ARCHITECTS (AMENDMENT) BILL

Order for Second Reading read.

The Acting Minister for National Development (Mr Lim Hng Kiang): Mr Speaker, Sir, I beg to move, "That the Bill be now read a Second time."

The main objective of the Architects (Amendment) Bill is to liberalise the requirements for licensing consultancy companies. The Bill seeks to amend two provisions of the Architects Act, namely:

(i) it seeks to remove the professional-shareholding requirement for architectural consultancy companies; and

(ii) it seeks to allow persons other than allied professionals to be appointed as directors of consultancy companies, subject to the Chairman and not less than two-thirds of the directors being allied professionals registered in Singapore.

[Mr Deputy Speaker in the Chair]

4.16 pm

The Acting Minister for National Development (Mr Lim Hng Kiang): Sir, the Architects Act was enacted in 1991 to replace the previous Architects Act of 1976. Among the new provisions, the 1991 Act provides a new legislative framework for the licensing of architectural consultancy companies to provide architectural services. Section 20(1) of the Act requires such consultancy companies to comply with the following four licensing conditions:

Firstly, not less than two-thirds of the shareholding of the consultancy company must be beneficially owned by allied professionals. Allied professionals here refer to architects, professional engineers and land surveyors registered under their respective Acts.

Secondly, only allied professionals can be appointed to the board of directors of the consultancy company.

Thirdly, the professional services supplied must be under the control and management of the appropriate allied professionals.

Fourthly, the consultancy company which is incorporated as a limited liability company must have at least $1 million paid-up capital and it is required to take out professional indemnity insurance.

Sir, the purpose of the two-third professional-shareholding requirement is to ensure that the licensed consultancy companies are majority owned by allied professionals. This was incorporated in the Act to address the concern among some allied professionals of the possible erosion of professional standards if these consultancy companies were under the control of persons other than allied professionals.

During the drafting of the 1991 Act, the Ministry of National Development looked at the multi-discipline corporate practices of several developed countries, including the USA, the UK, Canada and Australia. Some of these countries have liberalised their regulations on their architectural consultancy companies, including not having any requirement on professional-shareholding of their architectural consultancy companies. However, the Ministry of National Development felt that it was better to take an approach of gradual liberalisation given that the introduction of consultancy companies and the formation of multi-disciplinary practice were already considered a major change in the manner of providing professional services in Singapore.

Since the enactment of the Act in 1991, a total of 16 architectural consultancy companies have been licensed. Consultancy companies have become an accepted vehicle for the provision of architectural services here. The architectural profession should be ready for further liberalisation of the conditions governing consultancy companies.

Sir, the proposal to relax the shareholding restriction was prompted by the needs of the profession in an evolving business environment. Construction projects in Singapore are becoming larger and more complex in scope requiring the inputs of several professional disciplines. Clients may desire a complete package of related services under one roof, rather than having to deal with different professional firms. As the business environment becomes more competitive, consultancy companies may have to tie up with others to render such wide scope of services, or to expand and develop them in-house.

With the opening up of China, India, Vietnam and other countries in the region, quite a number of our architectural consultancy companies are venturing to these countries in search of business opportunities. To clinch deals, these consultancy companies are often required to take up equity stakes in the development projects in order to assure developers and clients of their commitment. Overseas projects are often large developments. Clients of such projects may expect a complete range of services, including financing, master planning, design and construction. As such, these companies are finding it increasingly necessary to expand their capital base to finance their overseas business ventures.

With the professional-shareholding requirement, a consultancy company's ability to expand its capital base is limited by the financial resources it can muster from its professional shareholders.

The professional-shareholding requirement is not an essential precondition for professionalism. Professionalism of a consultancy company depends on the competence and ability of its individual professionals in upholding high standards of professionalism. There are also provisions in the Act and its Rules to regulate the practice of individual professionals. Moreover, the company's licence can be withdrawn, or will not be renewed if the company's professional conduct is found unsatisfactory.

Mr Deputy Speaker, Sir, I now come to the second amendment. Currently, only allied professionals can be appointed as directors of consultancy companies licensed under the Act. As I have explained earlier, the removal of the professional shareholding requirement is to allow consultancy companies to grow by raising equity capital from investors other than allied professionals. In line with this, the Bill proposes to allow persons other than allied professionals to be appointed to the board of directors. However, to maintain substantially the professional character of these companies, the relaxation will be subject to the Chairman and not less than two-thirds of the directors being allied professionals.

Sir, consultancy companies in many developed countries are not hobbled by professional-shareholding requirements or restrictions on their capital base and board composition. The Architects (Amendment) Bill is necessary to allow our consultancy companies to grow and to compete on a level playing field internationally.

Sir, I beg to move.

Question proposed.

Mr Kenneth Chen Koon Lap (Hong Kah GRC): Mr Deputy Speaker, Sir, I declare that I am a practising architect.

Sir, I support the Bill. The rationale of the amendment to the Architects Act is appropriate and timely, as the present-day professional practice is very much interwoven with the business environment. Changes have to be made so that the scope can be expanded and regulations amended to accommodate the rapid changing conditions and demands. Specially in the light of our ever expanding regionalisation drive, corporatising of the professional service is necessary so that we can have sufficient capital base to service the ever increasing demand of the commercial interest.

However, I would like the Minister to enlighten me on a certain clause in the amendment that appears to have some ambiguity. I am referring to clause 4(1) which states:

`It shall be a condition of every licence granted to any corporation or partnership that the corporation or partnership shall supply architectural services in Singapore only under the control and management of a registered architect ...'

Then under paragraph (b)(ii), it states:

`in the case of an unlimited corporation which has a share capital, a director and registered owner of at least one share of the corporation;'

Sir, if the intention of the corporation which supplies architectural service requires the control and management to be under a registered architect, I cannot reconcile how the registered person who owns only one share of the corporation be in control of the management. Under company law, the control and management of a corporation is always under the majority shareholder. I therefore request that a provision be introduced to clearly state that the registered person, even if he is not a major shareholder, in a corporation that offers architectural service be given a special voting or management right so that he or she can be in control of the management of the corporation, so as to be consistent with the intention contained in clause 4(1) of the amendment.

Mr Lim Hng Kiang: Mr Deputy Speaker, Sir, the intention of clause 4 is to make sure that we separate the business practices from the professional practices. In the business practices, the company may have non-professionals as part of the shareholders. But in the supply of architectural services, clause 4 insists that in the supply of such services, this must be under the control and management of a registered architect who is resident in Singapore and has in force a practising certificate. Sub-clause (2) goes on to explain the different types of companies under such a condition. In the case of an unlimited corporation, the person who is controlling or managing the project not only has to be a registered architect ordinarily resident in Singapore and has in force a practising certificate but also be a director and a registered owner with at least one share. So sub-clause (2) is reinforced. In an unlimited corporation where the risk to all the persons involved in the corporation is unlimited, then the one who is supplying the services not only must be an architect but also has at least one share in the unlimited corporation.

Question put, and agreed to.

Bill accordingly read a Second time and committed to a Committee of the whole House.

The House immediately resolved itself into a Committee on the Bill. - [Mr Lim Hng Kiang].

Bill considered in Committee.

[Mr Deputy Speaker in the Chair]

Clause 1 -

The Chairman: In page 1, line 4, the citation year will be changed to 1995 as indicated in the Order Paper Supplement.

Clause 1 ordered to stand part of the Bill.

Clauses 2 to 4 inclusive ordered to stand part of the Bill.

Bill reported without amendment; read a Third time and passed.