In Singapore, a company is required to have a constitution that outlines the rules by which it must operate. This document describes the range of the company’s activities, its official name, and the protocols that its members will follow when interacting with each other and conducting business. It also details the rights and privileges held by the company, as well as those held by its officers and members. By law, the company must always behave in a manner consistent with its constitution. Therefore, one of the most essential tasks when incorporating a company is preparing an appropriate constitution.
At the time of formation, a Singaporean company must settle on a set of governing principles known as its constitution. If necessary, changes can be made to the constitution at a later time by following the process specified for doing so. Although the Singapore Companies Act (“CA”) does not specify the regulations that must be included in a company’s constitution, any provisions in the constitution that conflict with or violate the regulations outlined in the Companies Act are invalid and cannot be enforced by the government.
What are Company Bylaws (Company Constitution)?
In Singapore, the term “company constitution” refers to the governing text for a business entity. It lays out the rules and procedures that will govern the firm, and every business must follow those to the letter. To begin the incorporation process, a business must first submit its constitution to the Registrar.
Prior to the Companies (Amendment) Act 2014, this function was performed by two distinct documents, namely the Memorandum of Association and Articles of Association (M&AA). These two documents have been combined into one dubbed the company constitution as part of the Amendment Act 2014.
The CA defines a company’s structure as follows:
The company’s policy as filed with the Registrar, or the business’s M&AA (Memorandum & Article of Association) was in effect on the day before the 2014 Amendment to the Companies Act took effect if the company existed before the amendment. The company’s constitution details its name, its line of business, the extent of member liability, and the total quantity of the company’s capital. The company’s primary goals, the powers and duties of the board of directors, and the rules for running the business are all laid out in the constitution. All provisions of the constitution must be followed by business at all times.
Part III of the CA explains what the company’s constitution needs to have. A constitution must consist of:
- The company’s name;
- The liability of the company’s members(is the company limited by shares, limited by guarantee, or unlimited?);
- The location of the company’s registered office;
- The amount of the company’s share capital and how it is split into shares with fixed values;
- The full names, addresses, and positions of everyone who signed the company’s constitution, as well as how many shares each person owns;
- The objective of the company;
- Rules for the company; and
- The constitution may include a clause that limits its ability, rights, powers, or privileges.
Drafting a Company Constitution
The good news is that one does not have to start from scratch when writing the constitution for your business. The Companies (Model Constitutions) Regulations 2015 include a Model Constitution that can be consulted by proprietors of businesses. The private companies that are limited by shares use the constitution found in the First Schedule of the laws, while the public companies that are limited by guarantee use the constitution found in the Second Schedule.
Registration of Company Constitution
To establish a business, one must file the company’s bylaws with the Registrar as required by Section 19 of the CA (i.e., the Accounting and Corporate Regulatory Authority). Following that date, the company’s bylaws will become fully binding. If the Model Constitution is adopted in its entirety without any changes, then registration of the Constitution is not required. Instead, when establishing your company, you need only specify whether it will be a private company limited by shares or a company limited by guarantee, as dictated by the Model Constitution selected.
Effect of Company Constitution
The company’s constitution serves as a binding agreement between the business and its members and among the members themselves. Each shareholder has the individual right to initiate an action to enforce a provision of the CA or to restrain its breach under Section 39(1) of the CA. If the court rules that a violation of the Constitution has occurred, it may issue an order requiring the violation to cease or requiring compensation for the victims. Significantly, subsection 39(1) only applies to the member’s rights as a member, not his rights as an individual.
In conclusion, the company’s constitution serves as the cornerstone for its daily operations, providing a roadmap for its members and officers to follow. As such, it is crucial that the document is crafted with care and attention to detail, including all clauses that may affect the business’s future management and operations. By prioritising the preparation of a comprehensive and appropriate constitution, a company can establish a strong foundation for success and ensure compliance with legal requirements.
Please note that this article does not constitute express or implied legal advice, whether in whole or in part. If you would like a free initial consultation or simply more information, please email us at firstname.lastname@example.org or contact our Corporate Team.
Walter Alexander, Director & Head of Corporate Legal
Jerial Tan, Associate