Finance Companies (Amendment) Bill

Bill No. 28/1984

Read the first time on 24th August 1984.

An Act to amend the Finance Companies Act (Chapter 191 of the Revised Edition).

Be it enacted by the President with the advice and consent of the Parliament of Singapore, as follows:

Short title

1. This Act may be cited as the Finance Companies (Amendment) Act 1984.

Amendment of section 2

2. Section 2 of the Finance Companies Act (referred to in this Act as the principal Act) is amended —

(a)

by inserting, immediately before the definition of “auditor”, the following definition:

“ “agreement” means an agreement whether formal or informal and whether express or implied;”;

(b)

by inserting, immediately after the definition of “company”, the following definition:

“ “credit facilities” means —

(a)	the granting by a finance company of advances, loans and other facilities whereby a customer of the finance company has access to funds or financial guarantees; or
(b)	the incurring by a finance company of other liabilities on behalf of a customer;”;

(c)

by inserting, immediately after the word “public” at the end of the definition of “financing business”, the words “and such other business as the Authority may prescribe for the purposes of this Act”;

(d)

by inserting, immediately after the definition of “financing business”, the following definitions:

“ “officer”, in relation to a corporation, includes —

(a)	a director, secretary or employee of a corporation;
(b)	a receiver or manager of any part of the undertaking of the corporation appointed under a power contained in any instrument; and
(c)	the liquidator of a company appointed in a voluntary winding up;

“person” includes a corporation;”; and

(e)

by deleting the full-stop at the end of the definition of “public company” and substituting a semi‑colon, and by inserting immediately thereafter the following definition:

“ “share”, in relation to a finance company, means a share in the share capital of a finance company and includes an interest in such a share.”.

Amendment of section 6

3. Section 6 of the principal Act is amended —

(a)

by deleting the words “five thousand dollars” in subsection (5) and substituting the words “$20,000 and in the case of a continuing offence to a further fine of $2,000 for every day during which the offence continues after conviction”; and

(b)

by inserting, immediately after subsection (5), the following subsection:

“(5A) Any person who knowingly or recklessly furnishes any document or information which is false or misleading in a material particular in connection with an application for a licence falling within subsection (1) shall be guilty of an offence and shall be liable on conviction to a fine not exceeding $50,000 or to imprisonment for a term not exceeding 3 years or to both.”.

New sections 9A to 9D

4. The principal Act is amended by inserting, immediately after section 9, the following sections:

“Control of takeovers of finance companies incorporated in Singapore

9A.—(1) This section and sections 9B and 9C shall apply to and in relation to all natural persons whether resident in Singapore or not and whether citizens of Singapore or not, and to all bodies corporate or unincorporate, whether incorporated or carrying on business in Singapore or not.

(2) Without prejudice to section 9, no person shall, after the commencement of the Finance Companies (Amendment) Act 1984, enter into an agreement to acquire shares of a finance company that is incorporated in Singapore by virtue of which he would, if the agreement is carried out, obtain effective control of that finance company without first notifying the Authority of his intention to enter into the agreement and obtaining the approval of the Authority to his entering into the agreement.

(3) For the purposes of this section —

(a)

a person shall be regarded as entering into an agreement by virtue of which he would obtain effective control of a finance company if the person alone or acting together with any associate or associates of that person would be in a position to control not less than 20 per cent of the voting power in the finance company or would hold interests in not less than 20 per cent of the issued shares of the finance company;

(b)

a reference to an agreement by which a person would obtain effective control of a finance company that is incorporated in Singapore includes a reference to an agreement by which the person would acquire any interest in shares in the finance company where, upon the acquisition of those interests and of any other interests in other shares of the finance company that he has offered to acquire, he would have effective control of the finance company;

(c)

a reference to a person offering to acquire interests in shares includes —

(i)	a reference to a person making or publishing a statement, however expressed, that expressly or impliedly invites a holder of interests in shares to offer to dispose of interests in shares; and
(ii)	a reference to a person taking part in or proposing to take part in negotiations with a view to the acquisition of shares;

