Previously known as two separate documents, the Memorandum of Association and Articles of Association, the Companies (Amendment Act) 2014 combined them into a single document called the Company Constitution.
The Company Constitution is a legal document which spells out the rules and regulations as to how the company should be governed. It also firms up the roles and responsibilities of the various members of the company, mainly the directors and shareholders. The Company Constitution is a mandatory document as required under the Companies Act. You will need to upload a copy of the Company Constitution on BizFile to continue the registration of a new company. A company cannot be incorporated without a constitution.
The Companies Act specifies that certain sections must be mandatory in a company’s constitution.
1) Name Clause
This clause specifies the approved name by the company registrar. The company will use this name at all times in all business dealings and documentation.
2) Registered Office Clause
The company is to keep all records such as the register of members and other company documents at this address.
3) Liability Clause
This states the liability of the members of the company. This is important as it clarifies the liabilities which the members must undertake in case the company is dissolved.
4) Capital Clause
This states the total amount of share capital in the company and the number of shares issued.
5) Subscriber Clause
This states the full names, addresses and occupations of subscribers to the company
6) Objects Clause
This states the company’s business activities and the manner in which the business is conducted. It can also state businesses which the company cannot partake in.
7) Rules and Regulations
This covers the compliance of the company. This also helps the company to adhere to the regulatory authorities guidelines such as the ones from the Accounting and Corporate Regulatory Authority(ACRA). These are some of the common rules and regulations which are spelt out.
– Issue of Shares
– Alteration of share capital
– Share certificates- Different share classes (eg. common and preferred)
– Transfer of shares (method of transfer, fees payable)
– Transmission of shares
– Forfeiture and Lien on shares
– Calls on shares
– Annual General Meeting (Manner of calling for a meeting, manner of holding the meeting)
– Extraordinary General Meeting (Manner of calling for a meeting, manner of holding the meeting)
– Appointment and Resignation
– Duties and scope of power
– Managing Directors, Alternate Directors and Substitute Directors
– Appointment and Removal
e) Common Seal (Not necessary anymore. Although some companies may still choose to use it.)
– Place of safe keeping
– Persons authorised to use the common seal
f) Financial Statements
– Maintenance of accounting records
– Accounts to reflect company transactions accurately
g) Dividends and Reserves
– Declaration of dividends and method and timing of payout
– Purpose of maintaining reserves
f) Capitalisation of Profits and Reserves
– Approval of Capitalisation
– Power of Directors to give effect to Capitalisation
g) Sending of Notices
– Methods of sending notices to members and subscribers of the company
– Method of winding up the company
– A director’s role and powers to wind up the company
– Method of liquidation and appointment of a liquidator and his scope
– Indemnity to every director, secretary, auditor and officer of the company against any liability in the course of carrying out their duties to the company.
As you can see, the Company Constitution is an extremely important document. To put it simply, when you incorporate a company, you need a rule book for the company. The company should always be run in accordance with this rule book. In the event that certain rules need to be changed, you can either amend the Company Constitution. There are certain matters which may require a resolution rather than to alter the Company Constitution. To alter the Company Constitution a special resolution must be done. The alteration will form part of the original Constitution from the date of passing of the special resolution. The company then has to submit a notice of the special resolution within 14 days to the Registrar. The Registrar will issue a notice and certificate of incorporation to confirm the alteration to the Constitution.
Since the Company Constitution is such an important document, some companies choose to engage either a lawyer or a qualified corporate secretary to assist them in forming their constitution. You may also use the model constitution as provided for in the Companies Act. The Company Constitution must be submitted at the time of incorporation thus it would be wise for those who are thinking of incorporating a new company to consult professionals at an earlier date. During the incorporation process, either a director or a secretary must make a declaration to the Registrar stating that he or she has verified the identities of the members and subscribers listed in the Constitution of the proposed company.
The Company Constitution must be kept at its registered office. The registered office may be different from the place of business. For many companies, the registered office is the office of the Corporate Secretary. The Company Constitution is open to inspection at the registered office. The authorities, as well as the members, must be allowed to view the constitution when requested.
The Company Constitution is an extremely important document in every company. If you are serious about your company and its underlying business, you should have a well-drafted Constitution.
The editorial team at Singapore Secretary Services