Singapore Company Constitution – Key Contents, Benefits & Process

Singapore company constitution states the fundamental principles for how it will be run. It defines the company’s objectives and specifies the rights, obligations, and powers granted to the business, its board of directors, and its shareholders.

A firm must adopt a constitution at the time of Singapore company formation. The proper procedure must be used to modify a business constitution at a later time, if necessary. 

The Singapore Companies Act does not specify the requirements that must be contained in a constitution, however, any elements that are in conflict with or are against the restrictions outlined in the Companies Act are not enforceable.

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WHAT ARE THE MEMORANDUM OF ASSOCIATION AND ARTICLES OF ASSOCIATION (M&AA)?

Until the Companies (Amendment) Act 2014, this function was performed by two distinct papers, the Memorandum of Association and Articles of Association (M&AA). These two documents have been combined into a single one called the business constitution as part of the Amendment 2014 amendment.

The Singapore Companies Act defines the constitution of a company as follows:

The constitution that a company registers with or Businesses that were in existence before the 2014 Amendment to the Companies Act had Memorandum and Articles of Association (M&AA) that were in effect at the time of the Amendment.

The name of the company, the kind of business it will do, the members’ liability, and the capital amount of the company are all stated in the firm’s constitution. The primary goal of the company, the duties and privileges of the directors, and the rules by which a company must run are all outlined in the company constitution. A firm is required to follow all of the Constitution’s guidelines.

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KEY CONTENTS OF A SINGAPORE COMPANY CONSTITUTION

Only a few required components for a company constitution are listed in the Singapore Companies Act. Hence, the company must include additional crucial sections that specify numerous guidelines for the internal management of the company, such as shareholders’ rights, shareholders’ behavior, share transfer policies, director appointments, and meetings.

According to Section 22 of the Companies Act, the following provisions must be included in a company constitution:

Name Clause

The company name that has been authorized by the Company Registrar is specified in this section. All of the company’s official documents and business activities use this name.

Capital Clause

The clause specifies the amount of the company’s share capital and how it is divided into shares with fixed values.

Liability Clause

The liability of company members—whether restricted or unlimited—is described in this section. Also, this section details the roles of company members and their responsibilities during the organization’s dissolution.

The following information must be included in a liability clause:

• A business limited by shares must specify that the liability of its members is restricted.
• A business limited by guarantee must specify each member’s obligation to pay a specific amount throughout the winding-up process.
• It must be stated that members’ responsibility is limitless in an unlimited business.
• When submitting an application for registration, an unlimited company or a corporation limited by guarantee must specify how many members it has.

Subscriber Clause

This clause states the name, address, and occupation of each subscriber to the firm, along with the number of shares they agree to hold in the business’s capital.

Registered Office Clause

The location of the company’s registered address is described in this section. A company’s registered office address is where it is required to maintain statutory records, such as minutes.

Objects Clause

The business aim and intended business operations of the organization are stated in this clause. The Company Constitution for a corporation must list both the primary and secondary objectives.

The objective Clause is Singapore Company Constitution’s optimum requirement.

A business’s powers, operations, ability, privileges, and rights may also be subject to limitations set down in the company constitution. A restriction clause in the company’s constitution, for instance, might prohibit the corporation from engaging in harmful or immoral business activity, such as the sale of firearms.

Rules

In addition to the essential clauses mentioned above, a typical constitution would also provide certain guidelines for how the business will be handled. These guidelines will control the significant choices a business takes on a daily basis.

The company’s rules are outlined in this section of the constitution. This section of the firm’s constitution may be written however the company finds it necessary. The following are often covered under the rules:

Shares

• Issue of shares
• Variation of rights (in case of share classes)
• Transfer of Shares (Instrument of transfer, a notice of transfer, fees payable, etc)
• Transmission of shares
• Forfeiture and Lien on Shares
• Calls on Shares
• Alteration of the share capital
• Share certificates

Meetings

• Annual General Meeting and Extraordinary General Meeting
• Notice of meetings
• Meetings procedure

Secretary

• Appointment
• Resignation or removal
• Common Seal
• Keeping the common seal in safe custody
• Persons authorized to use the seal

Financial Statements

• Maintaining accounting records
• Accounts that explain and reflect the company’s transactions

Profits and Reserves Capitalization

• Capitalization Approval
• Distribution of Profits
• Rights to Directors for giving effect to Capitalization

Dividends and Reserves

• Declaration of dividend
• Purpose of reserves

Winding up

• Directors’ power to present a winding-up petition
• Appointed Liquidator’s powers
• Distribution of surplus assets

Notices

• The process for sending document notices, the method of delivery, and the members’ addresses where the notices should be sent.

Indemnity

• All company officials, including the director, auditor, and secretary, are indemnified against expenses incurred in the course of their duties.

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DRAFTING A COMPANY CONSTITUTION

The constitution must first be written by the person who wants to establish a new company. When drafting a constitution, Singapore companies have 3 key options:

choose a model constitution; design a constitution for itself in accordance with its business needs; or Contact a professional corporate service provider for assistance in drafting a constitution such as Relin Consultants.

A company may select a model constitution from the Accounting and Corporate Regulatory Authority (ACRA), the Singapore company registrar.

