The Truth About Dormant Status in Singapore Company Audit Reports Should It Be Disclosed?

Singapore, one of the world's major financial centers, has long been under scrutiny for its corporate governance and financial transparency. In recent years, as the global economic environment becomes more complex and corporate compliance requirements increase, the issue of disclosing dormant companies in audit reports has gradually become a topic of discussion in the industry.

According to data from the Accounting and Corporate Regulatory Authority ACRA of Singapore, as of June 2025, the number of registered companies in Singapore exceeded one million, with many of them in a dormant state. A dormant company refers to a business that has not been formally dissolved but has ceased operations, with no revenue, employees, or asset movement. Such companies are often referred to as shell companies or zombie firms.

However, there is still significant debate over whether these companies should be disclosed in audit reports. On one hand, those who support disclosure argue that transparency is one of the core principles of modern corporate governance. If a company remains dormant without explanation, it may mislead investors, creditors, and other stakeholders, affecting market fairness.

For example, in July 2025, the Straits Times reported that an investor mistakenly believed a company named XYZ Limited was still operational and entered into a partnership with it. Later, it was discovered that the company had been inactive for years, resulting in significant investment losses. The incident sparked strong public skepticism about the transparency of audit reports.

On the other hand, opponents argue that excessive disclosure could impose unnecessary burdens on businesses, especially small and medium-sized enterprises. Some companies may choose not to disclose their dormant status out of fear of being misunderstood as poorly managed. Some experts point out that Singapore's current legal framework does not require companies to explicitly indicate their dormant status in audit reports, meaning disclosure is not mandatory under existing regulations.

Nevertheless, with growing international attention on corporate social responsibility CSR and ESG Environmental, Social, and Governance standards, there is increasing pressure on Singapore to strengthen its corporate disclosure rules. In August 2025, the Monetary Authority of Singapore MAS released a consultation paper suggesting amendments to the Companies Act, requiring all dormant companies to clearly state their current status in annual reports and provide a brief explanation.

This proposal received support from some industry associations. The Institute of Chartered Accountants of Singapore ICAS stated that clear disclosure of dormant status would help improve overall market transparency, reduce information asymmetry, and thereby enhance investor confidence.

At the same time, some voices remind that dormancy should not be equated with failure or illegality. Many companies enter a dormant state due to strategic adjustments, business transitions, or other legitimate reasons. When formulating disclosure policies, it is important to fully consider the actual situations of different companies and avoid a one-size-fits-all approach.

Notably, Singapore's company registration system is relatively lenient, allowing a large number of companies to register at low cost and remain dormant. While this phenomenon has, to some extent, promoted entrepreneurial vitality, it may also be abused, becoming a breeding ground for money laundering, tax evasion, or other illegal activities.

In response, ACRA is gradually strengthening post-registration supervision. In September 2025, ACRA announced the introduction of a new active review mechanism, using big data analysis to identify companies that have not submitted reports for a long time and notify them to update their information or explain why they remain dormant.

In the long term, how to balance the necessity of information disclosure with the actual operational needs of companies will be a key issue in Singapore's corporate governance reform. With more regulatory measures and industry consensus emerging in the future, discussions on the disclosure of dormant status may deepen further.

In conclusion, whether Singapore companies should disclose their dormant status in audit reports is not only a matter of compliance but also affects the healthy operation of the entire market ecosystem. While promoting transparency, it is also necessary to take flexibility and fairness into account to achieve sustainable development.