2-Tier Penalty Framework for Annual Returns Lodgement takes effect - Updated

(Latest Update: The 2-Tier Penalty Framework takes effect from 14 January 2022 and higher penalties for late lodgement of annual returns kick in.

Update as at 1 May 2021: The Accounting and Corporate Regulatory Authority has updated on 30 April 2021 that it will defer the implementation of the 2-Tier Penalty Framework indefinitely to allow more time for transition. This means that the current flat rate of S$300 for late lodgement penalty continues to apply for now.)

Let’s do a quick recap of an earlier blog post. There were two main takeaway points:-

1. Directors or company secretaries may be debarred from taking on new appointments for repeated or multiple breaches of failing to hold Annual General Meetings and filing annual returns.
2. Failure to hold Annual General Meetings and filing annual returns result in penalties for late lodgement and composition fines.

Annual Statutory Obligation

Under Section 197 of the Companies Act 1967 ("Companies Act"), companies incorporated in Singapore has the statutory obligation to files annual returns. This means that after holding its annual general meeting, each locally incorporated company must lodge its annual returns within 7 months after its financial year end.

We now wish to update that the Accounting and Corporate Regulatory Authority has revised the penalty framework for not filing annual returns on time. With effect from 14 January 2022, it will impose a 2-tier penalty where a heftier late lodgement penalty is imposed if your Company files its annual returns more than 3 months after the filing due date.

Examples

Here are two simple illustrations on how the 2-tier penalty applies to your Company for late lodgement of annual returns under Section 197 of the Companies Act on or after 14 January 2022.

Example 1

Financial year end: 31 December 2021
Due date to hold AGM: 30 June 2022
Due date to file Annual Returns: 31 July 2022
Actual date Annual Returns filed: 25 August 2022
Late Lodgement Penalty: S$300

Length of default is 1 August 2022 to 25 August 2022 (Within 3 months after filing due date)

Example 2

Financial year end: 31 March 2022
Due date to hold AGM: 30 September 2022
Due date to file Annual Returns: 31 October 2022
Actual date Annual Returns filed: 1 February 2023
Late Lodgement Penalty: S$600

Length of default is 1 November 2022 to 1 February 2023 (More than 3 months after filing due date)

Additional Points to Take Note

There is no change to the current penalty framework for ad hoc filings (other than annual returns filings) as follows:

Separately, on top of the 2-tier penalty for late lodgement of annual returns, other enforcement actions may apply to your Company and its officers (i.e. directors and company secretaries) for incalcitrant annual statutory obligation breaches:

- Composition fines;

- Court prosecution;

- Disqualification/debarment of company officers; and/or

- Striking off of your Company.