A company is a separate legal entity, meaning it is separate from its directors, members, shareholders, etc. Being one of the most advanced business structures globally, companies can be complex. On top of their operations, companies also have to abide by rules and regulations set by governance bodies. This process falls under the scope of company compliance.
What is Company Compliance?
Company compliance does not have any standard definition. The word compliance means the action of complying with a company or meeting rules or standards. Company compliance is the process of ensuring a company and its operations follow all laws, standards, ethical practices and regulations. These rules may differ from one jurisdiction to another. Regardless of that, compliance with them is highly critical.
Company compliance usually relates to how companies abide by rules and regulations. Often, these rules and regulations come from external governing bodies. For most companies, these include the government, the share market, the companies act, etc. Sometimes, however, these rules and regulations may also be internal, coming from within the company itself.
Company compliance is an ongoing process for companies. Companies must ensure they follow all the necessary rules and regulations. Furthermore, it is crucial to identify any changes in those rules and regulations and keep updated. If companies fail to comply with any relevant regulatory compliance, they can face repercussions, depending on their jurisdictions.
Overall, company compliance is the process of ensuring compliance with rules and regulations. This process usually involves designing, implementing and monitoring all rules and regulations that apply to a company. Companies may also have compliance programs that are formal policies to help prevent violations. Within risk management, company compliance is an area of substantial importance.
What is statutory or mandatory Company Compliance?
Statutory or mandatory company compliance refers to complying with rules and regulations that come from statutory bodies. These may include the government, the share market, the companies act, etc. These rules will differ from one jurisdiction to another. However, complying with these rules and regulations is of the utmost importance for companies.
In Singapore, there are several rules and regulations with which companies must comply. These rules and regulations come from the Singapore Companies Act and apply to companies after incorporation. Among some of the clauses that apply to companies, the most prominent compliances include the following.
Appointment of Company Secretary
The Singapore Companies Act requires companies to appoint a company secretary within six months of incorporation. The act also specifies various requirements for the secretary. The secretary must also comply with section 171(1AA) of the Companies Act. This section defines the qualifications necessary for a company secretary.
Corporate secretarial services in Singapore are essential for businesses to comply with legal requirements and regulations in the country. The services typically include maintaining company records, preparing and filing statutory returns, and ensuring compliance with relevant laws and regulations.
Maintaining Statutory Registers
The Singapore Companies Act also requires companies to maintain several statutory registers. These form a part of a company’s information records. Some of the statutory registers include the following.
- Register of Business / Company Documents
- Register of Members (ROM)
- Register of Directors (ROD)
- Register of Chief Executive Officers (ROCEO)
- Register of Secretaries (ROS)
- Register of Auditors (ROA)
- Register of Registrable Controllers (RORC)
- Register of Nominee Directors (ROND)
Apart from these, companies must also maintain other documents or official books. These include the constitution of the company, share certificates, any resolutions and the common seal.
Financial Year End (FYE)
The Singapore Companies Act also requires companies to plan and disclose their Financial Year End. It is a date that represents the closure of a company’s accounts for a specific period. There are no restrictions when it comes to which dates companies can choose. However, there are some tax advantages that companies can have on specific dates.
Preparing, Auditing and Filing of Financial Statements
Once companies set their FYE, they must prepare their financial statements on that date. After that, they must also have an external auditor audit those financial statements. Then companies must file the audited financial statements with relevant bodies. There are some exemptions in this regard for some companies, for example, dormant companies. However, private and public companies must comply with these requirements. The primary financial statements include the following.
- Comprehensive Income Statement
- Balance Sheet Statement
- Cash Flow Statement
Companies must also file their statutory returns. This duty falls under the company secretary’s responsibilities. With the statutory returns, a company secretary must also update ACRA on other matters. These may include changes in the name and address of directors, disqualification of directors, change in company names, issuance of shares, changes in the particulars of the directors, etc.
Income Tax Returns
Income tax returns are also crucial for companies. The deadline for submitting these returns for companies in Singapore is the end of November each year. Every company must calculate their taxes based on profits for the year of assessment (YA). Once done, they must submit their tax computation along with the director’s report and Form C.
Keeping and maintaining records is crucial for companies. These records usually include documents related to financial transactions and accounting records. The Singapore Companies Act requires companies to maintain records for at least five years from the relevant YA. Companies can also use accounting software to help in this regard.
What is the importance of Company Compliance?
There are several reasons why companies should ensure proper compliance with the relevant rules and regulations. The first of these include avoiding fines and penalties. All rules and regulations that companies must follow also come with penalties and fines for non-compliance. By ensuring compliance, companies can avoid any unnecessary expenses.
Secondly, company compliance can also have internal benefits. Most rules and regulations exist to ascertain that companies follow a standard or benchmark. By doing so, companies can ensure effective and efficient operations. Apart from external compliance, internal compliance also ensures companies run smoothly. Therefore, company compliance can also have internal benefits.
Lastly, companies can attract more customers by abiding by regulatory compliance. Companies that avoid any rules and regulations attract negative attention. They also risk losing customers and their revenues. Instead, when companies follow compliance requirements, they get a positive reputation. This process can lead to increased customers and profits.
Company compliance is the process of ensuring a company meets the relevant rules and regulations. There are several regulatory requirements to which companies must comply. These rules and regulations differ from one jurisdiction to another. Nonetheless, company compliance can have several benefits, including avoiding penalties, ensuring efficient and effective operations and attracting positive attention.