(d)

a person holds an interest in a share if he has any legal or equitable interest in that share and, without limiting the generality of the foregoing, an interest in shares shall have the meaning assigned to that expression in section 6A(6) to (10) of the Companies Act (Cap. 185);

(e)

a reference to the voting power in a finance company is a reference to the total number of votes that might be cast in the general meeting of the finance company;

(f)

the following persons are associates of a person:

(i)	the person’s spouse or a parent or remoter lineal ancestor, son, daughter or remoter issue, brother or sister of the person;
(ii)	any partner of the person;
(iii)	any corporation of which the person is an officer;
(iv)	where the person is a corporation — any officer of the corporation;
(v)	any employee or employer of the person;
(vi)	any officer of any corporation of which the person is an officer;
(vii)	any employee of a natural person of whom the person is an employee;
(viii)	any corporation whose directors are accustomed or under an obligation, whether formal or informal, to act in accordance with the directions, instructions or wishes of the person or, where the person is a corporation, of the directors of the person;
(ix)	any corporation in accordance with the directions, instructions or wishes of which, or of the directors of which, the person is accustomed or under an obligation, whether formal or informal, to act;
(x)	any corporation in which the person who is in a position to control not less than 20 per cent of the voting power in the corporation; and
(xi)	where the person is a corporation — a person who is in a position to control not less than 20 per cent of the voting power in the corporation.

(4) Any person who contravenes subsection (2) shall be guilty of an offence and shall be liable on conviction to a fine not exceeding $50,000 or to imprisonment for a term not exceeding 3 years or to both.

Arrangements affecting control of a finance company incorporated in Singapore

9B.—(1) No person shall, after the commencement of the Finance Companies (Amendment) Act 1984, enter into any arrangement in relation to any finance company that is incorporated in Singapore by virtue of which he would, if the arrangement is carried out, obtain control of the finance company without first notifying the Authority of his intention to enter into the arrangement and obtaining the approval of the Authority to his entering into the arrangement.

(2) For the purposes of this section —

(a)

a person shall be regarded as entering into an arrangement by virtue of which he would obtain control of a finance company if he alone or acting together with an associate or associates would be in a position to determine the policy of the finance company;

(b)

the reference to entering into any arrangement is a reference to any formal or informal scheme, arrangement or understanding, whether expressly or by implication and without limiting the generality of the foregoing includes a reference —

(i)	creating a trust whether express or implied; and
(ii)	entering into a transaction or agreement,

and references to an arrangement shall be construed accordingly; and

(c)

the reference to associates of a person has the same reference as under section 9A.

(3) Any person who contravenes subsection (1) shall be guilty of an offence and shall be liable on conviction to a fine not exceeding $50,000 or to imprisonment for a term not exceeding 3 years or to both.

Control of substantial shareholding in finance companies incorporated in Singapore

9C.—(1) No person shall, after the commencement of the Finance Companies (Amendment) Act 1984, enter into any agreement to acquire shares by virtue of which he would, if the agreement is carried out, acquire a substantial shareholding in a finance company that is incorporated in Singapore without first notifying the Authority of his intention to enter into the agreement and obtaining the approval of the Authority to his entering into the agreement.

(2) For the purposes of this section —

(a)	a reference to an agreement by which a person would acquire a substantial shareholding in a finance company includes a reference to an agreement by virtue of which the person would acquire any interests in shares in the finance company where, upon the acquisition by him of those interests or of those interests and of any interests in other shares in the finance company, being interests that he has offered to acquire, he would acquire a substantial shareholding in the finance company;
(b)	a reference to a person offering to acquire interests in shares and to a person having an interest in shares shall be construed in the same way as under section 9A; and
(c)	a substantial shareholding has the same meaning as in section 69C of the Companies Act (Cap. 185).

(3) Any person who contravenes subsection (1) shall be guilty of an offence and shall be liable on conviction to a fine not exceeding $10,000 or to imprisonment for a term not exceeding one year or to both.

