Questions and answers regarding creation and maintenance of business entities in Singapore

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A Singapore company is a legal entity established for conducting business activities in accordance with the Singapore Companies Act (Cap. 50).
Legal entities in Singapore can independently own property, conduct business on their own name for an unlimited period of time, and can sue or be sued in their own names.
Depending on the form of responsibility of shareholders (members), the Singapore Companies Act provides for the possibility of creating the following types of companies:
  • company limited by shares - a company in which shareholders (members) are liable for the obligations of the company within the limits of their contributions to the share capital;
  • company limited by guarantee - a company in which the shareholders (members) are liable for the obligations of the company to the extent guaranteed by the shareholders (members) when creating the company;
  • unlimited company - a company in which shareholders (members) are liable for the obligations of the company with all their property; in this case, the liability of shareholders (members) is unlimited.
Depending on the set of shareholders (members), Singaporean companies are divided into public (open) and private (closed). The set of shareholders (members) of closed companies is known in advance and is limited in quantity, whereas shares of open companies can be distributed among an unlimited and initially unknown set of people.
The number of shareholders (members) in private Singaporean companies cannot exceed 50. The number of shareholders (members) in open Singapore companies is not limited. It can be either less or more than 50.
Business entities in Singapore can be created in the following organizational and legal forms:
  • Sole Proprietorship;
  • Partnership;
  • Limited Partnership;
  • Limited Liability Partnership (LLP).
Limited liability partnerships and companies comprise separate legal entities under Singapore Law.
Distinctive features of Singapore partnerships are as follows:
  • the number of partners in Singapore partnership should be from 2 to 20;
  • each partner in Singapore partnership has unlimited liability for the obligations of the partnership (in other words, in a partnership, each partner is responsible for the obligations of the partnership with all his/her/their assets).
Even with one new partner, the number of partners will exceed 20 people allowed by law. Therefore, the partnership should be converted into a company and offer participation in the company to new applicants.
Sole Proprietorships can be created by individuals or companies.
Sole Proprietorship, Partnership or Limited Partnership cannot establish a Sole Proprietorship due to the fact that the said business entities lack legal personality, so they cannot take liability for the obligations of a Sole Proprietorship established by them.
The main difference between the three types of Singapore partnerships is different level of responsibility of partners for the obligations of the partnership, namely:
  • in Partnerships, the responsibility of each partner for the obligations of the partnership is unlimited;
  • in Limited Partnerships, there are partners with unlimited liability (General/Full Partners) and partners whose responsibility for the obligations of the partnership is limited to the size of their contributions (Limited Partners);
  • in Limited Liability Partnerships, the responsibility of each partner for the obligations of the partnership is limited.
The most popular type of companies in Singapore are Private companies limited by shares where liability of members is limited by members’ contributions to the company's share capital.
Private limited companies are the most common legal form in Singapore for the following reasons:
  • limited liability of members for the company's obligations (as opposed to unlimited liability of owners of unlimited companies, Sole Proprietorships, Partnerships and general partners of Limited Partnerships);
  • a separate legal entity (Sole Proprietorship, Partnership and Limited Partnership are not legal entities);
  • there are restrictions on transactions with shares of the company, whereas free circulation of shares is allowed inn public companies; in other words, the form of a private company protects its members against the appearance of undesirable persons among shareholders;
  • the simplest administration of the company;
  • the ability to start a business with minimal financial investments.
A Singaporean company must have at least one shareholder.
Since a legal entity has the right to acquire assets in its own name, and shares are considered to be an asset, a legal entity can act as a shareholder of a Singapore company. This fully corresponds to Singapore law.
Yes, this is possible, since the Singapore Companies Act does not contain restrictions on citizenship or country of registration of shareholders of Singapore companies. Therefore, any capable person over the age of 18 can establish a Singaporean company, becoming its shareholder. Foreign citizens may also purchase shares of any existing company in Singapore.
The main function of the shareholders of a Singapore company is control over the company. In practice, the function of control is implemented through the adoption of key decisions (for example, the appointment and resignation of directors of a company, decision-making on major transactions, approval of financial statements, appointment of auditors, etc.)
The minimum authorized capital for a Singapore company is one Singapore dollar.
The Singapore Companies Act allows the companies to designate their capital in foreign currency.
Constitution is a concept introduced into business by the amendments to the Singapore Companies Act, which entered into force on February 3, 2017. The constitution of the company is a document regulating the key aspects of the Singapore company’s life, such as issue of shares, making decisions, convening meetings etc. The company's constitution is a set of rules according to which the Singapore company operates.
Companies registered before February 3, 2017, had two fundamental documents instead of the constitution, namely Memorandum of Association and Articles of Association (collectively also referred to as “M&A”). Since amendments to the Singapore Companies Act do not prescribe the mandatory conversion of the Memorandum and Articles of Association into the Constitution, companies registered under the old rules may not have a constitution.
The Singapore Companies Act provides for the automatic invalidity of those provisions of a Singapore company constitution that are contrary to Singapore laws. In other words, a company can continue to operate, even if some of its constitutional provisions are outdated. However, the incompatibility of the provisions of the Singapore company’s constitution with the country's legislation is a signal to the Singapore company’s management that the constitution needs to be brought into line with Singapore’s current legislation.
Decisions on daily business activities in a Singapore-registered company are made by the board of Directors or by the sole Director of a company. The decision-making function is also known as the company management function.
An individual over 18 years old can act as Director in a Singapore-registered company.
The only requirement of the Singapore Companies Act for citizenship and country of residence of a Singaporean company’s directors is that at least one of the company’s directors must be a person ordinarily resident in Singapore.
Usually, persons ordinarily resident in Singapore are those who have the right to stay in the country on a permanent basis or on the basis of a renewable long-term visa.
Persons ordinarily resident in Singapore include:
Persons under the age of 18 may not hold the position of director of a Singapore-registered company.
Yes, it is possible. However, such persons cannot be the sole directors of Singapore companies, as the Singapore Companies Act requires that each Singapore company has at least one director ordinarily resident in Singapore.
Taking into account all the requirements of the Singapore Companies Act (Chapter 50), the sole director of a Singapore company may be an individual over 18 years of age, ordinarily resident in Singapore.
Yes, a foreign citizen can act as a director of a company registered in Singapore.
A foreign citizen may be the sole director in a company registered in Singapore, provided that he is ordinarily resident in Singapore.
Before applying to incorporate a company in Singapore, the following things are пещиbe determined:
  • name of the future company;
  • the size of the share capital;
  • structure of the board of directors;
  • shareholders' personalities;
  • the proportions in which the shares of the company are distributed among the shareholders.
Singapore companies are registered by government agency called Accounting and Corporate Regulatory Authority (ACRA).
Currently, all data required for company registration is submitted electronically through a special section of the ACRA website, which simplifies and speeds up the registration process.
With all the necessary information, it is possible to register a Singapore company within one business day, since registration is carried out in electronic form.
Business activities (contracts preparation, office rent, staff recruitment, etc.) can be started immediately after receiving confirmation of successful company incorporation from ACRA.
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