Corporate Governance Standards to be enhanced with Amendments to the SGX-ST Listing Manual – Important Legal update

On 1 September 2006, Singapore’s Listing Manual will be amended to incorporate rules aiming to raise the corporate governance standards and promote good regulatory practices. The following are the key amendments that will be included:

1. Two independent resident directors for foreign issuers with new listing applications.
   
   
2. Appointment of a Compliance Adviser by a listing applicant on a selective and “need-to” basis.
   
   
3. Disclosure of directors’ prior experience or training in the offering document or via SGXNET for all new listing applications.
   
   
4. Two independent non-executive directors for all issuers (existing issuers and new applicants), not only at listing but on a continuing basis. Existing issuers will be given time up till 1 January 2008 to comply with this requirement.
   
   
5. “Negative assurance” confirmation by two directors on behalf of the Board on the accuracy of interim financial results.
   
   
6. Prominent statement by Issuer in all its announcements and information documents to identify sponsorship extended to two years after listing or completion of a reverse takeover.
   
   
7. Voluntary compliance with the Operating and Financial Review (OFR Guide) issued by the Council on Corporate Disclosure and Governance when preparing annual reports.
   
   
8. Easier disclosure requirement relating to accountants of subsidiaries.
   
   
9. Requirement for post-listing of financial results for issues of debt securities.
   
   
10. Disclosure of material information as and when it arises, even if it does so during trading hours.
    
    
11. New Rule 887 on issuance of new units by Real Estate Investment Trust (REIT) under a general mandate.

To view the SGX’s press release (dated 7 June 2006) with the complete list of amendments that will be made to the Listing Manual, please click here.

Central Provident Fund Policy changes to kick in on 1 July 2006

A number of changes to the Central Provident Fund (CPF) Board’s schemes aimed at improving the retirement adequacy of Singaporeans will kick in on 1 July 2006. The changes are:

1. 1. Transfer excess Medisave Account (MA) contributions to Special (for those below 55 years) or Retirement Account (for those aged 55 years and above) (SA, RA) instead of the Ordinary Account (OA)
   
   
2. Restrictions on use of CPF savings for multiple property purchases from 1 July onwards. Before the purchase of a second property, CPF members will have to set aside a Minimum Sum cash component in their OAs and SAs or indicate their intention to sell the first property within a grace period.
   
   
3. Phasing Out of Non-Residential Properties Scheme (NRPS) as CPF savings can no longer be used to buy non-residential properties such as factories and warehouses.
   
   
4. Increase in CPF Minimum Sum from $90,000,000 to $94,000,000, Medisave Minimum Sum from $27,500 to $28,000 and Medisave Contribution Ceiling from $32,500 to $33,000.

To find out more details on the changes, read the CPF News Release by clicking here.

Culmination of a new “Singapore Treaty on the Law of Trademarks”

The Diplomatic Conference for the Adoption of a Revised Trademark Law Treaty, held in Singapore in March 2006, agreed that the Treaty adopted by the Conference would be named “Singapore Treaty on the Law of Trademarks” (hereinafter referred to as “the Treaty”), after the host country.

Adopted on 28 March 2006, the Treaty heralds in a new era in intellectual property law by introducing a revision to the 1994 Trademark Law Treaty, allowing the law to keep pace with the rapid global technological developments, especially with the advent of electronic communications. Procedural frameworks for both national and regional trademark administration authorities will be streamlined, thus lowering the costs of registration of trademarks. All facets of the registration process will be covered including registration formalities, the recording of trade mark licences and the avenues of relief available when certain time limits are missed.

The rules also recognize the need to acknowledge the efforts made in terms of product differentiation or unique branding identities. By implementing a common standard in this area, the Treaty thus implements a regulatory framework for brand rights that is efficiently enhanced by the establishment of an Assembly of all contracting parties.