Power of Authority to require a finance company that is incorporated in Singapore to obtain information as to beneficial interests in shares of the finance company

9D.—(1) The Authority may by notice in writing direct a finance company that is incorporated in Singapore to obtain from any shareholder of the finance company and to transmit to the Authority information —

(a)	as to whether that shareholder holds any voting shares in the finance company as beneficial owner or as trustee; and
(b)	if he holds them as trustee, to indicate, as far as it can, the person for whom he holds them (either by name or by other particulars sufficient to enable those persons to be identified) and the nature of their interest,

and the finance company shall comply with that direction within such time as is specified in the notice.

(2) For the purposes of this section, “voting shares” has the same meaning as in the Companies Act.

(3) A finance company that fails to comply with a direction under this section shall be guilty of an offence and shall be liable on conviction to a fine not exceeding $10,000.”.

Amendment of section 11

5. Section 11(1) of the principal Act is amended —

(a)

by inserting, immediately before paragraph (b)(i), the following sub-paragraph:

“(i)	has furnished information or documents to the Authority in connection with its application for a licence which is or are false or misleading in a material particular;”;

(b)

by renumbering the existing sub-paragraphs (i) to (iv) as sub-paragraphs (ii) to (v), respectively;

(c)

by deleting the words “any person who is in” in paragraph (c)(i) and substituting the words “any of its directors or officers holding”; and

(d)

by inserting, immediately after the word “if” in paragraph (c)(ii), the words “, upon taking action under section 27A(2),”.

New section 11A

6. The principal Act is amended by inserting, immediately after section 11, the following section:

“Effect of revocation of a licence

11A.—(1) Where an order of revocation becomes effective under section 11 —

(a)	notice of the revocation shall be published in the Gazette; and
(b)	the finance company shall, as from the date of the notice, cease to transact any financing business in Singapore except as may be approved by the Authority for the purpose of winding up its financing business.

(2) Subsection (1)(b) shall not prejudice the enforcement by any person of any right or claim against the finance company or by the finance company of any right or claim against any person.”.

Amendment of section 18

7. Section 18 of the principal Act is amended —

(a)

by deleting the marginal note and substituting the following marginal note:

“Dealings by finance companies and credit facilities and limits.”;

(b)

by inserting, immediately after subsection (1)(b), the following paragraphs:

“(c)

grant or permit to be outstanding to any one person, firm, corporation or company or to any group of companies or persons which such person, firm, corporation or company is able to control or influence any credit facilities to an aggregate amount of such credit facilities in excess of 30 per cent of the capital funds or, with the approval of the Authority, up to but not in excess of 100 per cent of the capital funds of the finance company;

(d)

grant substantial loans which in the aggregate exceed 50 per cent of its total credit facilities or such other percentage as the Authority may from time to time determine;”;

(c)

by deleting subsection (1)(c)(i) and substituting the following sub-paragraph:

“(i)	any of its directors, whether those credit facilities are obtained by its directors jointly or severally;”;

(d)

by renumbering the existing subsection (1)(c) as subsection (1)(e);

(e)

by deleting the existing subsection (1)(d);

(f)

by deleting the words “paragraph (c)” in subsections (2), (3) and (4) and substituting in each case the words “paragraph (e)”;

(g)

by inserting, immediately after subsection (3), the following subsection:

“(3A) In subsection (1)(d) “substantial loan” means any credit facility granted by a finance company to a single person, firm, corporation or company or to any group of companies or persons which such person, firm, corporation or company is able to control or influence which in the aggregate exceeds 15 per cent of the finance company’s capital funds.”;

(h)

by inserting, immediately after the word “section” at the end of subsection (4), the words “whether the finance company has contravened these provisions or not”; and

(i)

by inserting, immediately after subsection (4), the following subsection:

“(4A) Any finance company which contravenes any of the provisions of this section shall be guilty of an offence and shall be liable on conviction to a fine not exceeding $50,000.”.

