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Satish Bakhda

Company regulations you need to watch out for in 2017 (Part I)

BY SATISH BAKHDA

[Applicable to Singapore]

Register of Registrable Controllers

Effective as of March 31, 2017, the Register of Registrable Controllers keeps track of beneficial ownership information. Learn if your entity is required or exempted to set up and register here.

Qualifiers and qualifying scenarios for the setting up of the register

ACRA has defined a “Controller” as an individual or a legal entity fulfilling at least one of the following conditions:

1.) Directly/indirectly holding more than 25% of the company shares
2.) Directly/indirectly holding more than 25% of the voting rights in the company
3.) Directly/indirectly has a right to share in more than 25% of the company's capital or profits
4.) Directly/indirectly holds the right to appoint or remove the director(s) of the company
5.) Has a right to exercise, or exercises significant influence or control over the company

I have also outlined four scenarios below in order to make clear the situations in which you will need to register as “Controller”.

Scenario 1 – Shares and Voting Rights (where each share comes with 1 voting right)

Mr. P & Mr. T are Controllers in respect to Company A because they each hold more than 25% of Company A’s shares & voting rights

Mr. Q & Mr. U are not Controllers in respect to Company A because they each neither hold more than 25% of Company A’s shares nor hold more than 25% of Company A’s voting rights

Note:

If Company A has issued different class of shares with different voting rights (e.g. 1 share comes with 2 voting rights), Mr. Q & Mr. U could qualify as a Controller in Company A if they each held more than 25% of voting rights in Company A

Any other person (not captured in above diagram) can also be a Controller in Company A if they fulfil ANY of the conditions #3, #4, or #5 mentioned above

Scenario 2 – Relevant Legal Entities (RLE)

In Figure 1, Company B is the registrable RLE in relation to Company A and its details must be entered on Company A’s Register of Controllers. This is because Company B owns 100% of the shares in Company A and Company B is a SG company that keeps a Register of Controllers. Company A is not required to look further at its chain of ownership for any indirect interests held via Company B as these are not registrable in relation to Company A. For this reason the details of Company C, which is also an RLE, and Person 1 will not be entered on Company A’s Register of Controllers.

In Figure 2, Company C is a SG company and its details will be entered on Company B’s Register of Controllers. As the first RLE in Company B’s chain of ownership, Company C is registrable in relation to Company B only. Person 1 also does not go on Company B’s Register of Controllers even though he or she again holds an interest in Company B indirectly. Instead, Person 1 is only required to be entered on Company C’s Register of Controllers, as per Figure 3 above.

If Person 1, for example, were to hold a direct interest in Company A which, met one or more of conditions #1-#5, cumulative with an indirect interest through Companies B and C, Person 1’s details, in addition to Company B’s details, must be entered on Company A’s Register of Controllers. Person 1 should be entered on Company A’s Register of Controllers as holding the total number of the shares held directly and indirectly. This is illustrated in Figure 4 above. In this situation, it might be unreasonable to expect Company A to identify Person 1, and there is a separate obligation on Person 1 to inform Company A that he or she must be entered on Company A’s Register of Controllers. Company A must then enter information about Person 1 on its Register.

Scenario 3 – Joint Interests/Arrangements

Individually standing, Persons 1 -5 (P1-P5) will not be registered as Controllers as each of them neither holds more than 25% of Company Z’s shares nor holds more than 25% of Company Z’s voting rights. However, if Persons 1 and 2 (P1 and P2) have joint interests or enter a joint arrangement where they exercise all or substantially all of their rights arising from their shares jointly, each of them is deemed to hold the total number of shares held by all of them, i.e. 40% of shares. Since the arrangement covers more than 25% of the shares or voting rights, both P1 and P2 will be registered as Controllers and must separately be entered on Company Z’s Register of Controllers.

Scenario 4 – Retired Founders and Next-of-Kin

Although both Retired Founders and your Next-of-Kin are not formally appointed as shareholders, they would qualify as Controllers and would have to be entered on the Company’s Register of Controllers as long as they fulfil one or more of the conditions #4 and #5 mentioned above.

The setting up and maintenance of your Register can be undertaken by your corporate secretary if you have appointed one. 

You can view Part II of this article here.

The views expressed in this column are the author's own and do not necessarily reflect this publication's view, and this article is not edited by Singapore Business Review. The author was not remunerated for this article.

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Satish Bakhda

Satish Bakhda

Satish Bakhda is the Chief Operating Officer at Rikvin. He brings with him over 15 years of experience in the corporate services industry and is a regular speaker at marketing events around the world. He is also a consultant on matters relating to incorporation, relocation, accounting and taxation in Singapore.

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