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A crucial part of being a business owner in Singapore is complying with government regulations. In this article, we will talk about how to ensure that your business complies with ACRA’s regulations, the common penalties that companies face if they violate these regulations, and more.
What Is ACRA?
The Accounting and Corporate Regulatory Authority, also known as ACRA, regulates and monitors Singapore’s public accountants, businesses, and corporate service providers. A few examples of the tasks that ACRA is responsible include:
- Ensuring that the aforementioned entities comply with Singapore’s various business laws, such as the Accounting and Corporate Regulatory Authority Act 2004, the Companies Act 1967, the Accountants Act 2004, the Business Names Registration Act 2014, and others
- Advising and representing the Singaporean government internationally on issues related to the registration, financial reporting, and regulation of these entities
- Administering the documents and information of these entities and allowing the public to access them when appropriate
- Increasing public awareness about new compliance requirements, business structures, and corporate governance practices in Singapore
Common Penalties for Failing to Comply with ACRA Regulations
Under Section 148(1) of the Companies Act, a person cannot be a director of a company if (s)he was adjudged to be bankrupt. This person may not, either directly or indirectly, take part in the management of any corporation unless the Court has granted the person leave or the Official Assignee has granted him/her written permission to participate in the company’s management.
Any person that fails to comply with this law will, upon conviction, be liable to a fine of up to $10,000, a prison sentence of up to two years, or a combination of the two penalties.
Section 173A(1) requires companies to notify the Registrar after a person becomes a director, secretary, chief executive officer, or auditor and after any change in these positions (e.g. when the auditor or secretary resigns). Companies must notify the Registrar within 14 days or face a penalty. Officers who are found to violate this law are liable upon conviction to a default penalty and a fine of no more than $5,000.
According to Section 401(2), any person who knowingly makes or authorizes a false or misleading statement in any report, financial statement, or other company documents shall be liable upon conviction to a fine of up to $50,000, imprisonment for a term of no longer than two years, or both punishments.
A person is also liable if (s)he wilfully omits or authorises the omission of information that results in the document becoming materially misleading.
Recent Changes to ACRA Regulations
ACRA requires all Variable Capital Companies (VCCs), Limited Liability Partnerships (LLPs), and companies incorporated in Singapore to file annual lodgments, which consist of annual returns and annual declarations. Companies are liable for a fine if they lodge these documents after the deadline.
However, the previous multi-tier penalty framework was excessively complicated and confusing. As a result, ACRA significantly changed the penalty framework for the late filing of annual lodgments by adopting a two-tier penalty system. The new two-tier system is much simpler than the old one and, therefore, makes it easier for companies in Singapore to comply with the rules. These changes took effect on 30 April 2021.
Under the new system, all Singapore-incorporated companies, LLPs, and VCCs must pay a penalty for late lodgments of $300 if the annual return or annual declaration is filed no later than 3 months after the filing due date and $600 if it is filed more than 3 months after the due date.
Tips for Ensuring That You Comply with ACRA Regulations
First, schedule your Annual General Meeting (AGM) well in advance. Every company is required to hold an AGM and newly incorporated companies must hold their first AGM within a year and a half from the date on which they were incorporated. However, private companies are not required to hold an AGM. If they submit their company’s financial statements within five months of their company’s financial year-end.
Second, always hire an accountant to prepare your financial statements. . However, these statements must be prepared per Singapore’s Financial Reporting Standards, which is another reason that it is so important to hire a professional to ensure that these documents are prepared on time and correctly.
Lastly, do not forget about your annual return. Many business owners think that they only have to worry about submitting their financial statements, but that is not all. You must submit your annual return regardless of whether your company is still making revenue. The annual return then has to be submitted to your corporate secretary and contain the following information.
- Your financial statements
- Contact details of the company’s officers and, if applicable, auditors
- Declaration of solvency for exempt companies or company financial report
- Any/all registered addresses
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