Every company in Singapore is required to have a company constitution. A company constitution provides much important information about the company. It also contains clauses which provide deeper information about the inner workings and mechanisms of the company in question.
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.
Drafting of a Company Constitution in Singapore
Anyone who plans to set up a company in Singapore should take the initial step of drafting a constitution. A company can either choose to use a model of constitution provided by another company in Singapore or draft a constitution from the beginning which covers the requirements of the company.
As an aside, many people, whether those from Singapore or abroad, are interested in starting a company in Singapore. Perhaps you are one such person; should that be the case, we at Paul Hype Page are able to assist you in this process. We will guide you through every step of the incorporation of your Singapore company in accordance with the corporate laws of the country.
After the constitution has been drafted, the company owner must verify that the constitution contains a legal statement with the signatures of the subscribers who have agreed to form the company. Those drafting the constitution should have the objectives and purposes of the company in mind while the constitution is first being drafted.
Instances in Which a Company Constitution Can Be Overruled by Authorities
In certain instances, the relevant authorities may choose to overrule the company constitution. This takes place when the authorities believe that the company’s constitution will lead to the company’s partaking in detrimental activities. If the business is attempting to set up an illegal company or engage in an activity which is likely to threaten the peace of Singapore, the company constitution can be overruled. If the registration is contrary to national security and the interests of Singapore, the company constitution will be overruled.
Altering of a Company Constitution
A company is allowed to alter its constitution by way of a special resolution. The company is expected to submit a notice of resolution or a court order, if it has one, to the registrar within 14 days. The registrar should then provide a certificate confirming the constitution alteration. A company is expected to keep its constitution at its registered office. The other required rule is that each subscriber to the constitution is expected to sign the number of shares they are willing to take on. The constitution is also open for inspection at its office where it was registered.
A company constitution is necessary to define the scope and activities of the company. It also serves as a provider of information about the foundation and incorporation of the company. Therefore, drafting a company’s constitution is essential for the continued operation of the business activities of the company. It is also through the constitution that the company can define responsibilities, activities, and relationships that exist between the company’s employees, managers, directors, and shareholders.
Company Constitutions in Singapore FAQs
One of the purposes of special resolutions is that of allowing for alteration of a company constitution. This is because the company registrar has to be informed about this alteration beforehand. Thus, a company cannot alter its constitution if there has not been a special resolution.
The Companies Act was most recently amended in 2014. It was amended by approval from Singapore’s parliament and subsequently the President of Singapore. The Companies Act was amended in two phases. The first phase took effect on July 1, 2015, while the second took effect on January 3, 2016.
Everyone who has or plans to set up a company in Singapore must prepare a company constitution. This is because the constitution aids a company in clearly defining the business activities within the company. The company constitution will not only help in defining the responsibility of every individual including directors and shareholders; it will also enable the observation of the rules of the company as per the constitutional requirements.