Introduction - The First Financial Year, AGM & Compliance Obligations
Congratulations to the many of you reading this post. By the time you are contemplating your first Financial Year, Annual General Meeting (AGM) and your compliance obligations, you would have successfully incorporated your companies and have started to embark on your start-up journey. For first time entrepreneurs and new start-ups, the administrative processes may seem complex and scary at first, especially if you are hearing about things like the Companies Act for he first time. Fear not, in this blog post, we will provide you with indispensable templates, step-by-step instructions, and vital information to navigate through your first financial year with confidence. From maintaining essential registers to understanding the requirements for filing estimated chargeable income with IRAS, and streamlining AGM processes, we’ve got you covered!
Singapore Compliance Requirements - ACRA & IRAS
If you are unfamiliar with the regulatory deadlines and filing obligations with ACRA and IRAS, please refer to our article on Singapore company deadlines. In general, these obligations relate to the appointment of a company secretary within 6 months of incorporation, filing of Estimated Chargeable Income (ECI) with IRAS within 3 months of Financial Year End (FYE), holding of Annual General Meeting within 6 months of FYE and filing of Annual Returns with ACRA within 7 months of FYE.
Do note for common pitfalls in the selection of FYE dates and its associated implication on filing and tax exemptions.
Section 1: Register Maintenance for Start-Ups
As a start-up, one of your first steps towards compliance is maintaining essential registers required by the Companies Act. The Register of Registrable Controllers (RORC) and the Register of Nominee Directors (ROND) are two crucial registers you must establish and maintain. The RORC keeps track of individuals or entities with significant control over your company. On the other hand, the ROND must be kept under Section 386KA, documenting individuals acting as nominee directors. By maintaining these registers, you not only comply with statutory requirements but also demonstrate transparency and accountability to stakeholders.
Register of Registrable Controllers
All companies and LLPs are required to file and maintain their Register of Registrable Controllers (RORC) with ACRA. Do note that this is a separate requirement from the Annual Returns filing requirement, and failure to do so may result in fines of S$5,000.
Individuals are deemed to be Registrable Controllers if they have an interest in > 25% of the shares of the company or LLP; or hold > 25% of the voting rights of the company or LLP; or can exercise significant influence or control over the company or LLP.
The RORC must be established within 30 days from the date of incorporation, with notices sent to potential controllers to confirm their particulars.
Register of Nominee Directors
Under the Companies Act, companies must adhere to specific requirements, including maintaining a register of nominee directors with details of the nominators (Section 386AL), and providing this register and related documents upon request (Section 386AM). These requirements have been in effect since 31 March 2017.
Please note that the register of nominee directors is distinct from the register of registrable controllers, with different definitions for “nominee director” and “registrable controller.” It’s essential for nominee directors to inform their companies and provide prescribed particulars within the specified timelines. Do note that an individual can be a nominee director, a registrable controller, both, or neither, depending on the circumstances. Being a nominee director does not automatically imply being a registrable controller, and vice versa.
Section 2: First Directors Resolution in Writing
Start-ups often overlook the significance of the First Directors Resolution in Writing, which lays the foundation for the company’s future decisions. This resolution seeks to:
- confirm the incorporation of the company;
- confirm the appointment of the first director(s);
- confirm the appointment of the company secretary, Managing Director or CEO (if applicable);
- confirm the registered office address of the company;
- confirm the subscriber’s shares and the issuance of share certificates;
- adopt the common seal (if required) – note that the common weal is no longer mandatory with effect from 31 March 2017;
- fix and notify on the financial year end (FYE);
- appoint the company’s auditors (if required);
- appoint the company’s tax agent (optional);
- open corporate bank accounts (if required);
- approve/resolve the issuance of shares to company directors (if applicable)
- declare director interest.
Template for First Directors' Resolution in Writing
Section 3: Streamlining Annual General Meeting (AGM) Processes
a. Directors Statement for Financial Statements
Along with the financial statements of the company for the Financial Year End, a Directors Statement is usually prepared for directors to present the financial statements to the members (shareholders) of the company.
The Directors Statement will usually cover the following details
- Company Name
- Whether the financial statements are audited or unaudited
- Financial Year End of the company
- Opinion of the directors on whether the financial statements present a true and fair view of the financial position of the company
- Whether the company is believed to be solvent and of going concern
- Name of the directors of the company
- Declaration of arrangements for directors to acquire shares or debentures in the company
- Declaration of directors’ interests in shares or debentures of the company
- Declaration of any share options within the company
- Appointment of auditors or relevant exemptions
- Date of Directors Statement
b. Consent for Shorter Notice
According to Section 177 of the Companies Act, companies are required to provide written notice of not less than 14 days or such longer period as is provided in the constitution when calling for meetings of the company.
When circumstances require convening an Annual General Meeting (AGM) on shorter notice than the standard 14 days, companies can utilize a template for “Consent for Shorter Notice” to obtain shareholders’ approval for the expedited meeting. The template should include the following key elements:
- Company Name and Registration Number
- Date of the AGM
- Shareholder’s Name and Signature
- Date of Consent
Using this template ensures compliance with Section 175 of the Companies Act, which requires the company to obtain written consent from shareholders if the AGM is convened on shorter notice.
Template for Directors Statement
Template for Consent for Shorter Notice
c. Director Resolution for Adoption of Financial Statements
Upon finalizing the Annual Report including the Directors Statement, Auditors Statement and the Financial Statements, Directors will have to pass a Directors’ Resolution to adopt the financial statements.
This Directors’ Resolution will cover the following details:
- Company Name
- Company UEN
- Adoption of Directors Statement and Annual Financial Statements of the company for the Financial Year End (FYE)
- Approving of the Directors’ remuneration of the company for the FYE
- Resolving to hold an AGM and for the Notice of Meeting to be issued to members accordingly
- Name of Director
- Date of Directors Resolution
d. Notice of Meeting
In order to call for an Annual General Meeting (AGM), the company will have to issue a notice of meeting to its members. This notice will include the following details:
- Company Name and Registration Number
- Registered Office Address
- Address of AGM venue
- Date and Time of AGM
- Agenda to be covered at the AGM including receiving and adopting the Directors Statement and Annual Financial Statements of the company for the Financial Year End.
- Approving of Directors remuneration
- Appointment of auditors or confirmation of audit exemption
- Election/re-election of directors of the company
- Transact any other business of the company
- Name of Director
- Date of Notice
Template for Directors Resolution
Notice of AGM Template
Conclusion
Congratulations on taking the first step towards a successful financial year for your start-up! By utilizing our provided templates and adhering to statutory requirements, we hope you will be equipped to navigate your start-up’s journey with confidence. Compliance is the foundation for growth, and with the right tools and knowledge, your start-up will thrive.
Remember, while this post offers valuable insights, it should not be construed as legal or financial advice. Consult professionals to ensure compliance with specific legal and financial matters tailored to your start-up’s needs. Here’s to your start-up’s bright future!
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