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Singapore Company Laws

Guest post by: Lawrence Smith

Article Overview: Singapore company formation is an attractive strategic option for all international entrepreneurs in order to grow and protect their assets. This article details some of the procedures required under Singapore company law when setting up a business operation in Singapore.

Singapore Company Laws

Incorporating a company in Singapore is generally simple and straightforward, requiring fewer legal steps and obligations when compared with other countries around the world. This article will help you better understand some of the laws that govern Singapore company formation and the relevant legal rights and duties of directors and members once the company is formed.

In Singapore, companies are governed by the Singapore Companies Act of 1963. This Act covers the necessary steps and structure for forming a company in Singapore. All companies must abide by the regulations of this Act in order to legally incorporate a company within Singapore.

The first step when incorporating a company in Singapore is to gain approval for your desired company name from the Accounting and Corporate Regulatory Authority of Singapore (ACRA). Your choice of company name is governed by section 27(1) of the Companies Act. It states that a company may not register a company under a name that is a) undesirable, b) identical to that of another company or c) a name that the Minister has directed the Registrar not to accept. Once ACRA has approved your company name the next step involves submitting your official company documents to be certified.

Under section 19(1) of the Act any potential company is required to submit the company Memorandum and Articles of Association to ACRA. The Memorandum of Association should detail the name of the company, the total amount of share capital and the liability of the members. The Article of Association is a document outlining the provisions and regulations by which the company will be governed.

In addition to the Memorandum and Articles of Association you must also submit any further documents that ACRA requires. Generally these are a Certificate of Identity, consent to act as Director and Secretary, Statutory Declaration of Compliance and the particulars of any shareholders, directors and secretaries.

Another provision of the Singapore Companies Act is that a private limited company must have at least one director who is ‘locally resident in Singapore’. This individual is often referred to as a ‘Resident Director’. To qualify as locally resident a director must be a Singapore citizen, permanent resident, employment pass holder or dependent pass holder. Professional corporate service firms can assist foreign entrepreneurs to meet these requirements.

After incorporating a company there are obviously various laws one must abide by to maintain the legitimacy and solvency of the company, two individual topics that may interest entrepreneurs are capital flexibility and incurring debts.

Generally, as with most Limited Liability companies, any debts incurred by a company in Singapore are its own, and do not extend to the personal wealth of any members or shareholders. Yet within the Singapore Companies Act there are a few provisions regarding limited liability protection. Sections 339(3) and 340(2) declare that when debts are incurred “without any reasonable or probable expectation that the company would be able to pay the debts” then any member or director of the company can be made personally liable for payment on those debts. The interpretation of these sections and thus the removal of limited liability protection are subject to the discretion of a Singapore courtroom.

Related to this is section 157(1), which states that a company director shall “at all times act honestly and use reasonable diligence in the discharge of the duties of his office”. Incurring unnecessary or unsustainable debt upon a company may be judged in breach of this rule. The penalty for this specific provision is a fine of up to SGD$5000 and imprisonment for up to one year.

A Singapore company is obligated to maintain its capital, with the Companies Act stating that generally a company cannot return capital to its members. A company is free to pay its members dividends from its profits, but not from its capital. However, in specially approved circumstances a company can reduce is capital thanks to section 73(1) by either:

- Canceling paid-up capital that is lost or unrepresented by available assets.

- Paying off paid-up share capital that is in excess of the needs of the company.

These are just a few of the laws that govern Singapore company incorporation, whether it be forming or maintaining a company. Generally, Singapore company formation laws are business friendly, comprehensible and rational, thus making Singapore company formation an extremely attractive option for any international entrepreneur looking for a jurisdiction in which to start a company.

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Article Tags: Singapore bank account, Singapore company, Singapore company formation, Singapore company incorporation, Singapore company law, Singapore company set up



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