Why Do Companies Need Constitutions in Singapore?

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When Singaporeans and foreigners want to start a private company, they must submit a copy of their constitution. It is one of ACRA’s main requirements in Singapore’s company registration process.

Besides being mandatory for those who want to incorporate a company, why do we need constitutions? Here is a closer look at why they are essential for corporations operating here in Singapore.

What is a Company Constitution For?

In summary, the company constitution outlines the rules, rights, and responsibilities of the organisation and its constituents and provides the framework for how the business operates.

It also helps maintain a system of checks and balances so that no one party has too much power while still protecting company interests.

What Should the Constitution Contain?

Before submitting the constitution when filing for company registration in Singapore, you should ensure that the document contains the following:

  • The approved company name and registered address
  • The company’s purpose and business operations
  • The company’s total share capital, number of shares, and the value of each share.
  • The total population of company members at the time of registration
  • The liability of the company and its members
  • The list of shareholders (also referred to as subscribers in the constitution) and the number of shares they each have.

The constitution must also contain a section for rules specifying how the company should govern itself. These can include but are not limited to:

  • How the shares are issued, transferred, and forfeited
  • Differences in rights among share classes
  • Procedures for conducting board meetings, appointment and removal of directors and secretaries, and decision-making
  • Instructions on protecting the company seal and who is authorised to use it
  • How the company maintains accounting records
  • Processes involved in dissolving the company, such as managing remaining assets and liabilities

You May Use ACRA’s Model Constitution

If you are at a loss on where to begin, ACRA has a Model Constitution which you can adopt for your company. This saves you from drafting one from scratch, as you use ACRA’s as references. You can download a PDF of it at their website.

Considerations When Drafting a Company Constitution

When creating your company’s constitution, keep in mind that this is a legal framework for handling your company’s internal affairs. Violating it can land you in trouble with Singapore’s governing bodies.

Here are a few points to consider before writing yours:

You also consider your company’s objectives so that they align with the provisions listed in the constitution.

All your clauses must be compliant with Singapore’s business regulations, including those that you added yourself. Your corporate secretary can assist you in this regard.

It would also be a good idea to clearly define the structures you have in mind for running the organisation, such as the decision-making process. This helps avoid conflicts among the board and with the rest of the company members later down the line.

Can a Business Consulting Service Help You Draft a Constitution?

Many entrepreneurs hire corporate services to smoothen their company registration in Singapore. Their assistance also extends to helping them draft detailed and compliant constitutions. If you are not fully prepared to craft the constitution, consider having them work with you through this. They have professionals who will ensure your constitution is perfectly legal.

Conclusion

Your company constitution is not only a registration requirement in Singapore. It is also a binding document that will shape and govern your organisation. Do take the time to construct it with your team. Should you need further assistance, do not hesitate to consult other experts who have in-depth knowledge of Singapore’s corporate laws and best business practices. With their support, your company can start on the right foot.

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