• Why is it Important to have a Company Constitution

A constitution is a document that circumstantiates rules governing your company. The constitution will also explain the relationship between your company, its shareholders and all the directors, and any other individuals involved directly / indirectly to the company.

A company is required to prepare their constitution before incorporating 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, it should not conflict with the Singapore Companies (Amendment) Act 2017 or any other regulations in Singapore. The constitution legally binds stakeholders of the company. Otherwise, the constitution can be designed and modified to suit a company’s operations. It can be drafted in a way whereby it gives you greater flexibility and certainty in your governance and allows you to have more control as your company grows or changes over time.

1. Business Objectives

Your business objectives are the results you hope to achieve as you run and grow your business.

2. Decision-making Structure

This is definitely 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 also avoid any potential conflicts among everyone involve in it.

3. Rules & Regulations

If you have any out of norm, specific sets of rules and regulations that are unique to your company, you should add them into your Constitution. But this must be in line with legal and compliance regulations of Singapore.

4. Mandatory Sections

Name clause, registered office clause, liability clause, capital clause, subscriber clause and objects clause are some of the mandatory clause.

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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. Example, a shareholder can be empowered to give directions to overturn 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. And what better care to go about it than to engage yourself with Paul Hype Page and Co, where we can assist you with this.

4. During applications of bank accounts, bank loans, grants, licensed 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.

Corporate Secretarial checker

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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