Singapore has recently amended laws to seek greater transparency of ownership and control of business and trust entities. There have also been other changes in the Companies Act and the stamp duty regime, as well as a newly-proposed vehicle for investment funds.

Keeping up with recent developments – and potential new ones – in and around legal and trusts issues in the Asia-Pacific region can be a challenge. The editors of this news service are therefore delighted to share these insights from lawyers at global firm Baker & McKenzie on recent changes and updates in Singapore. The authors of the piece are Dawn Quek and Jaclyn Toh. The content below is highly detailed and set out for the benefit, we hope, for readers trying to keep on top of issues such as trusts, the reporting requirements of the Common Reporting Standard and changes to Company Law. 
 

As always, this news service does not necessarily endorse all views of guest contributors and invites readers to respond and continue the debate. Email tom.burroughes@wealthbriefing.com Singapore has recently amended various legislation to seek greater transparency of ownership and control of business and trust entities. There have also been other changes in the Companies Act and the stamp duty regime, as well as a newly-proposed vehicle for investment funds. 

New requirements for trustees The Singapore Trustees Act has been amended, with effect from 31 March 2017, to require that trustees of express trusts need to obtain and maintain records on the identity and particulars of the “effective controller”, who exercises ultimate effective control over an express trust:

(i) that is governed by Singapore law; (ii) that is administered in Singapore; or (iii) in respect of which any of the trustees is resident in Singapore (a "relevant trust").
These amendments are not relevant to licensed trust companies as they are already subject to obligations in administering trusts to maintain a reliable paper trail of business relationships, transactions, and discloses the true ownership and movement of assets. 

However, express trusts that are not administered by licensed trust companies (e.g., nominees of bare trusts, or individuals) will need to take note of these additional paper trail obligations to:
(i) to obtain and verify relevant information on "relevant trust parties” ; (ii) to maintain records of such relevant information for a period of at least 5 years after the trustee ceases to be a trustee of the relevant trust; (iii) to keep accounting records of a relevant trust for a period of at least 5 years starting after the end of the calendar in which such relevant transaction has been completed; and (iv) to disclose to "specified persons"  that they are acting as trustee for a relevant trust for certain transactions and business relationships.

Regulations, exempt categories of express trust, and the applicable timelines To give effect to the amendments, the Trustees (Transparency and Effective Control) Regulations 2017 was enacted and came into force on 31 March 2017.The regulations exempt certain categories of express trusts from these changes as they are presently already subject to regulatory oversight. These categories include trusts in respect of which the trustees are: 

(i) Public Trustees appointed under the Public Trustee Act;  (ii) trust companies that are granted trust business licenses under the Trust Companies Act;  (iii) private trust companies that are exempt from the requirement to hold a trust business license under the Trust Companies Act; and (iv) merchant banks approved under the Monetary Authority of Singapore Act. The regulations also set out the following timelines that the trustees of relevant trusts will need to comply with: (i) on or before 30 May 2017 (for a trust that is a relevant trust on 30 April 2017); (ii) on or before the date of trust creation (for a relevant trust that is created after 30 April 2017); (iii) within 60 days on which the trust becomes a relevant trust (for a trust that is not a relevant trust on 30 April 2017 but subsequently become a relevant trust after 30 April 2017).

New requirement for Singapore companies and LLPs The Companies Act and the Limited Liability Partnerships ("LLPs") Act have also recently been amended to introduce a requirement for such business entities to maintain certain registers, namely:

(i) Registers of controllers (non-public) Singapore-incorporated companies, Singapore-registered LLPs, and Singapore-registered branches of foreign companies must maintain a register of their "controllers".

A “controller” is an individual or a legal entity that has "significant interest" in or "significant control" over an entity. This register is not a public register. However, it must be made available to the Registrar and public agencies administering or enforcing any written law (including law enforcement agencies) upon request.

Note, however, that the Minister is empowered to direct the Accounting and Corporate Regulatory Authority to maintain a central register, should it become necessary to do so. Entities which are exempted from this requirement include public companies listed in Singapore, Singapore financial institutions, and companies listed outside Singapore that are already subject to regulatory disclosure requirements; (ii)

Registers of nominee directors (non-public) Additionally, Singapore-incorporated companies must also maintain a non-public register of their nominee directors. Under the new provisions, this register must be made available to ACRA and public agencies administering or enforcing any written law (including law enforcement agencies) upon request. Nominee directors of Singapore companies are now required to disclose their appointment as nominee, and the particulars of their nominators to their respective companies; and  (iii) Registers of members of foreign companies (public) Foreign companies registered in Singapore are now required to maintain a public register of their members. This brings such foreign companies in alignment with Singapore-incorporated companies.

