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Setting Up a Company: How to Prepare Your Company Constitution

Setting Up a Company: How to Prepare Your Company Constitution

Great! You made the decision to incorporate a company in Singapore! Part of the process is to prepare your company constitution. This article will guide you through this.

The Company Constitution is one of the legal requirements in your company’s incorporation process. As a new business owner, you would need to know about the Company Constitution as you are required to submit it during incorporation.

Fully understanding, staying up-to-date and complying to the Singapore Government’s regulations would not expose a business owner’s company to non-compliance.

What is the Company Constitution in Singapore?

It’s a legal document that is part of Singapore’s good corporate governance to make sure that the country continues to be an ideal place to set up and run a business by anyone in the world who wants to do so. The Companies Act (CA) of Singapore is the main law that businesses and companies need to comply with. In 2015, the CA was updated. The Company Constitution was made mandatory for any new companies incorporated in Singapore from then on.

For companies incorporated after 3 January 2016 in Singapore, the Company Constitution is a legal document that:

  • States the name of the company, the type of business it will carry, the liability of its members, and the capital amount of the company;
  • Outlines the main purpose of the company, the responsibilities and rights of the directors and how a company must operate.

Before the Companies (Amendment) Act 2014, two different documents namely Memorandum of Association and Articles of Association (M&AA) (we will explain more on these later) were both required to serve this function. However, now, these two documents have been merged into a single document: the Company Constitution.

A company has to abide by all the rules set out in the constitution. The Company Constitution must be submitted when applying to incorporate your company.

As a business owner, you could either:

  • create your own constitution,
  • or, you may choose to adopt the Model Constitution provided by Singapore’s Accounting and Corporate Regulatory Authority (ACRA). This will reduce the cost of setting up a company and streamline the administration requirements for companies.

Did You Know?

Before the Company Constitution was made mandatory, companies incorporated on or before 3 January 2016 needed to prepare Company Memorandum and Articles of Association.

What does being compliant with the Company Constitution mean?

More paperwork ahead.

There are deadlines for each document to prepare for, from within 3 to 12 months after setting up.

The Company Constitution essentially creates a contract between the company and all of its members, and between these members.

Section 39(1) of the Companies Act gives each member of the company a personal right to bring an action to enforce a regulation of the constitution or to restrain its breach.

If the court finds that the constitution has indeed been breached, it could order for the constitution to be complied with, or for the losses suffered by the innocent parties to be compensated.

However, section 39(1) only relates to those rights which affect the member in his capacity as a member and not those in his personal capacity.

Ahmad, a member of a company named Forest Pte Ltd, could seek to enforce his right to vote at an Annual General Meeting, if it is being denied to him. This is because such voting rights are granted to him in his capacity as a member of the company.

On the other hand, even if the constitution provides for a veto right (i.e the right to reject a decision or proposal) to a company director, Ahmad might not succeed in getting the court to make an order for compliance with that particular provision. This is because that right affects him in his capacity as a director, and not as a member of the company.

In addition, each member in a private company limited by shares is required to make a declaration to ACRA of his intention to take shares in a company, and the number of shares that he will be taking.

The Company Constitution must be signed by its members and kept at the company’s registered office.

What are the Key Points to Consider When Drafting a Company Constitution?

The Constitution is vital to a company. Therefore, we need to consider these factors when drafting one:

  1. Business Objectives – Goals you have set for you and your company. It is in line with the Objects Clause in the Company Constitution.
  2. Decision-making Structure – This is particularly important if you have the desired structure (e.g. procedures for the election of directors) to implement in your company, to ensure your company complies with legal and compliance regulations, and to avoid potential conflicts among members.
  3. Specific Rules & Regulations – Clauses unique to your company, should also be in line with legal and compliance regulations.
  4. Mandatory Sections – In accordance with Section 22 of the Companies Act, there are certain mandatory sections. We explain more below.  i.e. the Name Clause, Liability Clause, and the Subscriber Clause in the Company Constitution.
SG Incorporation

What are the mandatory sections of the Company Constitution?

The constitution of the company must contain the following.

