Update: Companies Act- Singapore’s Beneficial Ownership Regime

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Update: Companies Act- Singapore’s Beneficial Ownership Regime

 The Panama and Paradise Papers scandal over the recent months has cast a dark shadow on the world of offshore companies leading to a series of regulatory changes imposed by governments across the globe.

As the papers revealed the inner workings of the world’s wealthiest and most powerful individuals, there has been an a substantial increase in the scrutiny on Beneficial Owners (BOs) of corporate entities globally  leading to changes in the regulation of these entities and ensuring higher standards of compliance.

The Financial Action Task Force (FATF) for Anti-Money Laundering and Counter-Terrorist Financing Mutual Evaluation Report on Singapore, released in early September 2016, emphasized Singapore’s need to enhance the transparency of beneficial ownership of legal persons.

As a response the Accounting and Corporate Regulatory Authority (ACRA) in Singapore, the company registration body of Singapore has emplaced more stringent regulations on Singapore Companies and the Corporate Secretaries acting for these entities.

ACRA requires Professional Service Providers (Corporate Service Providers (CSPs)) and financial institutions such as banks to maintain and update regularly the information on BOs and the companies’ controllers.

The report released in 2016 by FATF, highlighted the inadequacies faced and shown the light on the significant gaps and deficiencies faced by Singaporean firms especially those part of Designated Non-Financial Business and Professions (DNFBP)[1] in obtaining BO information.

New Regulation – Register of Controllers (RoC)

In light of the observations and recommendations made by FATF, amendments were made to the Companies Act and Limited Liability Partnership (LLP) Act.

Key Changes: effective on 31 March 2017

1.

Singapore registered companies, Singapore registered LLPs and Singapore registered foreign companies will have to maintain a register of controllers.

2.

Singapore listed companies and Singapore financial institutions are exempted from the requirement because the listed companies are required to fulfil exhaustive disclosure of interest obligations prior to their listing and the Monetary Authority of Singapore (MAS) conducts thorough ‘fit and proper’ checks on the directors and shareholders of financial institutions.

Key Purpose:

1.

To enhance the transparency of legal persons and to prevent them from being used for Money laundering and Financing Terrorism purposes;

2. To ensure that the information on the BOs is accurate and adequate and the competent authorities have timely access to such information.

Who is the Beneficial Owner?

FATF defines “beneficial owner” as the natural person who ultimately owns or controls a customer and/or the natural person on whose behalf a transaction is being conducted.

It also includes those persons who exercise ultimate effective control over a legal person or arrangement.

Therefore the definition centers on effective significant control and ownership and they are defined as follows.

Significant control:

The right to appoint or remove a majority of directors, and the right to exercise, or the actual exercise of, significant influence or control over certain matters, particularly if this is provided for in the company’s constitution and

Significant interest:

A natural person having an interest in more than 25% of the shares or voting rights or, where the entity has no share capital, the right to share in more than 25% of the capital or profits

Key Obligations under the New Regime

Companies and LLPs that are required to maintain a Register of Controllers shall:

1. take reasonable steps to identify their controllers and obtain information on their controllers, by sending out notices to anyone whom they know or have reasonable grounds to believe to be controllers, knows the identity of the controllers or is likely to have that knowledge;
2. maintain registers of controllers at prescribed places (e.g. their registered offices or their registered filing agent’s registered offices);
3. ensure that the registers of controllers are up to date by updating the registers within 2 days of receiving information on the controllers;
4. declare in their annual return filed with ACRA that their registers of controllers are kept up to date; and
5. make registers of controllers available to the Registrar and law enforcement authorities upon request and not to the public.
6. The controllers have the obligation to inform the company/LLP within 30 days of becoming a controller and any change in their particulars must be promptly notified.
7. Non-compliance of the above is an offence;

Information to be included in the Register of Controllers (RoC)

The following information must be included in the RoC

1 Full name;
2 Residential address;
3 Nationality;
4 Identification particulars e.g. NRIC or passport number;
5 Date of birth;
6 Date on which the person becomes, and if applicable, the date on which the person ceases to be a controller; and

* the reporting entity is prohibited from disclosing the register of controllers or any particulars contained in that register to the public;

*information subject to legal privilege may be withheld from disclosure;

Beneficial Owner Regime Internationally

Jurisdiction                          Comments
Hong Kong

Hong Kong

Hong Kong has made it mandatory for legal persons to have a register of persons with significant control (PSC). The register will be made available to competent authorities and not the general public;

USA

USA

USA has a state level register of beneficial ownership and had announced plans to have a central non-public register;

Germany

Germany

Germany recently tabled a law requiring all German companies to have the Beneficial Ownership Register (BOR);

United Kingdom

United Kingdom

United Kingdom implemented a central public register of BOs in 2016;

France

France

Committed to implement a central public register;

Netherlands

Netherlands

Committed to implement a central public register;

Nigeria

Nigeria

Committed to implement a central public register;

Australia

Australia

Exploring the implications of having a public register;

New Zealand

New Zealand

Exploring the implications of having a public register;

Indonesia

Indonesia

Exploring the implications of having a public register;

Ireland

Ireland

Exploring the implications of having a public register;

BVI

BVI

Implemented a central database of BOs called Beneficial Ownership Secure Search (BOSS) system, to which the law enforcement authorities have access;

EU

European Union

In February 2017, the European Union members agreed to a proposal that would allow information contained in BO registries to be made available to the public who demonstrate ‘legitimate interest’

Almost all major countries and offshore jurisdictions have begun to implement and adopt the FATF recommendations except for Canada and Japan in line with the AML/CFT regulations.

[1] Designated Non-Financial Business and Professions (DNFBP) such as public accountants, real estate agents, casinos, company service providers, developers, lawyers as well as the non-profit organisations such as the charities.

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