These requirements came into operation on 31 March 2017.
Shift in stamp duty point for the transfer of stock or shares  Previously, section 22(1) of the Singapore Stamp Duties Act provided for certain contracts and agreements for sale to be chargeable with stamp duties as "conveyances on sale". An exception was provided for certain contracts and agreements, including those for the sale of stock and shares. In other words, prior to the current amendments: 

(i) The relevant duty point for a sale of stock or shares would be at the time of execution of the share transfer form (and not the contract for the sale of the stock or shares); and   (ii) In the case of scripless shares where no transfer instrument is executed, no duty was payable.  With effect from 11 March 2017, a contract or agreement for sale of stock and shares that is made on or after 11 March 2017 – and not the share transfer forms (which can be, and often is, executed later) – will now be chargeable as "conveyances on sale". 

1.1 Impact of the shift in stamp duty point  The change will have a timing and cost impact on mergers and acquisitions involving shares of private companies. Where the signing and the closing of a transaction occur on different days, stamp duty would be triggered upfront on the date of signing, and not at closing. With this change, we recommend that parties should consider the allocation of the risk and cost of the stamp duty paid upfront in the event that the deal does not close for any reason.

For mergers and acquisitions involving scripless shares, this will likely have a significant cost impact. Prior to the change, only transfer instruments for the sale of shares were chargeable with stamp duty. The share purchase agreement itself would not be subject to duty. As there was no transfer instrument to be executed for a transfer of scripless shares, there was typically no stamp duty applicable. Under the new rule, contracts and agreements for the sale of scripless shares would be chargeable to duty. Its effect is that, going forward, transfers of scripless shares will be subject to stamp duty unless no document is executed.

While this change does not affect the conditions for stamp duty relief under sections 15 and 15A of the Stamp Duties Act, parties should be adequately advised on timing issues as these would depend on the nature and content of the documents executed.
Additional conveyance duties on Singapore residential property-holding entities
Prior to 11 March 2017, indirectly acquiring Singapore residential property through equity interests held in companies only attracted a stamp duty rate of 0.2 per cent. Conversely, directly acquiring or disposing of such residential property would attract much higher duties, being the Buyer’s Stamp Duty (in the range of 1 per cent to 3 per cent), and potentially both Additional Buyer’s Stamp Duty of up to 15 per cent and Seller’s Stamp Duty of up to 16 per cent. The maximum SSD rate has since been adjusted to 12 per cent with effect from 11 March 2017.

The new additional conveyance duties is meant to address such a stamp duty rate differential. The ACD is levied on the market value of the Singapore residential properties directly or indirectly owned by a target "residential property-holding entity".

Residential PHEs are entities whose primary tangible assets are residential properties in Singapore, and include companies, property trusts, and partnerships. There are two types of residential PHEs, namely: (i) Type 1 PHE: A target entity whose market value of the residential properties owned makes up at least 50 per cent of the value of its total tangible assets; and   (ii) Type 2 PHE: A target entity which has:
a. 50 per cent or more beneficial interest (directly or indirectly) in one or more entities ("related entities") which are Type 1 PHEs; and b. the sum of the market value of residential properties that is beneficially owned by the target entity and (proportionally based on the entity's equity interest in its related entities) its related entities is at least 50 per cent of the total tangible assets of the target entity and (proportionally based on the entity's equity interest in its related entities) its related entities.

Types and rates of additional conveyance duties  ACD is payable on applicable transactions occurring on or after 11 March 2017. There are two types of ACDs, namely:  (i) ACD for buyers ("ACDB"); and (ii) ACD for sellers ("ACDS"). The amount of ACD payable is pro-rated based on the percentage of equity interest that is acquired or disposed of by a significant owner of a target PHE, on or after 11 March 2017.  We set out below the relevant rates:

Type of ACD Rate of ACD ACDB The sum of the following:  1 per cent on the first $180,000;  2 per cent on the next $180,000 (if applicable);  3 per cent on the remainder (if applicable); and  15 per cent on the entire value ACDS Flat 12 per cent on the entire value   Scope of the new ACD  The new ACD is levied on "qualifying acquisitions" and "qualifying disposals" of equity interests in residential PHEs. (i) Qualifying acquisitions subject to ACDB

An acquisition of equity interest in a residential PHE is a "qualifying acquisition" when a buyer (together with any "associates"), is either: a. already a "significant owner" of such PHE before the acquisition of the relevant equity interest; or b. becomes a "significant owner" after the acquisition. (ii) Qualifying disposals subject to ACDS.

A disposal of equity interest in a residential PHE is a "qualifying disposal" when a seller (together with any "associates"), is a "significant owner" of such PHE and the relevant equity interest of the residential PHE disposed of: a. is acquired on or after 11 March 2017; and  b. is disposed of within 3 years of its acquisition (a holding period assessed on a first-in-first-out basis).

