An overview of the recent changes to the Singapore Companies Act in relation to financial statements such as the small company exemption

1. Companies
(Amendment) Act

2. Overview of provisions covered
 Period for holding AGM
 Financial statements
 Financial year of parent and subsidiary
 Power to appoint auditors
 Resignation of auditors
 Small company audit exemption
 Translation of financial statements and records to
English

3. Overview of provisions covered
 Annual Return filing requirements
 Criteria for determining dormancy
 Exemption from preparing FS for dormant
companies
 Retention of AGM documents
 Power to revise defective accounts
 Summary financial statements
 Indemnity for auditors

4. Period for holding AGM
Current position under Section 175(1):
AGM required to be held:
• once in every calendar year; and
• not more than 15 months after the last preceding AGM
 Exception: Where new company holds its first AGM within 18
months of its incorporation
S91
1 of 2

5. Period for holding AGM
 No change: Company may apply for extension
of time for holding AGM.
What is new:
Registrar is given power to extend the prescribed
time period for holding AGM in respect of any
prescribed class of companies.
2 of 2
S91

6. Financial Statements
Part VI of Companies Act renamed to
 “Financial Statements and Audit”
Division 1 of Part VI renamed to
 “Financial statements”
S112 /113
1 of 13

7. Financial Statements
Current references to
“accounts” – see current S201(4B)
“profit and loss accounts”
“balance sheets”
Replaced by
“financial statements” – see new S201(10)
S112 /113
2 of 13

8. Financial Statements
 Current references to
 “holding company”
 “subsidiary”
 Replaced by
 “parent company”
 “subsidiary company”
 Makes clear that obligation to keep accounts is
on company only – not “directors and
managers”
S114
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9. Financial Statements
Repeal of Section 200
Not mandatory for the financial year of
holding companies and subsidiaries to
coincide.
This will be governed by Accounting
Standards.
S115
4 of 13

10. Financial Statements
Current S201(1) and S201(3):
statutory requirement for directors to
lay the profit and loss account* and
balance sheet* at the AGM; and
the prescribed timeline for doing so.
S116
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11. Financial Statements
Statutory prescribed time period for
laying profit and accounts* at AGM
remains unchanged.
S116
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12. Financial Statements
What is new:
New S201(4)gives powers to the Registrar
to extend the prescribed time period for
laying the financial statements at the AGM
in respect of any prescribed class of
companies.
S116(c)
7 of 13

13. Financial Statements
 Current S203(1):
Statutory requirement to send financial
statements to all members at least 14 days
before date of AGM.
 No change to above timeline
 What is new:
S203(2) – 14 day timeline may be shortened if
all members agree
S122
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14. Financial Statements
Current New
S201(1A) – Profit and loss accounts
must:
“give a true and fair view of the profit
and loss of the company for the period
of accounting as shown in the
accounting and other records of the
company”
S201(3) – balance sheet must:
“give a true and fair view of the state
of affairs of the company as at the end
of the period to which it relates.”
New S201(2) – Financial
statements must:
“give a true and fair
view of the
financial position
and performance of
the Company.”
Company
financial
statements
S116(c)
9 of 13

15. Financial Statements
Current New
S201(3A) – consolidated
accounts must deal with:
“the profit or loss and the
state of affairs of the
company and its
subsidiaries for the period
beginning from the date
the preceding accounts
were made up to.”
New S201(5)(a) – consolidated
financial statements must deal
with:
“the financial position and
performance of group for
the period beginning from
the date the preceding
financial statements were
made up to.”
Group
financial
statements
S116(c)
10 of 13

16. Financial Statements
Current S201(4A) New S201(9)
Directors are required to
ensure that accounts are
audited not less than 14
days before the AGM
Same obligation applies
except: if all persons
entitled to receive notice
of general meeting agree
that the financial
statements may be
audited less than 14 days
before the AGM.
S116 (d)
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17. Financial Statements
 Current S201(5)- (9) relating to Directors’
Report repealed.
 New S201(16) – Provides for Directors’
Statement containing information required in
the new Twelfth Schedule, to accompany
the audited financial statements.
S116(e) / (f) and
S184
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18. Financial Statements
Applicability:
No retrospective effect
Current provisions will continue to apply
for financial years which end before 1
July 2015
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S116(e)

19. Power to appoint auditors
Amended S205:
 References to
“person or persons”
 Replaced by
“accounting entity or accounting entities”
S125(a)
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20. Power to appoint auditors
 Directors have power to appoint auditor to fill any
casual vacancy subject to the resignation
procedures applicable in respect of public and
non-public interest company
 Registrar may appoint an auditor for the company
if the auditor is removed from office at general
meeting and the company does not appoint a new
auditor
S125(b)/(c)
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21. Resignation of Auditors
Current New
Section 205(14) / 205(15)
An auditor can resign:
 If he is not the sole
auditor, or
 at a general meeting,
and
 where a replacement
auditor is appointed.
New sections 205AA to
205AF
Distinction between
 non-public interest
company
 public interest
companies and their
subsidiaries
S126
1 of 3

22. Resignation of Auditors
What is a “public interest
company”?
A listed company
A company in the process of issuing its debt or
equity instruments for trading on a securities
exchange in Singapore
Such other company as the minister may
prescribe.
S126
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23. Resignation of Auditors
 non-public interest company
 may resign before the end of the term of his
appointment by giving written notice to the
company.
 public interest companies and their subsidiaries
 Auditor required to give written statement of his
reasons for resignation
 Company required to send written statement to all
members
 Must obtain ACRA’s consent for resignation before
the end of the term of their appointment.
S126
3 of 3

