Definition of a Company Constitution
A company constitution is a formal document which spells out rules and regulations governing a company. It is within these rules that a company in Singapore is expected to operate. It clearly defines the scope of company activities including the company name as well as how the members and employees of the company are expected to operate. The company constitution also defines the relationships which exist within the company itself as well as its relationships with its shareholders, directors, and other company managers and employees. As long as the company’s constitution is in line with the general provisions of the Companies Act, it will be considered to be as a binding agreement which exists between the company and its shareholders. The constitution is a vital document which is a requirement prior to a company’s registration. It is the duty of a company registration officer (CRO) to verify a constitution. However, in case a company chooses to adopt a new constitution, the shareholders are expected to pass a resolution and a copy of the new constitution to the CRO for it to be effective.
Before the amendment of the Companies Act in 2014, both the memorandum and Articles of Association were responsible for the provision of the company’s direction during its operation as well as define how it is supposed to operate. In Singapore, the constitution of a company can either be the constitution used in registering a company or, if a company existed before the 2014 amendment, the memorandum and Articles of Association of the company which served as the company’s constitution before the date of the amendment of the Companies Act.
Before anyone makes any important decisions within a company, it is advisable for the responsible individuals to refer to the company’s constitution. In Singapore, a company should create and adopt a constitution at the time of its incorporation.
Topics to be Mentioned in a Company Constitution
Besides defining how the company should operate and the relationship that should exist between the company and its employees, there are also several other topics which should also be included in a company constitution. For instance, the company constitution should clearly state the name of the company. A company constitution should also define the type of business in which the company is to operate. The constitution also states the primary purposes of the company, defines the responsibilities and rights of the directors of the company, and describes the operational and managerial procedures of the company.
Other topics to be stated in the company constitution include the members’ liabilities and the capital amount of the company. With certain exceptions, the Companies Act does not mandate what should be included in the constitution of a company. However, in most of the constitutions, most of the content is related to internal management; transfer of shares rules, appointment rules, and powers of directors and their meetings are usually defined.
If your company does not have a director who is a Singapore resident, we at Paul Hype Page & Co will help you overcome this problem. We will supply a qualified and competent Singapore resident who will serve as the nominee director of your company. This would in turn fulfill the requirement which states that all Singapore companies require a director who is a resident.
Clauses of a Company Constitution
There are many clauses which typically exist within a company constitution in Singapore. These clauses provide further information with regard to the company and its statutory requirements. One such clause is the name clause. The name clause defines the name of the company as registered by the Company Registrar. The company is required to use this name at all times, especially when executing its official duties. The name as specified in the name clause is to be used in official documents. The registered office clause states the physical location or address of the company. The liability clause is another important clause. It ensures that the extent of the company’s liabilities is specified. Information about liabilities is critical during dissolution of the company as well as during clarification of the position of members. The capital clause specifies the amount of capital in the company as well as how this capital is to be divided.
Another clause commonly found in Singapore company constitutions is the subscriber clause. This clause specifies the position of subscribers with regard to the constitution. It includes their respective full names, occupations, and addresses. It also states the number of shares that each subscriber should claim. The objective clause requires that the business objectives of the company be stated within its constitution. The primary and ancillary objectives are to be stated. Certain other matters related to the company are also mentioned. However, the objective clause is not a mandatory part of the constitution.
The rules which govern the activities and operations of the company are also stated within the company constitution. These rules also help in making any of the company’s daily decisions. Information regarding the appointment and removal of secretaries and directors, the definitions of annual general meetings (AGMs) and extraordinary general meetings (EGMs), as well as issuance of shares is also present within a company constitution.