Professional Documents
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Seminar Notes 8A
Seminar Notes 8A
Seminar Notes 8A
Seminar Notes 8A
- Companies, their officers and members are subject to various disclosure obligations
o Required to make certain information available to parties who wish to find out more
about the company
o Disclosure obligations for listed companies are more onerous than for unlisted ones
Provide more information and greater transparency to market participants
- S7 CA is relevant for:
o Determining directors’ & CEOs’ interests in shares, which must be notified to
company under CA S165
o Determining “20% threshold” for CA S163, on prohibition against grant of financial
assistance to director-related companies
o Determining interests of substantial shareholders in Gazetted entities for disclosure
obligations pursuant to Part IV, Div 4, CA
- Associated Company: Company in which shares held by the listed company or group are:
o At least 20% AND
o Not more than 50% of its shares
- Directors need to make disclosures either to BOD or GM when faced with COI situations
o Failure to disclose potential COI gives rise to breach of directors’ duties either at:
Common Law
Statute (CA S156)
2. Director and CEO Interests in Shares [CA S165, SFA S133]
- Notification:
o Notification in writing within 2 business days after date which:
Person became director or CEO
Person acquired interest
Change in interest takes place
o Defence for director or CEO:
Proves that his failure to notify was due to lack of awareness of the fact that
caused him to be required to notify
- Consequence:
o Fine not exceeding S15,000
o Imprisonment up to 3 years
o Further fine of S1,000 every day the offence continues
- Consequence:
o If contravention was intentional/reckless:
Fine not exceeding S250,000
Imprisonment up to 2 years
Further fine of S25,000 every day offence continues
o If contravention was not intentional and not reckless:
Fine not exceeding S25,000
Further fine of S2,500 every day offence continues
o No proceedings for an offence where civil penalty order has been made against or
agreed to by the offender
- SFA S2 (6): Substantial Shareholder = Person who has substantial shareholding in corporation
o SFA S2 (4): Substantial Shareholding =
Interests in 1 or more voting shares in company AND
Total votes attached to those shares is at least 5% of total votes attached to
all voting shares of corporation (excluding treasury shares)
o Interest: Includes deemed interest under SFA S4
- Where a person arranges for an agent to hold, acquire, dispose voting shares on his behalf:
o S137A: Person must take reasonable steps to ensure that agent notifies him ASAP to
enable him to comply with notification requirements
No later than 2 business days
o S137B: Agent must give principal notice of any such shares acquired/disposed ASAP
to enable latter to comply with notification requirements
No later than 2 business days
- It is an offence
o If:
Any notification requirement is not complied with
In complying, person furnishes information which is false/misleading
o Penalties:
Criminal penalties
Alternative: Civil penalties
Court also has broad powers to make various orders
- CA S199 (1): Every company is required to keep accounting and other records
o So as to:
Sufficiently explain transactions and financial position of company
Enable true and fair financial statements to be prepared
o Keep those records such that they can be conveniently and properly audited
- CA S188: Companies required to keep minute books which record proceedings of members’,
directors’ & managers’ meetings
o S189: Members entitled to inspect record of proceedings of members’ meetings
But not records of proceedings of directors’ & managers’ meetings
- Listed companies subjected to various disclosure obligations by SFA, SGX Listing Manual
o Promote transparency in securities market
o Level playing field for investor
o Mechanisms for improved corporate governance
(a) Announcing interests in shareholdings (and changes) [SFA S137F – S137G]
- SFA S137G: When director, CEO, substantial shareholder notifies listed corporation of their
interests in shares & any changes, corporation has to announce/disseminate information
o To be done as soon as practicable
No later than end of business day following day of receipt of notice
o SFA S137G (4): Corporation is guilty of offence if:
It fails to comply with requirement
In purported compliance, it announces materially misleading information
o SFA S137G (5): Officer is guilty of offence if:
Intentionally, recklessly, negligently involved in corporation’s contravention
o For breaches by both corporation & officer:
Civil penalty order may be made against them
- SFA S137F: Listed corporation may, by notice in writing, require members to inform it as to
whether member holds any voting shares in corporation as beneficial owner or trustee
o Notice in writing must indicate:
For whom member holds shares as trustee
The nature of that person’s interest
o Where company receives disclosure from member, they can send a further tracing
notice to any person named in disclosure
Follow-up notices if there are several layers of persons/entities
o Offence for a person to whom notice is served to:
Fail to comply with notice
Give false statements in response to notice
o Function of tracing provision:
Enables listed company to discover who controls voting rights
Assists in proper functioning of takeover provisions