DRAFTING A COMPANY CONSTITUTION IN SINGAPORE

A company’s constitution is its primary operational document, and any sections that are left out could cause misunderstandings and problems down the road. It is crucial to draft the constitution in accordance with company law and the primary goal of the company.

When creating the company constitution, keep the following in mind:

• The legal declaration that the subscribers signed agreeing to form the firm must be included in the constitution.
• When creating the guidelines for running the business, keep the goal and purpose of the firm in mind.

ADOPTION OF COMPANY CONSTITUTION IN SINGAPORE

At the time the company is formed, the company constitution is adopted. It is necessary to provide this document at the time of company registration.

A person designated as a director or secretary in the proposed company’s constitution must submit a declaration to the registrar saying that they have confirmed the legitimacy of the subscribers and the individuals who will serve as the proposed company’s officials.

The Registrar may decline to register the proposed company’s constitution if:

• The company is establishing business operations that are illegal or that will disturb Singapore’s civil order and welfare; 
• The registration is against Singapore’s interests as well as its national security.

The corporation must maintain its constitution at its registered office. The constitution must be signed by each subscriber, who must also indicate how many shares they have agreed to accept.

At the company’s registered office, the applicant can view the firm’s constitution. If a member requests it, the firm will deliver a copy of the constitution upon payment of $5 or a lesser sum set by the company’s directors.

EFFECTS OF THE COMPANY CONSTITUTION

In general, the company constitution establishes a contract between each member and the firm as a whole.

Each member of the company has a personal right to file a lawsuit under Section 39(1) of the CA in order to enforce a provision of the company’s constitution or prevent its violation.

If the court determines that there has been a constitutional violation, it may order that the law be followed or that the innocent parties’ damages be made up.

Section 39(1), however, only applies to rights that the member is subject to in his capacity as a member, not in his individual capacity.

AMENDING THE COMPANY CONSTITUTION

Depending on whether the company’s objects are being altered, there are various procedures to follow when modifying the company constitution in Singapore.

If an amendment modifies the language of the company objects, it will be regarded as a revision to the objects. Changing from “brewing beer” to “running a café,” for instance.

The following modifications to the objects’ language are also considered:

• Fixing mistakes
• New English terminology in place of dated ones

It won’t be thought of as a modification to the corporate objects if the clauses are revised but the language of the objects remains the same. This modification will nevertheless be regarded as a constitutional amendment requiring compliance with a particular process.

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PROCEDURE FOR AMENDMENTS TO THE CONSTITUTION THAT DO NOT ALTER THE COMPANY OBJECTS

The process outlined in Section 26 of the CA must be followed for constitutional revisions that do not change the business objects. An Extraordinary General Meeting must pass a special resolution in order to accomplish this.

Members must support this extraordinary resolution with more than 75% of the vote, and they must be given at least 14 or 21 days’ notice before the EGM (for private and public companies respectively).

The agenda for the meeting as well as the date of the EGM should be included in the notification, among other things.

Typically, the modification will become a part of the constitution as of the special resolution’s date (or any other later date specified in the special resolution).

The business must also submit a copy of the special resolution and a copy of the updated constitution to ACRA via the BizFile+ website within 14 days of the resolution’s adoption. A notice of registration of the resolution is then published by ACRA. A certificate of incorporation that serves as proof of the constitution change can also be obtained from the Registrar via BizFile+.

PROCEDURE FOR ALTERING THE OBJECTS OF THE COMPANY

Section 33 of the CA outlines the steps to take if the applicant wants to change the purposes of the business. The amendment of the corporate objects must also be accomplished by a specific resolution under this method. This is similar to the process outlined in Section 26 of the CA for constitutional revisions that don’t include changing the business objects.

To change the business’s objectives, an EGM must be held, and the firm is required to provide its members with 21 days written notice of the EGM. 

There cannot be any more constitutional amendments included in the special resolution to change the corporate objects. To put it another way, the special resolution must only modify the corporate objects. Any amendments to the constitution of the organization must be made in a different special resolution.

Before filing the special resolution with ACRA to change the company’s objectives, 21 days must pass since the resolution was passed. But, after those 21 days have passed, the business has 14 days to file the special resolution with ACRA.

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BENEFITS OF THE SINGAPORE COMPANY CONSTITUTION

Here are some of the benefits of having a well-drafted Singapore company constitution:

• Clarity and certainty – The M&A provides clarity and certainty regarding the rights, duties, and responsibilities of the company’s directors, shareholders, and officers.
• Legal compliance –  The M&A ensures that the company is in compliance with the Singapore Companies Act and other relevant laws and regulations.
• Protection of shareholders’ interests – The M&A provides a mechanism for protecting the interests of the company’s shareholders, particularly in the areas of shareholding rights and decision-making processes.
• Customization – The M&A can be customized to suit the specific needs and requirements of the company, allowing for flexibility in governance and decision-making.
• Transparency – The M&A promotes transparency and accountability in the company’s affairs, as it sets out the procedures for conducting meetings, making decisions, and maintaining records.
• Investor confidence – A well-drafted M&A can enhance investor confidence in the company, as it demonstrates a commitment to good governance and a clear framework for decision-making.
• Limitation of liability – The M&A can include provisions that limit the liability of the company’s directors and officers, providing them with protection against legal claims arising from their actions or decisions.

Reach out to us at Relin Consultants for more information.