COMPANIES BILL

Order for Second Reading read.

3.51 p.m.

The Minister for Law and National Development (Mr E. W. Barker): Mr Speaker, Sir, I beg to move, "That the Bill be now read a Second time."

Sir, the need for an up-to-date company legislation has become a matter of urgency as our existing legislation on companies, which is based on the English Companies Act of 1929, is now completely out of date. The main provisions in this Bill are outlined in the Explanatory Statement attached to the Bill. I now propose to give only a brief outline of the significant changes in the law proposed by this Bill.

Under clause 15 of the Bill a private company is prohibited from inviting the public to invest money with it. Existing private companies should convert themselves to public companies if they desire to continue to borrow from the public.

Clause 170 requires every company to send copies of the Balance Sheet, Profit and Loss Account, and Auditor's Report to all members of the company before the general meeting, whereas under the existing law private companies are not required to do so.

Clause 181 gives a remedy to minority interests who are being oppressed by the majority. The provisions, which are new, are also applicable to private companies.

The definition of "director" has been widened to include a person in accordance with whose directions or instructions the directors are accustomed to act.

Clause 122 requires every company to have at least two directors, one of whom shall be resident in Singapore.

Clauses 131 and 132 impose upon the directors the duty of disclosing any conflicting interests they might have and prohibit officers of the company from acquiring an advantage because of information gained by virtue of their position.

Clause 133 restricts the right of companies to make loans to their directors or to directors of related companies, and clause 135 requires a director to inform the company promptly of any matters affecting his own position which are required to be known by the company.

Clause 136 prohibits tax-free payments to directors, and clause 137 strictly limits the right of a company to make payments to a director on his retirement.

These provisions will ensure that directors do not take undue advantage of their position in the company and will prevent the company from giving undue preference to them.

Special provisions have been introduced in this Bill to control unit and property trusts and investment companies. The Minister has to grant his approval to a company, acting as trustee, for the purposes of a trust deed, and the trust deed is required to contain certain covenants and has to be approved by the Registrar.

Returns have to be made to the Registrar every year containing a list of all persons who are holders of the interests to which the deed relates, and containing statements of all purchases and sales of land and marketable security, and of all other investments, and also of the total amount of brokerage paid or charged by the management company.

As regards investment companies, there are restrictions on borrowing, on investment, on underwriting, etc. They are also required to keep an investment fluctuation reserve.

Foreign companies are regulated by Division 2 of Part XI of the Bill. Every foreign company shall have a registered office in Singapore and shall, if it invites the public to subscribe for its shares, keep a Branch Register in Singapore.

The provisions of Part IX of the Bill, which deals with the investigation of companies, are more extensive than the corresponding provisions of the existing Ordinance. Clauses 207 to 209 enable the Minister to investigate the actual ownership of the shares of the company. He can restrain dealings in the shares and the exercise of rights attached to the shares if the owner refuses to co-operate in the investigation. These are new provisions. Clause 210 enables the Government to co-operate with other countries having similar legislation with respect to investigations.

Under the existing law the Registry of Companies is little more than a repository for documents required to be lodged with the Registrar. Under this Bill the Registrar's duties and powers are extensive and are basic to any proper control over companies and to the active enforcement of the law.

Clauses 374 to 388 authorise the Minister to make arrangements with Malaysia for the extension to Singapore of Winding-Up Orders made in Malaysia and for the extension to Malaya of Winding-Up Orders made in Singapore. I understand that the Malaysian Government is prepared to enact legislation containing reciprocal provisions.

The Bill proposes to give the investing public adequate protection, but, at the same time, tries not to place an undue or unnecessary burden upon honest business enterprises. It will do much to provide a healthy climate for investment and a sound basis for action against fraudulent and undesirable practices. As this Bill is comprehensive and far-reaching in its effects, it is proposed to refer it to a Select Committee.

Sir, I beg to move.

Question put, and agreed to.

Bill accordingly read a Second time.

Resolved, "That the Bill be committed to a Select Committee consisting of eight Members to be nominated by the Committee of Selection." - [Mr Barker]