  1. The company’s name (Name Clause);
  2. If the company is a company limited by shares, include a statement that the liability of its members is limited (Liability Clause);
  3. If the company is a company limited by guarantee, include a statement that its members are liable to contribute a specified amount if the company is being wound up;
  4. If the company is an unlimited company, a statement that the liability of its members is unlimited;
  5. If the company is an unlimited company or a company limited by guarantee, the number of its members at the time of its application for registration;
  6. The full names, addresses and occupations of the members; (Subscriber Clause); and
  7. A statement that such members wish to form a company on the terms of the constitution and (where the company is to have a share capital) they agree to subscribe for a stated number of shares in the capital of the company.

These conditions above are mandatory for a company’s constitution.

Other terms may also be included, such as:

  1. Issue, allotment and transfer of shares (For private companies limited by shares, the constitution is required to restrict the right to transfer company shares, and to limit its members to 50 at most);
  2. Organisation and conduct of board and shareholder meetings;
  3. Appointment and removal of directors;
  4. Directors’ duties and powers;
  5. Distribution and capitalisation of profits; and
  6. Distribution of surplus assets in the event of winding up.

The good news is that you do not need to draft a Company Constitution from scratch. A Model Constitution set out in the Companies (Model Constitutions) Regulations 2015 is available on ACRA’s website for business owners to refer to.

How to register and submit a Company Constitution?

When you apply to incorporate your company, a copy of your company’s constitution must be submitted. Here’s how: Log in to BizFile+  using your SingPass (for Singaporeans; for first-time registration) to submit the online transaction.

Once you have set up the company, you will need a CorpPass to file transactions in Bizfile+.

Email notification for endorsement will be sent to the appointed officers. This email is also accessible from the dashboard in Bizfile+.

All the company's directors, shareholders and company secretary must endorse their consent online via Bizfile+ within 60 days from the date of email notification.

The fee for registering a company is $300.

How do I amend a Company Constitution?

A company can change its constitution by means of a special resolution. The amendment will be a part of the original constitution from the date of passing of the special resolution.

The company has to submit a notice of the resolution or any court order that affects the constitution within a period of 14 days of such resolution or order to the Registrar.

The Registrar issues a notice which stands as a confirmation of the alteration to the constitution.

Company Constitution vs. Shareholders’ Agreement

A shareholders’ agreement is a formalized agreement between the shareholders of a company to supplement the constitution of a private limited company.

The shareholders’ agreement details the understanding of parties to it and how the company will be managed. It also states the relationships, rights and powers, and obligations of the parties to it. The scope of the agreement varies as per its purpose.

For example, it might stipulate the consequences of a shareholder’s death, or how a shareholder can buy out another in the case of a dispute. The shareholders’ agreement may also state circumstances, and rules and regulations regarding the policies and management of the company or the shareholders’ right to acquire or dispose of shares.

These are some of the differences between the Company Constitution and shareholders’ agreement:

  • Alteration to a shareholders’ agreement requires a higher percentage of approval (i.e. 90% of the incumbent shareholders). On the other hand, a company’s constitution can be altered based on votes.
  • As opposed to the company’s constitution, a shareholders’ agreement is not open for the public’s scrutiny.
  • The shareholder’s agreement can detail rules for governing matters not included in the company’s constitution.

How to buy a company's constitution from ACRA?

Any company that conducts business in Singapore must register with the Accounting and Corporate Regulatory Authority (ACRA), to ensure that companies adhere to local regulations. This registration system also means transparency for all businesses, and to create an open environment of data sharing.

It is possible to view the basic company registration details of any company in Singapore for free, via the Bizfile+ portal or the ACRA mobile app. ACRA also offers direct access to its wealth of company information through its Application Programming Interface (API).

On occasion, businesses may seek additional, in-depth information regarding other companies for the purposes of market research, decision-making, or partnerships.

ACRA offers extracts of PDF copy of forms with or without attachments, filed by business entities with ACRA, such as the Company Constitution, financial statements, incorporation of local companies and annual returns for purchase. It is available through ACRA’s BizFile+.

The cost of the extract is as follows: $11.00 – Forms without attachment, $26.00 – Forms with attachment and an additional $1 per page for certification.

The certified document bears an ACRA entity stamp, an authentication number and is endorsed by the Assistant Registrar of ACRA.

Well, there you have it, a complete guide on Singapore’s Company Constitution. You could go ahead and draft one right now, or you could make life simpler and we would manage the drafting of the company constitution for you. Our company secretary will help you!

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