority of Singapore (“IRAS”), which companies may sometimes overlook.
In a nutshell, ensuring that a company meets its annual compliance regulatory obligations is not a tedious or difficult task to accomplish, but it does take some advance preparation, e.g. getting the company’s finance team to get their books in order, ensuring that auditors commence their audit early, preparing AGM documentation, etc. – all of which is nearly impossible to execute overnight. Hence, it would be prudent of companies to ensure everything is completed on a timely basis, or perhaps engage the reliable service of a professional corporate service provider, who would be able to assist the company with liaising with all parties involved to ensure that everything is completed smoothly.
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