Being unaware of Compliance Matters in Singapore could end up with Business Owners and founders of Singapore companies heading to Court, as ACRA puts a stop on companies that consistently do not hold an Annual General Meetings or AGM.
In order to save costs and improve efficiency, many business owners in Singapore tend to exclude the yearly regulatory compliance requirements for their company to hold a meeting. What may often be overlooked are the difficulties that can arise from being unprepared and unaware of the importance of attaining such obligations, which can result in a disruption to business operations within the company.
A newly incorporated company will have to hold an Annual General Meeting after 18 months after the company’s incorporation. It’s easy enough for a Business Owner can look back on the company’s date of incorporation via several forms; checking the Business Profile of the company or the Certificate of Incorporation which will contain all particulars about a specific company.
Those that have already employed a corporate Service Provider, check to see if your contact includes the preparation of compliance documentation for holding the company’s Annual General Meeting.
Characteristically, the required documentation for most companies includes the following:
The documentation for different companies may differ based on the structure, for instance partnerships or Limited Liability companies may have Shareholders whereas a company owned entirely by another parent company will need varying credentials.
Another issue to take note of is how a company’s Annual General Meeting held is governed by the company’s Memorandum & Articles of Association as well as the Companies’ Act. Although modern Articles of Association will typically allow for meetings to be held via Skype or other electronic means for those who are based in different countries; whereas older articles will obviously not include such circumstances. Therefore, new Business Owners should review the Articles of Association having acquired an already existing company in order to make changes where required prior to when their AGMs should be held.
However, if your company has not engaged a professional corporate service provider, you may need to consider engaging one on an ad-hoc basis to prepare AGM documents or on a retainer basis. Or assign this task to a qualified and experienced employee who can arrange these papers. Even if the company is exempt from holding an annual meeting, it should still make sure that all records and books are kept organised and up to date to avoid complications later on.
The following matters need to be documented and discussed prior to holding an Annual General Meeting:
Given the above, the item of discussion that would require the longest preparation time would be the approval of the company’s accounts (audited or unaudited). Depending on the complexity of the company’s business operations and the amount of transactions throughout the fiscal year, companies can anticipate how long their auditors would take to audit their records. In many cases, companies would usually engage an audit firm to prepare their unaudited accounts as per the format as laid out in the Singapore Financial Reporting Standards, unless their own employees are already qualified to do so.
Generally, it is recommended that the company trigger its auditors to start the audit within one month after the company’s fiscal year has ended; and for the preparation of its AGM documents to be completed at least two weeks before the company’s Annual General Meeting is owed. Naturally, this might be different depending on the specific company and its own unique circumstances. For example, if a company has any Directors or members living overseas, they may wish to arrange for items to be completed and finalised earlier.
Funnily enough, some companies that meticulously ensure they have held an AGM sometimes fail to follow up with ACRA to duly inform them that the company has obeyed to the annual compliance regulatory obligations.
In the event that ACRA finds a company to have defaulted, the company and its founders will be held responsible, which may be a combination of fines and court summonses. Understandably, the imposition of fines or court summonses will result in concern and alarm, mostly for the Company Directors, who can be charged in a personal capacity and may be disqualified from acting in such capacity for other companies. Therefore, it’s sensible for companies to ensure that they have fulfilled this requirement, as it is not worth the inconvenience experienced with non-compliance.
A company can easily notify ACRA that an AGM has been held through an electronic submission known as the Annual Return via BizFile, ACRA’s electronic portal.
For companies that do not have an exemption, another essential component of the Annual Return compliance is the obligation to submit financial statements in XBRL format. This is a relatively new format promoted by ACRA; and may present an additional challenge for those who have not prepared financial statements in such format previously.
Business Owners should be able to anticipate if they may require an extension of time to hold their AGM. It is important to note that while it is possible to request for an extension of time for the company’s AGM, it may not also be possible for the Annual Return of the company, which should be submitted one month from the date of the company’s AGM. Therefore, if the company does foresee that it may have to accommodate for delays in preparing its XBRL as a result of inexperience with the software, may also want to request for an extension of time before holding its AGM.
As mentioned earlier, the application for extension of time will have to be submitted via the Bizfile portal; using two separate extensions to apply for, namely, the Companies Act: Section 175 – Section 201. Depending on the conditions, 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.
The cost of an extension is SGD $50 for each month, to a maximum of two months. Therefore, despite the fact the option for an extension is available; it is important to note that the maximum time for an extension is merely two months, which is not long.
Even though the holding of the company’s Annual General Meeting and submission of the Annual Return, companies must also file their income tax return with the Inland Revenue Authority in Singapore, which companies sometimes have a tendency to overlook.
In conclusion, ensuring that a company meets its annual compliance regulatory obligations is not a tedious or difficult task to accomplish, but it does take preparation in advance, e.g. getting your company’s finance team to organise their books, making sure Auditors start their tasks early, preparing documents for the holding the AGM; all of which is nearly impossible to implement overnight. Therefore, it would be wise for all companies in Singapore to make sure all necessary reports are filled out in a timely manner, or perhaps to engage the service of a reliable professional Service Provider, who can assist the company to communicate with all parties involved to oversee the smooth running and effective completion of necessary tasks.
Contact us for help with filing your Annual General Meeting or Annual Reports.