Application to set up a Public Accounting Corporation must comply with these requirements:
- The main function of the PAC is to provide public accountancy services (i.e. auditing and reporting on financial statements).
- The name of the firm is not undesirable or identical to any other business entity.
- Directors
- Management of the PAC
- Shareholdings
- Professional Indemnity Insurance
- Provision of Matters in the Articles of Association
- Provision of Matters in the Memorandum and Articles of Association
Requirement on PAC Name
Every PAC must have the words “Public Accounting Corporation” as part of its name or the acronym “PAC” at the end of its name.
You can apply for any name as long as it is not:
- offensive or vulgar
- an identical name to any of existing entities registered with ACRA.
Please refer to the Practice Direction No. 7 of 2006: Identical Name Prohibition of for All Accounting Entities (PDF, 143KB) for information on the principles for the purpose of determining whether a name is similar to anther. You can also perform a search at Bizfile+ to check whether your entity name is identical to an existing entity.
Requirements on Directors
- If you are the sole director in the PAC, you have to be a public accountant.
- If the PAC has two directors, one of you must be a public accountant.
- If the PAC has more than two directors, two-thirds of the directors must be public accountants.
- If the office of the director required above is vacated, it should be filled as soon as practicable but no later than one month, by appointing another public accountant to fill the vacancy.
- Only members (i.e. shareholders) of the PAC may be appointed as directors of the PAC.
Requirement on Management of the PAC
The provision of public accountancy services in Singapore have to be under the control and management of directors (s) who are public accountants ordinarily resident in Singapore – also known as “Partners under section 17(3)(d)” or “Managing Directors”.
Directors should ensure that all invoice / official correspondence of the PAC bears the statement that it is incorporated with limited liability.
Requirements on Shareholdings
- The paid up share capital of the PAC must be at least $50,000.
- At least two-thirds of the voting shares of the PAC must owned by corporate practitioners i.e. director or employee who is a public accountant and practising in the PAC.
- Only natural persons (i.e. non-entities) can hold the shares of the PAC
- No share in the PAC may be held by a person as nominee for another person, and no security may be created over any share in the PAC. Any purchase or acquisition of a share of the PAC, and any security created over any such share shall be null and void.
Public Accountants whose registration is Cancelled pursuant to Practice Monitoring Programme or Disciplinary Proceedings cannot:
- hold shares in any PAC; or
- take part or be concerned in the management or practice of any PAC without the permission of the Public Accountants Oversight Committee (PAOC).
Public Accountants whose registration is Suspended pursuant to Practice Monitoring Programme or Disciplinary Proceedings cannot:
- exercise voting rights attached to his shares in the PAC; or
- take part or be concerned in the management or practice of the PAC without the permission of the PAOC.
Public Accountants who have ceased to be a public accountant / director / employee of the PAC due to reasons other than death, bankruptcy or incapacity due to mental or physical disability
The PAOC may, upon application made, grant the person a grace period of up to a maximum 2 years to transfer his voting shares in the PAC.
Public Accountants who have ceased to be a public accountant / director / employee of the PAC due to death, bankruptcy or incapacity due to mental or physical disability
The PAOC may, upon application made, allow the administrator or executor of that person’s estate, the trustee in bankruptcy or the committee of that estate to hold the person’s voting shares in the PAC for a grace period.
The grace period shall be a period not exceeding 2 years commencing —
- in the case of death, from the date the administrator or executor is appointed by the court;
- in the case of bankruptcy, from the date the person is adjudged a bankrupt; or
- in the case of incapacity by reason of mental or physical disability, from the date the person becomes incapable to act.
The persons who are allowed a grace period to transfer or hold voting shares in a PAC shall:
- be treated as corporate practitioners for the purposes of computing the proportion of any voting shares in the PAC which is required to be owned by corporate practitioners.
- not during the grace period exercise any voting rights attached to his or their voting shares in the PAC or take part or be concerned in the management or practice of the PAC.
Requirement on Professional Indemnity Insurance
The PAC shall be covered by professional indemnity insurance of not less than one of the following amounts, whichever is the highest:
- $1 million;
- a sum equal to the total of $500,000 for every corporate practitioner in the PAC; or
- where applicable, a sum equal to two and a half times the gross income of the PAC in the last completed financial year of the PAC, subject to a maximum sum of $50 million.
For the purpose of submitting the application to incorporate a PAC, quotations provided by the insurer may be accepted. Subsequent to the incorporation, the PAC will have to ensure that it is covered by the required insurance amount at all times.
Matters to be provided in the Articles of Association of the PAC
The articles of association of the PAC should provide that:
- Not less than two-thirds, or such other proportion as may be prescribed, of the directors (including the chairman) shall be public accountants. If the PAC has only one director, that director shall be a public accountant; or if the PAC has only two directors, that one of those directors shall be a public accountant.
- Not less than two-thirds, or such other proportion as may be prescribed, of the voting shares of the PAC shall be owned by corporate practitioners.
- Only natural persons may own any shares of the PAC.
Matters to be provided for in Memorandum and Articles of Association of a PAC
The Memorandum and articles of association of the PAC should provide:
- A statement in relation to the transfer and disposal of shares in the following terms: “No person shall transfer or dispose of any shares in an accounting corporation without the prior approval of the directors. The directors shall not grant their approval if such transfer will result in a contravention of any requirement in section 27 of the Accountants Act (Cap. 2) or any rules made thereunder on the holding, transfer or disposal of shares in an accounting corporation.”
- The manner and terms of the transfer or disposal of any shares in a PAC in the event that the person holding such shares:
- is suspended from practice as a public accountant, or is removed from the Register of Public Accountants pursuant to any disciplinary proceeding; or
- ceases to be a corporate practitioner by reason of death or bankruptcy or incapacity due to mental or physical disability.
No Provision of Conversion of public accounting firm into a PAC
The Accountants Act does not provide for a conversion process from a public accounting firm to a PAC.
If a public accountant wishes to change his business structure from an accounting firm to a PAC, he will need to set up a new PAC, cease his business as an accounting firm and transfer the business (property, assets, interests, rights, privileges, liabilities, obligations and undertakings, etc) to the PAC.
Every accounting firm which intends to change its structure to a PAC and transfer its business to that PAC shall, no later than seven days before the transfer, give written notice to every client of the accounting firm of the intention to transfer its business.
The accounting firm should make its clients aware of the effect of the transfer on any audit appointments. The written notice that an accounting firm intends to transfer its business to a PAC is treated, in law, as if it were a notice of intention by an auditor to resign within the meaning of section 205(15) of the Companies Act. This means the directors of the client company must call a general meeting, as soon as is practical, to appoint a new auditor (which can be the new accounting entity). The original accounting entity will remain as the auditor until the appointment of the new auditor.