Implications 
As a result of ACD, a stamp duty differential has now been created in favour of acquiring residential property directly because: (i) ACD is levied in addition to the prevailing stamp duty of 0.2 per cent for the acquisition of equity interests in companies. (ii) The ACDB also includes a component that applies at a flat rate of 15 per cent, which is aligned with the highest ABSD rate of 15 per cent (a rate only applicable to entities and foreign individuals). The ACDB is levied regardless of the profile of the buyer.  Following the amendments discussed in Section 3 on the stamp duty point, parties to share transfers involving PHEs should note that the duty point for any ACD and the usual 0.2% stamp duty for share transfers is at the time when the relevant contract or agreement is executed.

While the concept of "significant owner" means that retail investors will not be caught by the new rules, the ACD rules may potentially affect wealth planning structures, residential real estate developers, and REITs that hold interests in residential properties. 

It is noted that the stamp duty relief provisions in section 15(1) and 15A(1) of the SDA do not apply to the ACD. In particular, section 15(1)(a) grants relief from stamp duty where equity interests are transferred in an intra-group transfer as part of a scheme for the reconstruction or amalgamation of companies. This creates substantial additional duties for groups of companies seeking to reconstruct or amalgamate their entities.

Additionally, we also note the broad ambit of the new ACD rules, which apply to companies, property trusts, partnerships, limited partnerships, as well as limited liability partnerships. Finally, we would like to highlight that taxpayers would now be subject to extensive disclosures of documents and information for the purpose of paying ACD. Based on the guidance on ACD provided by the Singapore tax authority, some of the information required for disclosure would include the entire group structure of the taxpayer and its chain of ownership (both pre- and post-acquisition), valuation reports of all residential properties owner in Singapore, and the latest audited accounts of the target entity and all related entities.

Removal of requirement for use of common seal by Singapore companies With effect from 31 March 2017, the Companies Act and the LLP Act have been amended such that it is no longer mandatory for companies and LLPs to affix the common seal in order to execute documents such as deeds, and for certain documents such as share certificates.

Though they may still use the common seal if desired, companies and LLPs can now also choose to execute documents via the signatures of: (i) Authorised persons for companies a. a director and a secretary of the company; b. two directors of the company; or c. a director of the company, in the presence of a witness who attests the signature. (ii) Authorised persons for LLPs a. two partners of an LLP; or b. a partner of an LLP in the presence of a witness who attests the signature.

New regime that allows foreign corporate entities to re-domicile into Singapore The Companies Act amendment has introduced a framework to allow foreign corporate entities to re-domicile (i.e., transfer their registration) to Singapore.

A foreign corporate entity which re-domiciles to Singapore becomes a Singapore company. Once re-domiciled, it is subject to and must comply with the Companies Act like any other Singapore company. ACRA has announced that the inward re-domiciliation regime will be implemented within the first half of 2017.

Enactment of CRS regulations to make CRS requirements a part of the laws in Singapore
In 2016, Singapore committed to implementing the Common Reporting Standard ("CRS") for the purposes of automatic exchange of information, with the first exchange to take place by September 2018.  To implement this information exchange, Singapore has enacted regulations with effect from 1 January 2017. Singapore has also entered into various Competent Authority Agreements with the following countries: Australia, Belgium, Canada, Denmark, Estonia, Finland, France, Guernsey, Iceland, Ireland, Italy, Japan, the Republic of Korea, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, New Zealand, Norway, South Africa, and the United Kingdom.

On 21 June 2017, Singapore also signed the Multilateral Competent Authority Agreements on the automatic exchange of financial information under the CRS ("MCAA"). By signing the MCAA, Singapore has increased the number of potential partner jurisdictions that it may participate in automatic exchange of information with. The list of exchange relationships that Singapore will have under the MCAA will be published in due course.

ew corporate structure for investment funds - Singapore Variable Capital Companies (S-VACC)
On 23 March 2017, the Monetary Authority of Singapore ("MAS") commenced a public consultation on a new corporate structure for investment funds – the Singapore Variable Capital Company ("S-VACC"). The introduction of the S-VACC will provide an additional option for collective investment schemes, and overcome certain restrictions on companies such as capital reduction and share redemption limitations under the Companies Act. For example, a S-VACC wishing to carry out a capital reduction or redeem its shares would not be subject to solvency tests and corporate approvals, provided that such shares are redeemed at net asset value. 
The S-VACC public consultation ended on 24 April 2017.

About the authors: 
Dawn Quek is the head of the wealth management practice at Baker McKenzie Wong & Leow in Singapore. She is also the Asia Pacific representative on the Firm's Global Wealth Management Steering Committee. Her practice includes assisting ultra-high net worth families on their tax, trust and estate planning issues on a cross-border basis. She also advises the financial institutions that provide services to high net worth individuals on various issues, including structuring their business operations and product offerings for tax efficiency and the legal issues involved. Jaclyn Toh is with Baker McKenzie Wong & Leow in Singapore and has worked with various ultra-high net-worth families in the Asia-Pacific region, assisting them with their tax, trust, and complex estate and succession planning issues.