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What is Memorandum and Articles of Association

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The constitution of company is a compilation of the rules, regulation, laws, and the like, which need to be adhered to strictly while 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.

What is included in a company’s constitution?

Barring a a few compulsory provisions, etc, 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, rules on share transfer.

Further, according to the Companies Act, it is mandatory to have a separate section on Name, clause for registered office, Liability Clause, subscriber clause, capital clause, rules, objects clause.

Rules should be framed with respect to shares, meetings, secretary, directors, financial statement, common seal, capitalization of profits and reserves, dividends and reserves, notices, winding up, indemnity.

These rules are not exhaustive. Companies have to enforce the rules mentioned in their constitution.

How to draft your company’s 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:

  • The constitution must furnish a legal statement signed by the subscribers that they agree to create the company.
  • When framing rules for the operations of the company, take into account the business objectives and purpose of business.
  • As a matter of reference, you could use the First Schedule of the Company Act as a Model Constitution.

How to register the constitution?

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.

The effects of creating a constitution

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.

  • The company's liabilities and obligations belong to itself. They are not those of members.
  • The company will have a separate set of rights. These are not those of the members.
  • Section 39(1) of the Companies Act confers on each member of the company a special right to initiate action to implement the regulation of the Constitution or make sure it's infringement does not happen.
  • If the court of law comes to know that constitution rules have been violated, it could order for strict compliance of the constitution or orders for compensation for the loss borne by the innocent parties.
  • Only Section 39(1) is related to the right that affects company members in their individual capacity as a member. It is not those in their individual personal capacity.
  • The constitution provides special powers (veto) to company director. The director can initiate the court to enforce compliance with a particular provision. The reason is the right affects his in his director's capacity. It is not as a member of the company.
  • A member has a limited number of shares. He has to make a declaration to ACRA of his choice to take shares of the company.

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.

How to make amendments to the document?

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. For this, members should be served an communication 14 days (for private companies) or 21 days (for public companies) before the EGM.

Note that the amendment will be integral part of the constitution and will be in force 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.

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