In Singapore, the Constitution sets out the basic framework for organizing the company. It outlines the purpose of the company and sets out the powers, rights and obligations granted to the company, its board of directors and its shareholders.
Prior to January 3, 2016, two different documents namely Memorandum of Association and Articles of Association (M&AA) were both required to serve this function. As part of the Amendment 2014, these two documents have been merged into a single document called the Company Constitution.
A company has to abide by all the rules set out in the constitution. As business owner, you could create your own constitution or you may choose to adopt the Model Constitution provided by Singapore’s Accounting and Corporate Regulatory Authority (ACRA). This will reduce the cost of setting up a company and streamline the administration requirements for companies.
The mandatory sections of the company constitution
The constitution of the company must contain the following:
- Name Clause
This clause specifies the name of the company as approved by the company registrar. The company will use this name at all times when executing its business as well as in official documents.
- Registered Office Clause
This clause specifies the location of the registered office of the company. The company keeps records such as statutory registers, minutes etc at its registered office.
- Liability Clause
The company has to state the extent of the liability of its members as a part of the constitution. This clarifies the position of members and their liability in case of dissolution of the company.
- Capital Clause
This clause contains the share capital amount of the company and the division of the share capital into shares of fixed value.
- Subscriber Clause
The subscribers to the constitution and the full name, address and occupation of each subscriber.
The number of shares that each subscriber agrees to take in the company’s capital.
- Objects Clause
The company has to state the business it wishes to carry out. The company should state the main as well as ancillary objects.
The object clause in the constitution is an optional requirement. However, the constitution can specify certain restrictions on the capacity, rights, powers as well as privileges of the company. For example, the constitution can contain a clause restricting a company from carrying out activities that are risky or immoral, such as dealing in arms.
Other terms may also be included, such as:
- Issue, allotment and transfer of shares
- Organisation and conduct of board and shareholder meetings;
- Appointment and removal of directors;
- Directors’ duties and powers;
- Distribution and capitalisation of profit and distribution of surplus assets in the event of winding up.
Consideration of the articles of association
- Business objectives
Consider the company’s goals and what the company wants to achieve, and align the articles of association with those goals.
- Decision structure
An ideal decision-making structure for the operating company to be implemented in the articles of association, all of which can be included in the “Rules” section of the charter, which may help avoid potential conflicts in decision-making among future members of the company.
- Specific rules and regulations
If the model articles of association do not provide for specific rules and regulations to be implemented by the promoter of the company in the new company, the addition needs to be considered outside the framework of the model charter.
