Company Law Incorporated Company in Singapore

Question: Describe about the Company Law for Incorporated Company in Singapore. Answer: Introduction In the given situation, The Everything Possible Lah Pte Ltd is an incorporated company in Singapore that has independent directors and is therefore governed by the Companies Laws and legislations that are prevalent in Singapore. Profits were being made by the company and in this scenario, three directors of the company made three comments regarding their future course of action. These three statements made by the directors shall be taken into account for discussion in the given matter and advice shall be provided on the relevant penalties that arise from non-compliance. Director Arsene Director Arsene said that there was no necessity of providing details of accounting to the shareholders as long as the organization is earning profits. Sections 199 to 204 of the Companies Act clearly lay down the duties of the directors. It has been provided that directors need to comply with their financial reporting obligations which entails them to maintain financial reports and statements, laying down the accounts for profits and losses made by them, maintaining accurate balance sheets and also presenting the director's report in front of the shareholders and members in the Annual General Meeting of the company and simultaneously, it is expected that they should report on the state of the affairs of the company and provide members with copies of statements providing all the requisite financial details ("Ch.17 Corporate Finance and Securities Regulation", 2016). A failure by the directors to observe this requirement exposes them to criminal liability and fines may be imposed on t hem for making breach of duty under the Act. The amount of fine may be up to S$15,000 and in certain cases, there might also be an imprisonment for up to three years (Halsbury's laws of Singapore, 2006). Case precedents like (Lim Weng Kee v PP, 2002) can be taken into account here. The directors failed to comply with the auditing requirements and the shareholders though they received a share of their yearly dividends, yet the failure on the part of the directors to show the accurate books of audit was held to be a valid ground for considering breach of duties by the directors and hence civil penalties and criminal charges were levied against them. It should be noted that in the given instance, though the company is making profits, it cannot be said that just because of this reason, the shareholders do not have a right to access the books of accounts of the company (Shorewala Vasumitra, 2015). It is a statutory duty of the directors to show the correct books of accounts to all the shareholders and hence, they cannot err from this duty. Thus, it can be said that the proposal of Director Arsene is not a sound one and if the breach of duty is proved against them, all the three directors can become liable for civil and criminal penalties. Director Mourinho Subsequently, Director Mourinho stated that since the government had provided relaxation with auditors, and at the same time, regulatory burden has been reduced to the companies, there is no necessity for the company to appoint another auditor for them and they can manage their work with the appointment of Ah Seng from the accounts department under the shoes of their auditor. This could have been said to be a sound option if this was a small listed company with only one director and much lesser annual profit turnover. It should be noted that all companies in Singapore should be registered with the Accounting and Corporate Regulatory Authority and at the same time, should abide by the requirements of the Companies Act. The present company is a private limited company (Vita Health Laboratories Pte Ltd Ors v Pang Seng Meng, 2004). The key requirements for setting up this company are that it should have at least one shareholder, one resident director, one company secretary, initial paid -up capital of at least S$1 and a physical office address in Singapore (Company law in Singapore, 2008). Appointment of an auditor is mandatory for this company because it has been made compulsory that all Singapore incorporated companies should appoint one auditor within three months from the date of which it is incorporated. Unless and until the particular company is exempt from the auditing requirements, appointment of an auditor is necessary and this cannot be avoided. To get the exemption from the auditing requirements, the company should fulfill certain criteria. One of them is that the company should have less than 20 individual shareholders and there should be none of them who are a corporate shareholder. Second requirement under this criterion is that the annual turnover of the company must be less than S$5 million ("Form a Singapore Private Limited Company", 2016). However, in the given situation, the company that is being discussed does not satisfy these requirements and hence, it is not exempt from auditing requirements. Thus, it is necessary to appoint an independent and di stinct auditor for the company. If this is not done, then the company is liable to become responsible for breach of statutory requirements and thus, penalties might be imposed on the company (Soderquist Gabaldon, 2011). Director Klopp The third statement was made by Director Klopp who opined that it was not necessary for the company to issue a prospectus because it is not listed on the stock exchange. Considering the present recommendations of the working committee, it can be said that the opinion of Director Klopp is a valid one and the company in fact does not need to issue a prospectus at this time if it has not yet planned to list itself on the stock exchange. The issue of a prospectus becomes necessary whenever an offer of securities is being made and this is not an excluded or exempt offer that is being taken into consideration. Moreover, issuing a prospectus also becomes important if the company issues units in collective investment schemes. However, the present business structure is not under any of these criterion and hence, it is not necessary for them to issue prospectus at the present time (Yeo, 2011). Had the company been involved in any business for which issuing a prospectus is mandatory and even th en it fails to issue the prospectus, then criminal as well as civil liabilities would have been imposed on the directors for breach of statutory duties. Prospectus is basically a document that is designed in such a way that the investors get an idea of the business, assets and nature of the company so that they can make informed decisions regarding whether they wish to invest or purchase the securities or not. However, since the present company in question is not involved in any business of this kind, nor is it listed on the stock exchange at present, it is exempt from the requirement of issuing a prospectus and there is no requirement under the law for this company to mandatorily issue a prospectus. The nature of business of the company is not misleading in any way and hence there is no question of deceiving the creditors or the shareholders (Guide to company law in Malaysia Singapore, 1990). Moreover, it also has shown compliance with all other requirements as specified under the laws and thus it automatically becomes immune from the liability of issuing a prospectus. Lastly, as far as the general interest of the public is concern ed, since there has been no reporting of any kind, the company is not mandated to issue prospectus at present. Conclusion It can thus be stated in the given situation that the Companies Act as well as the Securities and Futures Act are powerful tools that determine whether the statements made by the directors in the meeting are justified or not. The analysis as presented above indicates that for having made such statements, the law can impose civil and criminal penalties on the directors in the majority of the instances. References Ch.17 Corporate Finance and Securities Regulation. (2016).Singaporelaw.sg. Retrieved 5 October 2016, from https://www.singaporelaw.sg/sglaw/laws-of-singapore/commercial-law/chapter-17 Company law in Singapore. (2008). Singapore. Form a Singapore Private Limited Company. (2016).Singapore Company Incorporation | Registration and Work Visa. Retrieved 5 October 2016, from https://www.singaporecompanyincorporation.sg/how-to/incorporate/a-beginners-guide-how-to-form-a-singapore-private-limited-company/ Guide to company law in Malaysia Singapore. (1990). [Singapore]. Halsbury's laws of Singapore. (2006). Singapore. Lim Weng Kee v PP, 2 SLR (R) 848 (2002). Shorewala, K. Vasumitra, V. Comparing Takeover Laws in the UK, India and Singapore.SSRN Electronic Journal. https://dx.doi.org/10.2139/ssrn.1753341 Soderquist, L. Gabaldon, T. (2011).Securities law. New York, N.Y.: Foundation Press Thomson/West. Vita Health Laboratories Pte Ltd Ors v Pang Seng Meng, 4 SLR 162 (2004). Yeo, V. (2011).Commercial applications of company law in Singapore. [Singapore]: CCH Asia.