Limited Liability Partnerships (Amendment) Bill

Order for Second Reading read.

1.38 pm

The Senior Minister of State for Finance (Ms Indranee Rajah): Mdm Speaker, I beg to move, "That the Bill be now read a Second time."

The proposed amendments in the Limited Liability Partnerships (Amendment) Bill are intended to align with the changes in the Companies (Amendment) Bill, which has just been passed.

The first set of amendments is to implement transparency-related changes. Like companies, limited liability partnerships (LLPs), will be required to maintain registers of controllers at prescribed places. Obligations similar to those required of companies will apply to LLPs, recipients of notices from LLPs and their controllers. The Minister will also be empowered to direct the Registrar to maintain a central register of controllers of LLPs in the event a central register becomes a new internationally-agreed standard.

Besides the register of controllers, the LLP Act will be amended to implement three changes on record retention.

First, to require the liquidator to retain the LLP's records for at least five years, instead of the current two. Second, not to allow an LLP that is wound up by its partners or creditors to destroy records early. Such an LLP will have to retain its records for at least five years. Third, to require former partners or managers of an LLP that has been struck off and dissolved to retain its accounting records and registers of controllers for at least five years.

As with the changes for companies, we intend to effect the transparency-related changes for LLPs by 31 March 2017. Existing LLPs will have 60 days after the laws are effected to comply with the new requirements. The Accounting and Corporate Regulatory Authority (ACRA) will publish guidance to help LLPs comply with the new requirements.

The final set of amendments will remove the requirement for a common seal. With the change, LLPs can execute documents by having them signed by two partners of an LLP, or a partner of an LLP in the presence of a witness who attests the signature. Notwithstanding the change, LLPs can choose to retain the use of a common seal based on business needs. Mdm Speaker, I beg to move.

Question proposed.

Mdm Speaker: Mr Louis Ng.

1.40 pm

Mr Louis Ng Kok Kwang (Nee Soon): Madam, this Bill, viewed together with the Companies (Amendment) Bill, displays our Government's efforts to make continual improvements to our business regulatory landscape and I stand in support of it.

The Bill allows our businesses to continue operating with minimal costs while adhering to statutory requirements and ensures that our regulatory regime keeps up with the times.

I note that a public consultation on the proposed changes for companies and LLPs was held via the feedback unit Reaching Everyone for Active Citizenry @ Home (REACH) as the Senior Minister of State just mentioned. A detailed summary of feedback received was also published online, and the Ministry of Finance (MOF) and ACRA even went as far as to publish the corresponding responses to each category of feedback.

This high level of stakeholder engagement is a welcome initiative and I would like to commend this effort. I am also heartened by the fact that many of the proposals from the public were taken into serious consideration, resulting in some amendments to the Bill. As I mentioned in my Budget speech, I believe there is merit in greater engagement with stakeholders before the proposal of each Bill. We should always listen to feedback, spot gaps and co-develop solutions with the community.

Madam, I would like to seek a few clarifications with regard to this Bill.

Firstly, I have spoken to members of the business community and many have welcomed the removal of the common seal. This is a positive step to reduce auxiliary costs of doing business in Singapore. Today, we are able to use cheaper alternative methods, such as electronic signatures sent with official emails, to ensure the authenticity of documents.

Moving forward, I would like to ask if the Ministry would be conducting a thorough review to identify and subsequently remove similar non-essential costs when incorporating businesses. For example, will ACRA be doing another round of review to streamline regulatory fee structure? Considering that the last review was done more than two years ago, it would be timely to conduct another one soon. This will go a long way in supporting entrepreneurs and startups, as they can then allocate resources to essential needs.

Secondly, we are extending the period for which the liquidator of an LLP that is wound up must keep the books and papers of the LLP from a minimum of two years to a minimum of five years. This will improve transparency and enhance confidence in our regulatory environment, as creditors, accountants and other stakeholders will have a longer period of access to key business documents.

I also applaud the removal of the option for LLPs to destroy records early if they are wound up by partners or creditors. This prevents the destruction of potential evidence of fraudulent business practices. However, a longer period of retention will result in higher costs of storage for businesses. The cost will have to be borne by the owners of the businesses and it is important to ensure that it is kept within reasonable limits. The higher costs could also mean that when company assets are rounded up, creditors end up with less, which might be unfair to them. In this regard, is the Ministry exploring more cost-effective means of technology to ensure the retention of key documents of the wound-up LLPs?

In addition, as I raised earlier in the Companies (Amendment) Bill, why is the retention period increased to five years? I would like to ask how we have determined five years to be the optimal period of retention. And I note again that the retention of books and papers after a company has been struck off, we are similarly increasing that period to five years.

Madam, these comments notwithstanding, this Bill assures businesses operating in Singapore that the Government will do all it can to protect their interests, and I stand in support of it.

1.43 pm

Ms Indranee Rajah: Mdm Speaker, I thank Mr Louis Ng for his comments and support of the Bill and his positive acknowledgement of MOF and ACRA's stakeholder engagement efforts. I would also like to thank the respondents who took part in the engagement for their useful feedback. Let me address the two questions from Mr Louis Ng.

Mr Louis Ng's first question is whether MOF will conduct a thorough review about our corporate regulations to remove unnecessary costs for the business community. He has also suggested that ACRA conduct another review of regulatory fees. We would like to assure Mr Louis Ng and the House that MOF and ACRA regularly review our corporate regulations to ensure that our regime is robust and yet business-friendly.

Apart from reviewing the laws, MOF and ACRA also review ACRA's regulatory fees every few years. In the fee review in 2014, ACRA also streamlined over 100 ad hoc and routine transactions, resulting in reduced costs to businesses. We will continue to monitor areas where we keep business costs reasonable.

On the second issue of record retention, Mr Louis Ng has asked whether MOF is exploring most cost-effective means of technology for retaining records of wound -up LLPs. Liquidators of wound-up LLPs will have the flexibility to decide how the records should be kept. The law does not prescribe the format for keeping records. The business community should explore and adopt the most cost-effective means to keep their records.

Mr Louis Ng has also asked for the rationale for the minimum retention period of five years. This period is equal to that for companies. In determining the period of retention, we took into account international standards, such as the Financial Action Task Force (FATF) and the Global Forum on Transparency and Exchange of Information for Tax Purposes standards, as well as the minimum retention period of five years in jurisdictions, such as Hong Kong and the United Kingdom. Mdm Speaker, I beg to move.

Question put, and agreed to.

Bill accordingly read a Second time and committed to a Committee of the whole House.

The House immediately resolved itself into a Committee on the Bill. – [Ms Indranee Rajah.]

Bill considered in Committee; reported without amendment; read a Third time and passed.