This article is designed to be an easy-to-understand guide on compliance and regulatory matters surrounding Dormant Companies incorporated in Singapore.
In this context, let us first define what dormant company is under the definition given by Accounting and Corporate Regulatory Authority (ACRA). A company is considered dormant during a period in which no accounting transaction occurs.
Transactions that will not affect the dormant status of the company:
- The appointment of a secretary of a company;
- The appointment of an auditor;
- The maintenance of a registered office;
- The keeping of registers and books;
- The payment of fees to the Registrar or an amount of any fine or default penalty paid to the Registrar (ACRA)
- The taking of shares in the company by a subscriber to the memorandum in pursuance of an undertaking of his in the memorandum.
Are Dormant Companies required to file Annual Return?
Dormant companies are required to file Annual Return. However, they no longer need to attach the Statement by dormant companies exempting them from audit requirements (currently in PDF format). The appropriate online declarations will appear in the new Annual Return if the correct company type has been selected earlier.
Audit Exemption for Dormant Companies
The audit exemption applies to the financial accounts of a dormant company for any financial year beginning on or after 15 May 2003.
Companies that are exempted from audit requirements are not required to have their accounts audited. Instead, they will prepare unaudited accounts for purposes of AGMs and filing with ACRA. If the company chooses to have the accounts audited, it will submit the audited accounts together with the auditor’s report.
Can ACRA require the accounts to be audited?
The Registrar may require the company to submit audited accounts and the auditor’s report, to the Authority, if
- the Registrar believes that there has been a breach of the Companies Act; or
- it is otherwise, in public interest, to do so.
Are Dormant Companies required to prepare financial statement?
The Companies (Amendment) Bill, which was passed by Parliament on 8 October 2014, contains amendments to the Company Act aimed at reducing regulatory burden on companies, providing for greater business flexibility and improving the corporate governance landscape in Singapore. The legislative change relating to new exemption of dormant companies from the preparation of financial statement take effect in the first quarter of 2016.
A dormant non-listed company (other than a subsidiary of a listed company) is exempt from requirement to prepare financial statements if the Company has been dormant from the time of formation or since the end of the previous, and it fulfills the substantial assets test. The substantial assets test is that the total assets of the company at any time within the financial year must not exceed $500,000. For a parent company, the consolidated total assets of group at any time within the financial year must not exceed $500,000.
Dormant listed companies and their subsidiaries, and dormant unlisted companies which do not fulfill the substantial asset test must prepare financial statements but are exempt from audit. There is no change for dormant listed companies and their subsidiaries. This new exemption aims to reduce regulatory costs for dormant companies which have lower public impact.
Is a Dormant Company required to file any documents to IRAS?
A dormant company must submit its Income Tax Return (Form C/Form C-S) unless it has been granted a waiver from IRAS. The company may apply for a waiver from IRAS by submitting the form ‘Application for a Waiver to Submit Income Tax Return (Form C) by a Dormant Company’.