- Rules require listed company to disclose information relating to company as and when they
take place (i.e. continuously) through an announcement via SGXNET
o SFA S203: Offence if company does not comply
- Chap 7 & 12 of SLM provides for specified information that is to be included in annual report
to be given to shareholders of listed corporation
o Rule 710: Corporations must describe corporate governance practices with specific
references to principles of Singapore Code of Corporate Governance
Disclose also any deviation from any guideline of the Code
Provide appropriate explanation for such deviation in annual report
(d) Disclosure in Interested Person Transactions (IPT) [Chap 9, SGX Listing Manual]
- Summary of Rules 905 & 906: Compare single/sum of IPT against group’s latest audited NTA
o If below 3%:
No immediate announcement
No shareholder approval
o If between 3% (inclusive) and 5% (exclusive):
Immediate announcement of single/all IPT
No shareholder approval
o If 5% and above:
Immediate announcement of single/all IPT
Shareholder approval for latest IPT
(e) Disclosure for certain Realizations & Acquisitions [Chap 10, SGX Listing Manual]
- What the company needs to do depends on size of bases under Rule 1006:
o Net asset value of assets to be disposed of (Not Applicable for Asset Acquisition)
Compared to group’s net asset value
o Net profits attributable to assets acquired/disposed of
Compared to the group’s net profits
o Aggregate value of the consideration given or received
Compared with issuer’s market capitalization (total number of issued shares)
o Number of equity securities issued by the listed co as consideration for an
acquisition
Compared with the number of equity securities previously in issue
o Aggregate amount of reserves to be disposed of (Not Applicable for Asset
Acquisition)
Compared with aggregate of group’s reserves
(f) Consequences of Non-Compliance with SLM Disclosure Obligations [SFA S203]
- CA requires companies to disclose to ACRA details of certain events when they occur
o Method of disclosure:
Using many forms prescribed for use under CA OR
File requisite notices electronically
2. Annual Return
- Taking into account the changes in 2017 Amendment on AGM dates, the table below shows
the time frame for lodging annual returns
o Time frame for AGM:
Listed Company: Must hold AGM within 4 months of end of FY
Unlisted Company: Must hold AGM within 6 months of end of FY
o The below table also applies to companies dispensed with holding AGM
Members of such private companies may however require company to hold
AGM upon giving required notice under S175A (4)
If company had already lodged annual return by the time the AGM date is
set, company must notify Registrar of date of AGM within 14 days after that
date
- S197 (1B): Permits companies to apply for time extension to file annual returns
- Pt VI of CA: Contains financial reporting and audit requirements that apply to companies
o Investor protection mechanism: Requires managers, directors to disclose the
financial position, management, operation of company
Reduce extent to which members are vulnerable to fraud, negligence or
over-reaching by company’s management
o Enable members to use their control rights in an informed manner
By allowing access to performance of company’s management periodically
Important corporate governance measure
o Important in maintaining an informed and transparent market for securities
Via provision of standardized information about companies’ performance
- S201 (1): Directors of every company must lay before company, at its AGM, the FS for the FY
w.r.t. the AGM that is being held
o Companies which require time extension to prepare FS:
Have to apply to extend time frame within of holding AGM instead
- For companies which dispense with need to hold AGM under S175A:
o Minimally 28 days before end of period allowed for laying of those documents
o Maximally 5 months after end of FY to which documents relate
(c) Contents of FS
- FS contains:
o Profit and Loss account for period since preceding account, made up to a date:
Listed Company: Not more than 4 months before date of AGM
Other Company: Not more than 6 months before date of meeting
o Balance Sheet
As at date to which P/L account is made up
o Consolidated FS
Where applicable
- For parent company, directors must cause to be made out & laid before company at AGM:
o Consolidated financial statements for FY w.r.t. which AGM is held
Dealing with financial position and performance of group in that FY
o Balance sheet at end of FY
Dealing with state of affairs of parent company
- Before FS and balance sheet are made, directors have to take reasonable steps:
o To ascertain what action has been taken w.r.t. writing off of bad debts & making of
provision of doubtful debts
Ensure that all known bad debts are written off
Ensure that adequate provision is made for doubtful debts
o To ascertain whether any current assets are unlikely to realize, in ordinary course of
business, their value as shown in accounting records; If yes:
Write down assets to an amount expected to be realized OR
Make adequate provision for difference between value shown in accounting
records and expected realized value
o To ascertain whether any non-current asset is presented at a value that exceeds its
recoverable amount (either in use or at disposal); If not:
Make adequate provision for writing down the asset OR
Include in FS any information and explanations so as to prevent FS from
being misleading, as a result of overstating the asset’s amount