New sections 22A and 22B

8. The principal Act is amended by inserting, immediately after section 22, the following sections:

“Control over finance companies in the acquisition of shares in companies

22A.—(1) No finance company shall, after the commencement of the Finance Companies (Amendment) Act 1984, enter into an agreement to acquire the share capital of any company by virtue of which the finance company would, if the agreement is carried out, acquire or hold, whether directly or indirectly, an interest of 20 per cent or more of the share capital of that company, without first notifying the Authority of its intention to enter into the agreement and obtaining the approval of the Authority to its entering into the agreement.

(2) The Authority may approve the entering into the agreement with or without conditions or may disapprove it without giving any reasons.

(3) Subsection (1) shall not apply to an agreement by virtue of which the finance company would acquire an interest of 20 per cent or more of the share capital in a company by way of enforcement of security to satisfy debts due to it by the company, if, upon making the acquisition, the finance company obtains the approval of the Authority to retain the shareholdings as an investment. In the event, however, that the Authority does not grant approval, the finance company shall dispose of the shareholdings at the earliest opportunity.

(4) In this section, “company” means a company whether incorporated in or outside Singapore.

(5) A finance company that contravenes subsection (1) shall be guilty of an offence and shall be liable on conviction to a fine not exceeding $50,000.

Power of the Authority to secure compliance with sections 18, 21, 22 and 24

22B.—(1) Any finance company, if at any time called upon in writing by the Authority to do so, shall satisfy the Authority by the production of such evidence or information as it may require, that the finance company is not in contravention of any of the provisions of section 18, 21, 22 or 24.

(2) For the purpose of securing compliance with the sections referred to in subsection (1), the Authority may from time to time by notice in writing require any finance company to aggregate its assets, liabilities or profits, as the case may be, with the assets, liabilities or profits of all or any of the finance company’s related companies, as described in section 6 of the Companies Act (Cap. 185), and the finance company shall comply with that requirement within such time as is specified in the notice.

(3) A finance company that fails to comply with any requirement of the Authority under this section shall be guilty of an offence and shall be liable on conviction to a fine not exceeding $2,000 for every day during which the default continues.”.

Amendment of heading to Part VI

9. Part VI of the principal Act is amended by deleting the words “INSPECTION OF FINANCE COMPANIES” in the heading and substituting the words “INSPECTION AND CONTROL OF FINANCE COMPANIES”.

Repeal and re-enactment of section 27, and insertion of new sections 27A to 27E

10. Section 27 of the principal Act is repealed and the following sections substituted therefor:

“Finance company unable to meet obligation to inform Authority

27. Any finance company that considers that it is likely to become unable to meet its obligations or is about to suspend payments shall forthwith inform the Authority of such fact.

Action by Authority if finance company is unable to meet obligations or is conducting business to the detriment of its depositors or creditors

27A.—(1) Where —

(a)

a finance company informs the Authority that it is likely to become unable to meet its obligations, or that it is insolvent or about to suspend payments; or

(b)

a finance company becomes unable to meet its obligations, or is insolvent, or suspends payments; or

(c)

after an inspection or investigation is made under section 26 the Authority is of the opinion that the finance company —

(i)	has carried on or is carrying on its business in a manner likely to be detrimental to the interest of its depositors or its creditors; or
(ii)	is insolvent or is likely to become unable to meet its obligations or is about to suspend payments; or
(iii)	has contravened or failed to comply with any of the provisions of this Act; or
(iv)	has contravened or failed to comply with any conditions attached to its licence; or

(d)

the Authority considers it in the public interest to do so,

the Authority may exercise such one or more of the powers specified in subsection (2) as appears to it to be necessary.

(2) Subject to subsection (1), the Authority may —

(a)	require the finance company concerned forthwith to take any action or to do or not to do any act or thing whatsoever in relation to its business as the Authority may consider necessary;
(b)	appoint a person to advise that finance company in the proper conduct of its business; or
(c)	assume control of and carry on the business of that finance company or direct some other person to assume control of and carry on the business of that finance company.

