The constitution of company is a compilation of the rules, regulation, laws, and the like, which need to be adhered to strictly when performing regular business. The constitution spells out the rights, powers, obligations and duties that are mandatory to be executed by the company - the Board of Directors and the shareholders. In other words, the constitution regulates the activities and offers guidelines for the whole spectrum of activities executed by the company. Officially, the constitution of a company is known as memorandum and articles of association or M&A in Singapore.
Barring a a few compulsory provisions, the Companies Act does not point out what should be included in the constitution. However, as a matter of fact, it specifies diverse rules with respect to the day-to-day affairs of the company. This also includes rights of shareholder and rules with respect to shareholders' conduct, as well as rules on share transfer.
Further, according to the Companies Act, it is mandatory to have a separate section for the name, clause for registered office, Liability Clause, subscriber clause, capital clause, rules, and objects clause.
Rules should be framed with respect to shares, meetings, secretary, directors, financial statements, common seal, capitalization of profits and reserves, dividends and reserves, notices, winding up, and indemnity.
These rules are not exhaustive. Companies have to enforce the rules mentioned in their constitution.
If you are planning to start a new company, you have to create a draft constitution. You can also choose to adopt the Model Constitution as provided by Singapore company registrar. Alternatively, you can make a constitution according to your business's requirement.
For a company, the constitution is the main operative means to direct the company in conducting business. If you fail to include any of the provisions of the Companies Act, it may lead to ambiguities and hardship later should disputes of any sort arise.
While drafting the constitution, the following are mandatory:
Section 19 of Companies Act mandates that anyone aiming to incorporate (create) a company has to frame the constitution and submit the constitution to the Registrar (ACRA). Following this, the constitution of the company starts working.
Another way of creating your company's constitution is to choose the official Model Constitution (in Companies Act) as it is. That is, without any amendments.
If you're planning to submit the Model Constitution, you will not have to register the constitution during incorporation process for the company.
When you choose the official Model Constitution, you need just to express the type of Model Constitution you choose when registering. The options are private company limited by shares, or a company limited by guarantee. To learn more about these options, see how to register a private limited company in Singapore.
Once the constitution comes into force, there is a contract between the company and all the participating members as well as between the members themselves.
Once framed, the constitution of the company has to be signed by all the members and has to be kept in the company’s registered office.
To bring out an amendment in the constitution of a company, a special resolution has to be initiated. It must be passed in a Extraordinary General Meeting (EGM).
To initiate the special resolution, 75% of the members must support this. For this, members should be served a communication 14 days (for private companies) or 21 days (for public companies) before the EGM.
Note that the amendment will be an integral part of the constitution and will be enforced from the date of special resolution or any other specific date.
Once the amendment process is done, the company has to forward a copy of the special resolution as well as a copy of the amended constitution to ACRA. This has to be done through BizFile+ website. This has to be done within not more than 14 days of passing the special resolution. The ACRA circulates a notice of the resolution being registered.
Thus, the memorandum and articles of association Singapore is a significant and elaborate document. It details all the things with respect to conducting business, managing the company and other aspects. All this is aimed to rule out ambiguity anywhere in the company.