Professional standing in front of office building holding a notebook

Navigating compliance pitfalls in Singapore’s asset and wealth management industry

Effectively navigating the complex regulatory and compliance landscape remains a significant challenge for companies in Singapore's asset and wealth management industry. Without robust governance frameworks and internal controls, many risk falling behind in an increasingly competitive and regulated market. Proactively addressing these common pitfalls is essential to maintaining regulatory adherence and building a strong track record that supports long-term growth.

 The following practical strategies can enable companies to navigate the common challenges in the asset and wealth management industry.

Non-compliance with statutory requirements under the Companies Act 1967 (the Act) and relevant regulations

Non-compliance with regulatory requirements to hold an Annual General Meeting (AGM) unless exempted, file annual returns with the Accounting and Corporate Regulatory Authority (ACRA), and maintain up-to-date company registers, including the non-publicly available Register of Registrable Controllers (RORC), will result in breaches of the Act and lead to serious consequences for a company.

Lapses often arise from poor internal governance, unfamiliarity with filing requirements and deadlines, or mismanagement of corporate records. Smaller companies, family offices in particular, may overlook these processes due to limited human resources allocated internally to the relevant supporting functions. This can lead to consequences that include escalating penalties, delays in capital transactions due to incomplete or inaccurate records, compromised compliance records with ACRA, reputational loss, and eroded stakeholder confidence.

Strategies to implement: 
  • Engage an external and experienced company secretary to provide guidance on complex regulations and solutions to local statutory compliance requirements.
  • Develop a compliance framework to streamline tracking and ensure timely and complete filings.
  • Perform periodic checks proactively to identify potential compliance issues and discrepancies before they escalate.

Paying dividends without sufficient profits

Singapore private limited companies require positive retained earnings to pay dividends, as distributing dividends from capital is not permissible.

Key considerations include:

  1. Ensure alignment with the company constitution, which might restrict the types of earnings and profits that can be paid as dividends.
  2. Profits should reflect the company’s own earnings, not those of the broader group to which it belongs.
  3. Share capital does not need to be paid-up for dividends to be distributed, provided there is a net inflow of income.

Paying dividends from a robust profit reserve ensures shareholders receive steady returns without compromising the company's ability to fund its operations and growth. Proceeding with dividend payments despite a financial loss can lead to fiscal instability and significant legal consequences for the board of directors.

Strategies to implement:
  • Establish a clear and practical profit distribution policy that aligns dividend payments with the company’s long-term financial projections. This ensures dividends are paid under the condition that the company is in a sustainable profit position.
  •   Engage auditors to assess the company’s financial status before declaring dividends. They can provide an independent opinion on the sufficiency of profits and the legality of any proposed dividend distributions.

Incorrect application of the audit exemption criteria

Certain small companies may be eligible for a statutory audit exemption if they meet specific criteria established under the Act over the relevant financial years. Misinterpreting these criteria can lead to erroneous filing of unaudited financial statements, possible court summons, costly and cumbersome remediation procedures.

Important considerations to note:

  1. Variable Capital Companies (VCCs) are subject to audit requirements even if they qualify as a small company.
  2. A company that is part of a consolidated group may still fall within the scope of audit requirements, even if it meets the conditions for a small company.

In particular, VCCs must consider specific compliance obligations under the Variable Capital Companies Act 2018. Although VCCs are identified as a company, the statutory requirements are different from those of private limited companies. Companies without a local advisor to navigate and track all relevant obligations may encounter difficulties in identifying which requirements are relevant, leading to unintended non-compliance.

Strategies to implement:
  • Partner with a professional specialist who is well-versed in ACRA requirements, to help businesses understand and navigate the nuanced criteria for audit exemptions.
  • Maintain accurate and up-to-date financial records to facilitate eligibility assessment for audit exemption and ensure compliance.

Conclusion

By diligently complying with statutory requirements and understanding exemption criteria, companies can significantly mitigate risks such as penalties, reputational damage, and operational inefficiencies. In addition, a robust governance framework that facilitates effective decision-making, audits, and regulatory reviews can enhance investor confidence and foster a culture of compliance and integrity within the organisation, driving sustainability and enduring success in a dynamic business landscape.

How can we help?

1. Corporate secretarial support
  • Ensure all necessary statutory registers and records are properly maintained, and timely annual filings with ACRA.
  • Support entity formation, board activities, statutory filings and shareholder communications.
2. Corporate accounting and bookkeeping
  • Offer comprehensive accounting and bookkeeping services, including periodic bookkeeping, preparation of annual statutory financial statements, audit coordination, and eXtensible Business Reporting Language (XBRL) conversion services tailored to meet the company’s compliance requirements.
  • Provide guidance and support on local accounting and bookkeeping matters to address client queries.
3. Fund office support services
  • Deliver comprehensive fund accounting and financial reporting, including bookkeeping, Net Asset Value (NAV) calculations, and preparation of financial statements tailored to your requirements.
  • Prepare and support your annual returns filing to relevant authorities (Singapore or other countries).

For more information, please visit our AWMS website.

gsap_scrolltrigger

We unite expertise and tech so you can outthink, outpace and outperform
See how
Follow us
Hide

Required fields are marked with an asterisk(*)

By submitting your email address, you acknowledge that you have read the Privacy Statement and that you consent to our processing data in accordance with the Privacy Statement (including international transfers). If you change your mind at any time about wishing to receive the information from us, you can send us an email message using the Contact Us page.

Contact us

Justin Ong

Justin Ong

Asia Pacific Asset and Wealth Management Leader, PwC Singapore

Tel: +65 9731 3758

Charles Lim

Charles Lim

Deputy Head, Fund Office Support Services, PwC Singapore

Tel: +65 9661 6710