(3) The Authority may, upon representation made to it or on its own motion, modify or cancel any action taken by it under subsection (2) and in so modifying or cancelling any action may impose such conditions as it thinks fit, subject to which the modification or cancellation shall have effect.

Powers of Authority

27B. Where the Authority has taken action under section 27A(2), it may, without prejudice to the powers conferred by section 11(1)(b), exercise one or more of the following powers:

(a)	confirm, vary or reverse any requirement, appointment or direction made by it;
(b)	make such order as it may think fit in relation to the affairs of the finance company and exercise any power which it may exercise under section 27A(2);
(c)	present a petition to the High Court for the winding up of the finance company by the High Court.

Duration of control

27C.—(1) Where the Authority has assumed control of the business of a finance company in pursuance of section 27A, it shall remain in control of, and continue to carry on, the business of that finance company in the name of and on behalf of the finance company until such time as the Authority is satisfied that the reasons for which the Authority assumed control of the business have ceased to exist, or that it is no longer necessary for the protection of the depositors of the finance company that the Authority should remain in control of the business.

(2) Where the Authority has assumed control of the business of a finance company in pursuance of section 27A or ceased to control the business of the finance company in pursuance of this section, the Authority shall notify that fact in the Gazette.

Finance company under control of the Authority to co-operate with Authority

27D.—(1) Where the Authority has assumed control of the business of a finance company in pursuance of section 27A, the finance company shall submit its business to the control of the Authority and shall provide the Authority with such facilities as may be required to carry on the business of that finance company.

(2) Any finance company which fails to comply with subsection (1) or with any requirement of the Authority thereunder shall be guilty of an offence and shall be liable on conviction to a fine not exceeding $20,000 and in the case of a continuing offence to a further fine of $2,000 for every day during which the offence continues after conviction.

Remuneration and expenses of Authority and others in certain cases

27E.—(1) The Authority may at any time (whether or not the appointment of such person has terminated) fix the remuneration and expenses to be paid by a finance company to any person appointed by the Authority under section 27A(2) or section 27B to advise the finance company in the proper conduct of its business.

(2) Where under section 27A(2) or section 27B the Authority has assumed control of the business of a finance company or some other person has assumed control of the business of a finance company pursuant to a direction or order of the Authority, the Authority may, at any time, whether or not it or that other person has ceased to be in control of the business of the finance company, fix the remuneration and expenses to be paid by the finance company to the Authority and to any person employed or authorised by it under section 29(2) to assist it in the control of and the carrying on of the business of the finance company, or to that other person, as the case may be.”.

Amendment of Part VII

11. Part VII of the principal Act is amended —

(a)	by deleting the words “AUDITOR’S REPORT” in the heading and substituting the words “DUTIES OF AUDITORS”;
(b)	by deleting the words “and auditor to submit copy of his report to Authority” in the marginal note to section 28;
(c)	by deleting “—(1)” in the first line of section 28(1); and
(d)	by deleting section 28(2).

New section 28A

12. The principal Act is amended by inserting, immediately after section 28, the following section:

“Appointment and duties of auditors

28A.—(1) Notwithstanding the provisions of the Companies Act (Cap. 185), every finance company shall appoint annually an auditor approved by the Authority.

(2) An auditor shall not be approved by the Authority as an auditor for finance companies unless he is able to comply with such conditions in relation to the discharge of his duties as may be determined by the Authority.

(3) The Authority may appoint an auditor —

(a)	if the finance company fails to appoint an auditor; or
(b)	if it considers it desirable that another auditor should act with the auditor appointed under subsection (1),

and may at any time fix the remuneration to be paid by the finance company to that auditor.

(4) The duties of an auditor appointed under subsections (1) and (3) shall be to carry out, for the year in respect of which he is appointed, an audit of the accounts of the finance company and to make a report in accordance with section 174 of the Companies Act.

