Running a business in Singapore comes with stringent compliance requirements, primarily governed by the Companies Act 1967. One of the most critical annual obligations is the preparation and filing of financial statements.
However, business cycles fluctuate. Sometimes, a company may be inactive, effectively “sleeping” or dormant. In such cases, the law provides relief from certain administrative burdens—but only if you strictly meet the statutory definitions.
This article details the specific sections of the Companies Act you need to know to determine if your company is dormant and exempt from filing financial statements.
- The General Requirement: Filing Financial Statements
Before understanding the exemption, it is crucial to understand the obligation. By default, every company incorporated in Singapore must prepare financial statements.
The Governing Provision: Section 201 of the Companies Act
Section 201(1) mandates that the directors of a company must lay before the company at its Annual General Meeting (AGM) the financial statements for the financial year. These statements must comply with the Accounting Standards applicable to the company (statutorily known as the Financial Reporting Standards).
Furthermore, Section 197 requires that after the AGM, the company must file an Annual Return with the Accounting and Corporate Regulatory Authority (ACRA), which typically includes a copy of these financial statements.
In summary: Unless an exemption applies, the company is required to prepare true and fair financial statements and present them to its shareholders and ACRA.
- The Exemption: When Can You Skip the Financial Statements?
The Companies Act recognizes that it is inefficient to require a company with no activity to go through the cost and effort of preparing complex accounts. Therefore, it provides a specific exemption for what is termed a “Dormant Relevant Company.”
The Exempting Provision: Section 201A
Section 201A(1) states that the directors of a dormant relevant company are exempt from the requirements of Section 201 (the requirement to prepare and present financial statements) for a financial year if specific conditions are met.
To qualify for this exemption, your company must satisfy two main tests:
The first test: The “Relevant Company” Test
The company must not be a listed company or a subsidiary of a listed company. Crucially, the company’s total assets at any time during the financial year must not exceed S$500,000. (If the company is a parent company, the consolidated total assets of the group must not exceed S$500,000).
The second test: The “Dormant” Test
The company must have been dormant throughout the entire financial year.
If your company meets these criteria, you do not need to prepare financial statements. Instead, you will file your Annual Return with a simple declaration of dormancy.
- Defining “Dormant”: The Statutory Test
How does the law decide if you are truly “dormant”? It is not just about whether you have “business” or “sales.” It is about accounting transactions.
The definition is provided in Section 205B(1) of the Companies Act.
It states that a company is dormant during a period in which no accounting transaction occurs.
An “accounting transaction” is defined broadly as a transaction that essentially requires an entry in the company’s accounting records. If you buy a pen using company funds, that is an accounting transaction. If you receive $1 of interest from a bank account, that is an accounting transaction.
If any such transaction occurs, the company ceases to be dormant immediately.
- The Exceptions: Permitted “Minimal” Transactions
This is the most critical part for business owners. If “no accounting transactions” was interpreted literally, a dormant company couldn’t even pay its annual renewal fees to ACRA without losing its dormant status.
To prevent this, the Act provides a “safe list” of transactions. These are transactions that the law disregards when determining dormancy. You can carry out these specific activities, and the company will still be considered dormant.
The List of Disregarded Transactions: Section 205B(2)
According to Section 205B(2), a company remains dormant even if the following transactions occur:
Taking of Shares by a Subscriber: The initial taking of shares by a subscriber to the constitution in pursuance of an undertaking in the constitution.
Appointment of a Secretary: The appointment of a company secretary under Section 171.
Appointment of an Auditor: The appointment of an auditor under Section 205.
Maintenance of Registered Office: Costs associated with maintaining a registered office under Sections 142, 143, and 144.
Statutory Registers: The keeping of registers and books as required by Sections 88, 131, 173, 189, and 191.
Statutory Fees and Payments: The payment of any fee or charge (including any fee, penalty, or interest for late payment) payable under any written law. Example: Paying your annual ACRA filing fee or a tax penalty.
Composition Amounts: The payment of any composition amount payable under Section 409B or any other written law.
Nominal Sums: The payment or receipt by the company of such nominal sum not exceeding such amount as may be prescribed.
Note on Nominal Sums: Current regulations generally prescribe this limit at S$5,000.
Practical Implications
This means you CAN:
Pay your Corporate Secretary’s annual fee (often categorized under maintenance of registered office/statutory requirements).
Pay ACRA filing fees.
Pay a fine if you filed late.
You CANNOT:
Pay for a business lunch.
Pay for a website domain renewal (unless strictly argued as statutory maintenance, which is risky).
Receive bank interest (unless it is a nominal sum under the threshold, but many experts advise closing interest-bearing accounts to be safe).
Buy and sell goods.
Employ employees.
- How to File as a Dormant Company
If you have determined that your company meets the criteria in Section 201A and Section 205B, you must formally declare this status. You cannot simply “do nothing.”
The Process
Prepare the Statement: The directors must prepare a statement confirming that:
The company has been dormant for the relevant financial year.
No notice has been received from the Registrar or shareholders requiring financial statements to be filed.
The company’s accounting records have been kept in accordance with Section 199.
File the Annual Return: Log into the ACRA BizFile+ portal. When filing the Annual Return, select the option for a “Dormant Relevant Company.”
The Outcome: You will bypass the section requiring the upload of financial statements (XBRL or PDF).
Important Note on Tax (IRAS)
While this article focuses on the Companies Act (ACRA), remember that the Inland Revenue Authority of Singapore (IRAS) has a separate definition of dormancy (based on income generation).
Even if you are dormant under ACRA, you must still file a Tax Return (Form C-S/C) unless you have applied for and received a waiver of Income Tax Return Submission from IRAS.
Summary Checklist
To determine if you can skip filing financial statements, ask these questions:
Question 1: Are total assets S$500,000 or less? (If yes, proceed).
Question 2: Have there been ANY accounting transactions this year?
Ouestion 3: If there were transactions, were they ONLY for statutory compliance? (e.g., paying the Company Secretary, paying ACRA fees, or transactions under S$5,000).
Question 4: Is the company unlisted?
If you answered YES to all, your company is likely a Dormant Relevant Company under Section 201A and is exempt from filing financial statements.
Disclaimer: This article provides general information based on the Singapore Companies Act 1967. It does not constitute legal or financial advice. Acts and regulations are subject to amendment. Always consult with a qualified Company Secretary or Accountant to verify your specific situation.
For more information, please contact the Raffles Corporate Services customer service team at [email protected].
Yours sincerely,
The editorial team at Raffles Corporate Services
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