Company Constitutions in Singapore: Importance & How To Draft

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.

1. Business Objectives

2. 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.

3. 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.

4. 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.

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

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+.

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.

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:

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.

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.