Singapore to allow issuance of shares with different voting rights: DPM Tharman Shanmugaratnam

by Linette Lim

The Companies Act governing all companies incorporated in Singapore is in for "major housekeeping", says Deputy Prime Minister and Finance Minister Tharman Shanmugaratnam.

This is following a review and public consultation process that took four years.

Of the 217 recommendations that were put forth by a committee appointed to review the Act, the government has accepted 192 recommendations

This is the largest number of changes to the Act since it was enacted in 1967.

Singapore will soon let public companies issue shares with different voting rights.

And there will be measures to protect the rights of minority shareholders, said Mr Tharman

"We will require shareholders to approve the issuance of shares with different voting rights via a special resolution, and will continue to require that holders of non-voting shares have equal voting rights on resolutions to wind up the company."

In the case of listed companies, a dual class share structure may give rise to issues pertaining to entrenchment of control.

Therefore Mr Tharman said this will be an issue studied by the Singapore Exchange and the Monetary Authority of Singapore. The regulators will decide whether and how listed companies may issue such shares.

Mr Tharman added that allowing companies to issue shares with different voting rights will provide them more flexibility in raising capital, as well as widen the range of investment opportunities for investors.

Making the announcement at the Investors' Choice Awards dinner organised by the Securities Investors Association (Singapore), Mr Tharman also highlighted changes to encourage greater shareholder activism among retail investors.

These include putting in place a multiple proxies regime for indirect investors, including CPF investors.

Nominee companies and custodian banks will be allowed to appoint more than two proxies so that indirect investors can be appointed as proxies to participate in shareholders' meetings.

Each proxy will also be given the right to vote by a show of hands instead of by poll, as was the case previously.

Other changes are aimed at reducing compliance costs for small companies.

For example, a new small company criteria will be introduced to exempt private firms from statutory audit.

A firm will be considered a small company if it fulfils two of the following three criteria - having a total revenue of not more than S$10 million, total gross assets of not more than S$10 million or employing less than 50 people.

This will replace the current criteria whereby a company is exempted from having its accounts audited only if it is an exempt private company (EPC) with annual revenue of S$5 million or less, said Mr Tharman

"This move will allow us to exempt another 25,000 more companies from audit. Existing safeguards will be retained, such as requiring all companies to keep proper accounting records and empowering shareholders with at least 5% voting rights to require a company to prepare audited accounts. "

Other key changes to boost transparency and corporate governance standards include:

- Extending statutory duty on disclosure of conflict of interests to CEOs, and 

- Requiring public companies to disclose why its auditors resign, in the event of premature resignation.

The last review of the Act was done in 1999, with the changes implemented in 2002. At that time, all 77 recommendations were accepted by the government.

The next step is to amend the Companies Act to reflect the changes, and draft a Bill to be passed in Parliament.

Public Consultation on the Bill will start early next year, and it will be followed by a reading of the bill in Parliament in the middle of 2013.