24. Small company audit exemption
Current New
Concept of
• “Exempt Private
Company”
Concept of
• “Small Company”
• “Small Group”
• Current section 4(1)
and 205C
• New section 205C and
Thirteenth Schedule
S128
1 of 4

25. Current position
 An exempt private company with annual revenue of
$5m or less for the financial year is exempt from
auditing its financial statements.
 What is an “exempt private company”?
 Does not have more than 20 members
 Does not have corporations holding any beneficial
interest in its shares.
S128
2 of 4

26. Small company audit exemption
 What is a “small company”?
(a)it is a private company in the financial year in
question; and
(b)it meets at least 2 of 3 following criteria for
immediate past two financial years:
(i) total annual revenue ≤ $10m;
(ii) total assets ≤ $10m;
(iii) no. of employees ≤ 50.
 The criteria are consistent with those used for the
Singapore Financial Reporting Standards for Small
Entities.
S128
3 of 4

27. Small company audit exemption
 Companies which are part of a group?
For a company which is part of a group:
(a) the company must qualify as a small company; and
(b) entire group must be a “small group”
to qualify for the audit exemption.
 What is a “small group”?
For a group to be a small group, it must meet at least 2 of
the 3 quantitative criteria on a consolidated basis for the
immediate past two consecutive financial years.
S128
4 of 4

28. Translation of Financial Statements
and records
 Translation to English language required at 7-day
intervals if accounts, financial statements, minute
books or other records are not in English.
 Translation must be kept together with the originals
S171
1 of 1Phase 1 End

29. Annual Return filing
requirements
Current
S197
New
What is
required to
be filed?
For companies having a share
capital:
• A return containing the
particulars in Eighth Schedule
in the prescribed form
For companies not having a
share capital
• A return in the prescribed form
For all companies:
A return in such form
and particulars as
may be prescribed
Eight Schedule
is repealed.
S111 /183
1 of 4

30. Annual Return filing
requirements
Current
S197
New
Timeline Within 1 month after AGM
For companies having share
capital and keeping a branch
register outside Singapore:
Within 2 months after AGM
No change
*except that references to
‘1 month’ and ‘2 months’
are changed to ‘30 days’
and ‘60 days’ respectively.
S111 /183
2 of 4

31. Annual Return filing
requirements
What has changed?
New S197(4) deals with filing of annual
return where a private company has
dispensed with holding of its AGM under
S175A by the passing of a resolution by all
of its members who are entitled to vote.
S111 /183
3 of 4

32. Annual Return filing
requirements
 Timeline for filing annual return is
referenced to “start date” instead of AGM
date.
 “Start date” being the later of:
The date on which the financial statements
required by S203(1) are sent to all members
The date on which all written resolutions
(which would have been passed at the AGM)
are passed.
S111 /183
4 of 4

33. Criteria for determining dormancy
 Company is dormant if no ‘accounting transaction’
takes place
 Current S205B(2) amended to expand the
activities to be disregarded for determining
dormancy.
S127
1 of 1

34. Dormant Companies
Current – S205B New - S201A
A dormant company is
 exempted from the
statutory audit
requirements
 still required to
prepare financial
statements.
A dormant non-listed
company (other than
a subsidiary of a listed
company) is exempt
from requirement to
prepare financial
statements if certain
conditions are met
S117
1 of 5

35. Dormant Companies
Conditions:
(a) the company fulfils the substantial assets
test; and
(b) the company has been dormant from the
time of formation or since the end of the
previous financial year.
S117
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36. Dormant Companies
(c)The directors have lodged with the Registrar, together
with the Annual Return,
a statement by the directors that the company has been
dormant for the said period above;
no notice has been received under Section 201A(3) of the
Act; and
the accounting and other records have been kept by the
company in accordance with the requirements of the Act
S117
3 of 5

37. Dormant Companies
What is the substantial assets test?
 The substantial assets test is that the total
assets of the company at any time within
the financial year must not exceed
$500,000.
 For a parent company, the consolidated total
assets of group at any time within the
financial year must not exceed $500,000.
S117
4 of 5

38. Dormant Companies
No change from current
position:
Dormant listed companies and their
subsidiaries, and
Dormant unlisted companies which do
not fulfil the substantial asset test
must prepare financial statements but
are exempt from audit.
S117
5 of 5

39. Retention of AGM Documents
 Documents laid before the company at AGM
must be retained for 5 years after AGM date.
 This 5 year timeline also applies for a private
company who has dispensed with holding its
AGM under S175A.
S117
1 of 1

40. Power to revise defective accounts
 New S202A gives power to the directors to cause
the FS, summary financial statements or
directors’ statement to be revised.
 Power of revision is limited only to those aspects
in which the FS did not comply with the Act or the
Accounting Standards.
 Regulations dealing with the manner of such
revision will be issued.
S121
1 of 2

41. Power to revise defective accounts
 New S202B gives power to the Registrar to require
directors to respond to its questions if the Registrar
thinks there is question whether the FS complies with the
requirements of the Act or the Accounting Standards.
 Registrar may apply to court:
for a declaration that the FS do not comply with the
requirements or the Act or the Accounting Standards
and
An order requiring the directors to cause the FS to be
revised.
S121
2 of 2

42. Summary financial statements
 What is new
 All companies may send summary financial
statements to its members instead of profit and loss
account and balance sheet
 ** Clarify that directors of a company are
responsible for ensuring that the summary financial
statements comply with the prescribed
requirements
S123(a)
1 of 1

43. Indemnity for auditors
 Any provision which exempts or indemnifies any
auditor from liability from negligence, default,
breach of duty or breach of trust is void.
 Exception:
 Where auditor is acquitted, company may indemnify
auditor from liability incurred in defending the
proceedings.
S132
1 of 1