Establishing Business and Company in Singapore
What is a company
A company is a business entity registered under the Companies Act, Chapter 50. It has a legal personality i.e. it has rights to own properties, can sue or be sued.
A company is a separate legal entity and distinct from the members who form it The most important consequence is that any liabilities of the company are directly only the company’s responsibilities and not its members/directors. Similarly, the rights of the company can generally only be brought in the name of the company.
Types of companies
Company limited by shares
A company limited by shares means it has share capital. Authorized share capital in the company refers to the maximum shares that can be issued and issued share capital refers to the actual shares issued. Members in such companies are only liable to contribute up to the amount paid or payable on the shares (e.g. $1.00 per share).
A private company limited by shares is one where the number of shareholders is limited to 50. A public company limited by shares is one where the number of shareholders can exceed 50. The company may raise capital by offering shares and debentures to the public. A public company must register a prospectus with the Monetary Authority of Singapore before making any public offer of shares and debentures.
Company limited by Guarantee
A company limited by guarantee is usually incorporated to carry out non-trading functions, for instance, professional associations or charitable institutions, which want both the advantages of incorporation and limited liability.
Here, the liability of the members is limited by the amount each member has guaranteed to pay towards the company assets once the company is wound up (e.g. $1 per member).
Shareholder and Directors
Generally, the directors have the responsibility of running the business of the company. However, they are under a statutory duty to act honestly and in the interest of the company and the shareholders. They also cannot be in a position of conflict of interest.
Shareholders in a company are only responsible for the amount paid or to be paid for their shares. Shareholders become members of the company when their names are recorded as members in the Register of Members by the company secretary.
While directors may run the company, members who collectively own all the shares of the company have the right to decide the following matters:-
a) Amendment of Memorandum and/or Articles of Association;
b) The allotment of shares; and
c) Substantial disposal of the company’s assets
Effect of using a company to do business
As an artificial legal person, a company has right and duties distinct from its human members and directors. Thus, the most important consequence is that any liabilities of the company are directly only the company’s responsibilities and not its members/directors. Similarly, the rights of the company can generally only be brought in the name of the company
Some other advantages of a limited company as compared to doing business as a sole trader or a partnership are:
the liability of the members is limited to the amount of capital agreed to be contributed by them;
the continuity of business regardless of any change in the membership of the company;
easy transferability of shares or other interests;
the capacity to borrow large sums of money through access to borrowing facilities;
the facility of raising capital by inviting the public to subscribe for shares and debentures in the company; and
the division of the functions of ownership and management.
Incorporating a Local Company
Any person who wants to incorporate a local company may engage a professional firm to assist him in the filing of the application for incorporation.
A business firm can be converted to a company. If a business owner wishes to retain the same business name for a new company, he will have to submit the name application for approval via Bizfile by way of a name appeal. The business owner will have to undertake to cease his business within 3 months from the date of incorporation of the company, as the law does not permit identical names to be registered.
We provide services to file the necessary applications for the incorporation of companies in Singapore and conversion of businesses, including filing the application for a new company name and preparing the Memorandum and Articles of Association for company.
Requirements for Incorporation
A company can have one director whom must be “ordinarily resident in Singapore” i.e. a Singapore Citizen, a Singapore Permanent Resident, a person who has been issued an Employment Pass/Approval-In-Principle letter or a Dependant Pass.
Where a foreigner wishes to act as a local director of a company, we can assist in applying for an Employment Pass or Approval-In-Principle letter from the Work Pass Division of the Ministry of Manpower (MOM).
Filing of Annual Return
Companies are required under the law to hold an Annual General Meeting (“AGM”) and file its Annual Return.
A local company is required to hold its first AGM within 18 months of its incorporation and at the AGM, the directors shall present the company’s accounts and give a true and fair view of the status of the company to its shareholders. Subsequent AGMs must be held every calendar year and the interval between these meetings should not be more than 15 months after the date of the last AGM.
The company is required to file its Annual Return with the Registrar within one month after the holding of the AGM.
We provide services to file the Annual Return on behalf companies.
CHANGES IN PARTICULARS, CHANGES TO COMPANY OFFICERS, CONVERSION OF COMPANY TYPE
We provide services to update your company particulars with the Registry, update the Registry on the change of share capital or transfer of shares and the appointment, cessation or change to the company’s directors, secretaries, managers and auditors.
The material in this memorandum is of the nature of the general comment only, and neither purports, nor is intended to be advice or any particular matter. Legal advice should be sought from qualified lawyers on any issues and queries relating to the topic.