With a view to facilitating the implementation of the Treaty in Developing and Least Developed Countries (LDCs), the Diplomatic Conference requested the World Intellectual Property Organization (WIPO) and the Contracting Parties to provide additional and adequate technical assistance comprising technological, legal and other forms of support to strengthen the institutional capacity of those countries to implement the Treaty and enable those countries to take full advantage of the provisions of the Treaty. Such assistance is vital to the success of the Treaty as there are many provisions dealing with non-traditional and non-visible trademarks like sounds, smells and holographic signs. Technical assistance would include:
(i) assistance in establishing the legal framework for the implementation of the Treaty,
(ii) information, education and awareness raising as regards the impact of acceding to the Treaty,
(iii) assistance in revising administrative practices and procedures of national trademark registration authorities,
(iv) assistance in building up the necessary trained manpower and facilities of the IP Offices, including information and communication technology capacity to effectively implement the Treaty and its Regulations.

To view the full text of the Treaty, please click here.

Interpretation of Requirement to Prepare Accounts under section 201(1A), (3) and (3A) of the Companies Act – Practice Direction No 4 by the Accounting and Corporate Regulatory Authority of Singapore.

On 27 April 2006, the Accounting and Corporate Regulatory Authority (ACRA) issued Practice Direction No 4 of 2006 to replace Practice Direction No 9 of 2005 with immediate effect. The new Practice Direction (PD) interprets sections 201 (1A), 3 and 3(A) of the Companies Act (CA) and elaborates on the issues raised and the interpretation taken in the older PD.

Section 201(1) and (3) of the CA requires the directors of a company to present a profit and loss account and a balance sheet for the company at the end of the financial year at its Annual General Meeting. Section 201(3A) CA on the other hand requires the directors of a holding company to present the consolidated accounts of the company and its subsidiaries, as well as a balance sheet dealing with the state of affairs of the holding company, at the end of the financial year at its Annual General Meeting. Under these sections, the profit and loss account and the balance sheet must comply with the prescribed Accounting Standards and give a true and fair view of the profit and loss of the company and the state of affairs of the company.

The prescribed Accounting Standards under the CA are the Financial Reporting Standards (FRS) and basically refer to statements of standard accounting practice applicable to companies.

The older Practice Direction dealt with the difference between the definitions of “subsidiary” and “holding company” in section 5(1) and (2) of the CA, and the accounting definitions of a “subsidiary” and “parent” under FRS 27 of the prescribed Accounting Standards. As the legal and accounting definitions are similar but not identical, a company may meet the definition “subsidiary” or “holding company” under the CA but not the accounting definition of “subsidiary” or “parent” under FRS 27, and vice versa.

This uncertainly caused by the differences in the legal and the accounting definitions was finally clarified with the new PD. ACRA’s views are summarized in the following table which was provided by them:

* Excluding cases which fall within paragraph 10 of FRS

To view ACRA’s PD No 4 of 2006, please click here.

New Financing Scheme for Marine Firms

A Maritime Finance Scheme Incentive (MFI) was unveiled by the Maritime and Port Authority of Singapore (MPA) at the end of June this year for ship-leasing companies and shipping business trusts that provide financing for all types of vessels. Welcomed by the industry, the scheme includes a tax exemption on the 'qualifying'' income for the entire life of any vessel acquired by an approved ship investment vehicle (ASIV) within its incentive period. It is expected that the tax certainty provided by this unique feature will increase the attractiveness of such investments to potential investors and spur ship investment management companies to set up such investments in Singapore.

First announced during the 2006 Budget Speech by the Prime Minister and Minster of Finance, as an objective to aid the shipping community to tap Singapore’s world-class financial infrastructure and expertise, the scheme also provides for:
(a) A Concessionary tax rate of 10% on qualifying management-related income for Approved Ship Investment Managers (ASIM) for a period of 10 years; and
(b) Tax exemption on qualifying income (from both finance and operating leases) derived by Approved Ship Investment Vehicles (ASIV) from:
(i) Ship leasing activities to non-tax residents of Singapore;
(ii) Leasing of vessels registered with the Singapore Registry of Ships (SRS);
(iii) Leasing of foreign-flagged vessels operated by companies under the Approved International Shipping Enterprise Scheme (AIS).

To read the News release by the MPA, please visit http://www.mpa.gov.sg

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