(5) The Authority may impose all or any of the following duties on an auditor in addition to those provided under subsection (4):

(a)	a duty to submit such additional information in relation to his audit as the Authority considers necessary;
(b)	a duty to enlarge or extend the scope of his audit of the business and affairs of the finance company;
(c)	a duty to carry out any other examination or establish any other procedure in any particular case; and
(d)	a duty to submit a report on any of the matters referred to in paragraphs (b) and (c),

and the finance company shall remunerate the auditor in respect of the discharge by him of all or any of these additional duties.

(6) The auditor’s report made under subsection (4) shall be attached to the balance-sheet and the profit and loss account and a copy thereof together with any reports submitted under subsection (5) shall be transmitted in writing to the Authority.

(7) If an auditor, in the course of the performance of his duties as an auditor of a finance company, is satisfied that —

(a)	there has been a serious breach or non-observance of the provisions of this Act or that otherwise a criminal offence involving fraud or dishonesty has been committed;
(b)	losses have been incurred which reduce the capital funds of the finance company by 50 per cent;
(c)	serious irregularities have occurred, including irregularities that jeopardise the security of the creditors; or
(d)	he is unable to confirm that the claims of creditors are still covered by the assets,

he shall immediately report the matter to the Authority.”.

Amendment of section 30

13. Section 30 of the principal Act is amended by deleting the words “with the public” and substituting the words “without the approval of the Authority”.

Repeal of section 32

14. Section 32 of the principal Act is repealed.

New section 37A

15. The principal Act is amended by inserting, immediately after section 37, the following section:

“Falsification of books, documents, etc.

37A.—(1) Any director, manager, trustee, auditor, employee or agent of any finance company who —

(a)	wilfully makes or causes to be made, a false entry in any book of record or in any report, slip, document or statement of the business, affairs, transactions, conditions, assets or accounts of that finance company;
(b)	wilfully omits to make an entry in any book of record or in any report, slip, document or statement of the business, affairs, transactions, conditions, assets or accounts of that finance company, or wilfully causes any such entry to be omitted; or
(c)	wilfully alters, abstracts, conceals or destroys an entry in any book of record or in any report, slip, document or statement of the business, affairs, transactions, conditions, assets or accounts of that finance company, or wilfully causes any such entry to be altered, abstracted, concealed or destroyed,

shall be guilty of an offence and shall be liable on conviction to a fine not exceeding $50,000 or to imprisonment for a term not exceeding 3 years or to both.”.

Miscellaneous amendments — penalties

16. The principal Act is amended —

(a)	by deleting the words “five thousand dollars” in section 3(2) and substituting “$20,000”;
(b)	by deleting the words “one thousand dollars” in section 5(1) and substituting “$5,000”;
(c)	by deleting the words “one thousand dollars” and “one hundred dollars” in section 5(2) and substituting “$5,000” and “$500”, respectively;
(d)	by deleting the words “five hundred dollars” in section 8(4) and substituting “$2,000”;
(e)	by deleting the words “three hundred dollars” in section 10(4) and substituting “$1,000”;
(f)	by deleting the words “one thousand dollars” in section 16(3) and substituting “$5,000”;
(g)	by deleting the words “two thousand dollars” in section 19(3) and substituting “$10,000”;
(h)	by deleting the words “interest charge of not less than one-fifteenth of one per cent of the amount of the deficiency” in section 25(5) and substituting “interest charge of $100 per day or such larger amount as the Authority may determine”;
(i)	by deleting the words “two thousand dollars” and “two hundred and fifty dollars” in section 26(5) and substituting “$10,000” and “$1,000”, respectively;
(j)	by deleting the words “five thousand dollars” in section 35(3) and substituting “$20,000”;
(k)	by deleting the words “five thousand dollars” in section 36(1) and substituting “$20,000”;
(l)	by deleting the words “five thousand dollars” in section 37(1) and substituting “$20,000”; and
(m)	by deleting the words “four thousand dollars” in section 38 and substituting “$15,000”.

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