Company Constitutions in Singapore: Importance & How To Draft

7 min read|Last Updated: October 1, 2024|

A constitution clearly outlines the rules governing your company. It also explains the relationship between your company, its shareholders, and all the directors, as well as any other individuals involved directly or indirectly with the company.

A company is required to prepare their constitution before company incorporation with Accounting and Corporate Regulatory Authority (ACRA).

Typically, a company secretary would prepare this document for submission.

According to the Singapore Companies Act, the constitution of a company is defined as:

  1. The constitution that a company registers with the Registrar, or
  2. In the case of companies existing before the 2014 Amendment to the Companies Act, the Memorandum and Articles of Association of the company in force immediately before the amendment date.

Key Points to Consider When Drafting the Constitution

When drafting your company’s constitution, you must ensure that it does not conflict with the Singapore Companies (Amendment) Act 2017 or any other regulations in Singapore. Moreover, the company constitution legally binds the stakeholders. However, you can design and modify the constitution to suit your company’s operations. In fact, you can draft it in a way that provides greater flexibility and certainty in governance, while giving you more control as your company grows or changes over time.

  1. Business Objectives

Your business objectives are the results you hope to achieve This is an important aspect especially if you have a desired structure to implement in your company. Moreover, this will ensure your company complies with legal and compliance regulations. Additionally, these objectives help guide your strategies and decision-making processes.

  1. Decision-making Structure

This is an important aspect if you have a desired structure to implement in your company. This will ensure your company complies with legal and compliance regulations, and avoid any potential conflicts among everyone involved in it.

  1. Rules & Regulations

This is an important aspect especially if you have a desired structure to implement in your company. Moreover, this will ensure your company complies with legal and compliance regulations, while also helping to avoid any potential conflicts among everyone involved in it.

  1. Mandatory Sections

For instance, the name clause, registered office clause, liability clause, capital clause, subscriber clause, and objects clause are some of the mandatory clauses that must be included.

Other terms to include when drafting a company constitution in Singapore

Aside from the above, there are some other terms that you can include in your company constitution. They are:

  • Issue, allotment, and transfer of shares

  • Organisation and conduct of board and shareholder meetings

  • Appointment and removal of directors

  • Directors’ duties and powers

  • Distribution and capitalisation of profits

  • Distribution of surplus assets in the event of winding up or strike off

How to Amend Your Company Constitution in Singapore

The amendment procedure of a company constitution is dependent on the company’s objectives. There are 2 key distinctions:

  1. Amendments that do not alter the company objects – e.g. changing the language of the objects in the constitution, fixing errors, renumbering of clauses, etc.
  2. Amendments that alter the company objects – For amendments that do not alter the company objects, you will need to pass a special resolution in an Extraordinary General Meeting (EGM). Once that is approved by the board and completed, the amended constitution will be effective from the date of the special resolution, unless otherwise stated.

Companies need to submit a copy of the special resolution and amended constitution within 14 days from the passing of the resolution through BizFile+.

Effects of the Company Constitution

The company constitution establishes a contractual agreement between the company and its members, as well as among the members themselves. Under Section 39(1) of the Companies Act (CA), each member has the right to take legal action to enforce a provision of the constitution or prevent its violation. If the court determines that a breach of the constitution has occurred, it can order compliance with the constitution or award compensation for any losses suffered by the affected parties. Additionally, Section 39(1) specifically applies to rights that relate to a member in their capacity as a company member, rather than in their personal capacity.

A member can enforce their right to vote at an Annual General Meeting, especially if it is wrongfully denied. The company grants this right to them as a member. However, if a member brings an action that does not directly affect their role as a member, it is less likely to succeed.

For example, even though the constitution may grant a company director a veto right, the director may not succeed in obtaining a court order to enforce that provision. This happens because the right affects them as a director, not as a member of the company. Moreover, in a private company limited by shares, each member must declare to the Accounting and Corporate Regulatory Authority (ACRA) their intention to acquire shares in the company and specify the number of shares they plan to acquire.

The company constitution must be signed by all members and kept at the company’s registered office.

When you amend the Company Constitution in Singapore, the process varies depending on whether the amendment involves changes to the company’s objectives. In particular, you must follow different procedures if the amendment affects the company’s objectives.

Any amendment that changes the language of the objects is considered an alteration to the company’s objects. For example, if you change “brewing beer” to “operating a café,” it would be classified as an alteration.

The following changes are also considered modifications to the language of the objects:

  • Rectifying errors

  • Replacing outdated English terms with modern equivalents

However, when you renumber the object’s clauses without altering the language of the objects, it is typically not considered a change to the company’s objects. Nevertheless, this type of change still counts as an amendment to the constitution, so you must follow the prescribed procedure.

The company constitution defines the contractual obligations between the company and its members, as well as among the members themselves. Moreover, members can enforce the provisions of the constitution, though they can only enforce matters that affect them in their capacity as members. Additionally, when making amendments to the constitution, you must follow specific procedures, particularly if the changes involve the company’s objects.

 

Situations Where Your Constitution Is Important

1. Avoiding incorrectly classed shares

Having a company constitution can avoid company to be set up with any absurd rules and incorrectly classed shares. This saves the cost of having any expensive legal fees if any conflict arises.

2. Maintaining the balance of power between stakeholders

A constitution may also work well to amend the balance of power between owners/shareholders and directors/management when there is a perceived or evident gap in control. For example, a shareholder can be empowered to give directions to overturn the decisions of the company’s directors.

If you are unhappy, or you have a new director or shareholder coming into the company and requires a change of the company constitution, then it can only be altered by means of a special resolution.

This is usually not recommended, but if it needs to be done it has to be done. The alteration 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 of order to the ARCA. ACRA will then issue a notice and certificate of incorporation which stands as a confirmation of the alteration to the constitution.

3. In setting the tone of what a company does

A constitution defines the scope of the activities that a company carries out. It is the foundation for the company to start its business. Since it is one of the most important documents, the company must take great care while drafting it.

4. During applications of bank accounts, bank loans, grants, licenses etc.

The opposite party would investigate the company’s constitution to understand the relationship between stakeholders, the scope of activities and how these fit into their risk assessment. Having unusual circumstances might be flagged out and questioned during your applications.

STAY COMPLIANT WITH THE RIGHT COMPANY SECRETARY IN SINGAPORE

Come to our office or get in touch virtually for a consultation on your company registration, and other corporate services today.

FAQs

Can I run an online business without incorporating in Singapore?2020-11-20T11:59:02+08:00

Nope, you must register a company to run your online business. 

As a foreigner, can I be the shareholder of the company?2020-11-20T11:58:47+08:00

Yes, you can. 

Is it mandatory to have a Singaporean/ PR to incorporate a company in Singapore?2020-11-20T11:58:34+08:00

Yes, to incorporate a company in Singapore, you need at least one local resident. As a foreigner, you can appoint a nominee director or get an employment pass. 

What are the popular businesses in Singapore?2020-11-20T11:54:51+08:00

Some of the popular businesses in Singapore are laundry, online marketing, e-commerce, financial services, cleaning service, content writing and consulting. 

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