Starting a business is not easy. There are usually a lot of administrative details that a new business owner needs to be aware of. Failure to do so may result in inconveniences at best, and at worst, running afoul of the Companies Act, resulting in prosecution and even penalties.
Given that these penalties may also cause loss of reputation, it would be counterproductive to profitability as well as the conduct of business for a company to commit these offences.
#1 Using An Unregistered Business Name
One common offence is persons carrying out business activities under an unregistered business name. It is still legal to conduct business activities under your personal name, however if you wish to conduct these activities using a business name, you will need to register it with ACRA. Here’s a handy-dandy guide on how to register your business.
In addition to registering your business, the words ‘Limited’ or ‘Berhad’, and ‘Private’ or ‘Sendirian’ are restricted in how they may be used in the business name. Section 405 of the companies act prohibits for these words to be used in the business name in a way which creates the image that they are Private Limited (Pte. Ltd) companies (or Sdn Bhd) when they do not in fact meet the criteria for this.
Individuals who pretend that they have a registered business, or who misrepresent their company as a private/limited company are liable to face a $10,000 fine and/or 2-year jail term.
Read Also: Complete Guide To Singapore Corporate Taxes: Tax Rates, Tax Rebates And Tax Exemptions
#2 Provides False And Misleading Statement
Section 401 of the companies act deals with the circulation or advertisement of financial information. Generally, it is an offence to be untruthful with your financial information, and this extends to omitting or structuring information in a way with the intention to mislead. This applies both to official documents that needs to be submitted to the authorities, as well as to statements made to the public.
Individuals involved in making or approving such statements can be fined up to $50,000 and/or be imprisoned for up to 2 years.
Read Also: 7 Financial Thresholds Small Businesses Need To Know For Tax Reporting In Singapore
#3 Failure To Update The Registrar With Important Company Information
Section 142 of the companies act requires the company to submit a registered office address, to which all official notices and communication will be posted. This is also where the company’s registers and records are kept. This registered office address must not be a P.O. Box address, but it can be a residential address under the Home Office Scheme.
Section 143 requires the company must also submit the working hours of the office, for which the office must be open for at least 3 hours every day. Should the address or the opening hours be changed, notice must be lodged to the registrar within 14 days of such a change.
In addition to this, section 173A(1) requires companies to notify the registrar within 14 days if there are changes in the appointments of directors, managers, secretaries and auditors.
Failure to notify the registrar for any of this information may result in a $5,000 fine.
Read Also: Step-By-Step Guide On How To Change Your Registered Business Activity In BizFile
#4 Failure To Imprint Company’s Name And Registration Number On Official Documents
Section 144 of the companies act requires companies to use the name and registration number of the company on its company seal (or rubber stamp) as well as official documents such as business letters, statements of account, invoices, cheques, receipts and letters of credit.
Most companies possess a rubber stamp which is used for those official documents. The more common occurrence is where such a document needs to be stamped, but the rubber stamp is either not functioning or in another physical location.
An employee or director can still sign the document without using the company stamp, however this person will be held individually liable should the company fail to make payments (if any) as stipulated in that particular document.
Company stamps are not mandatory, especially in cases where the company name and registration number is already printed on the document. For sole proprietorships, the owner is the only person who will be held liable for the company anyway, so there is no legal advantage to having a company stamp, but it is still good to have since it gives the company a more professional image.
However, for other cases, having a company stamp makes it more convenient since the full company name and UEN can be conveniently imprinted on official documents. Either way, a company stamp is inexpensive and only costs between $10-30.
Read Also: Complete Guide To Understanding UEN For Singapore Businesses
#5 Fails To Hold Annual General Meeting (AGM) And Lodge Annual Return Within Stipulated Timeframe
Section 175 of the companies act requires all companies to call for an AGM within 4 months of the financial year end for public companies, and 6 months for private companies. Companies need to do this so long as they are not dormant and hence exempt, or if shareholders have approved a resolution that does not require the company to hold an AGM.
In addition to this, Section 197 requires companies to lodge their annual return within 5 months of the financial year end for publicly listed companies, and within 7 months for private companies. This lodgement must be done after the AGM.
Failure to do so may make shareholders and other company officers liable to a $5,000 fine.
Read Also: Singapore Companies Act: What Business Owners Need To Know When Starting A Company
#6 Not Having A Valid Director
Every company must have at least 1 director who ordinarily resides in Singapore. This would mean someone who is a local Singaporean and who is living in Singapore except for occasional overseas travels, or a foreigner who is ordinarily residing in Singapore on a work pass.
Should this director resign, the company must reappoint a valid director, otherwise shareholders may be liable to face fines of up to $1,000 a day until the director is appointed.
Directors who are disqualified from directorship, usually due to undischarged bankruptcy or conviction for certain offences, cannot continue acting as a director or take part in the management of a company directly or indirectly. If found guilty, the person is liable to a fine up to $10,000 and/or a 2-year jail term.
Read Also: What Is Your Responsibility As A Company Director In Singapore?
Errant Companies May Also Face Default Penalties
Companies which fail to comply with the timelines and rules as stipulated may face a default penalty on top of the stipulated penalty. This default penalty awards a fine up to $200 per day until the defaulting company makes the necessary submissions or changes.
Subscribe To The DollarsAndSense Business Pass
Enjoy what you are reading and want more? Join The DollarsAndSense Business Pass and unlock access to valuable tools, exclusive networking opportunities, and tap into the wisdom of industry experts to fuel your business expansion!
