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12 Things You Need to Know Before Incorporation
Incorporation is the first step to formalise a local entity. Here's what you should look out for when you set up a company.
Perhaps you have been thinking about how to move your business forward, have done enough reading on business entities and decided to go ahead with a company. Here are 12 things you need to know about a company before incorporation.
1. Registration
You can apply to incorporate a company by lodging the constitution of the company and other required documents, providing the prescribed information, and paying a prescribed fee to the Registrar of Companies (the “Registrar”) with the Accounting and Corporate Regulatory Authority (ACRA). There are law firms and other corporations that can assist in this as well.
A person who is named as a director or secretary in the constitution or a qualified filing agent must declare to the Registrar that the requirements of incorporation have been met and that the identities of the named persons in the constitution have been verified.
2. Constitution
The constitution of the company states the name of the company, the type of business activity it will carry, the liability of its shareholders and the paid-up capital of the company on incorporation.
3. Model constitution
A person wanting to incorporate a company may choose to adopt the model constitution provided by ACRA. Alternatively, a more tailored constitution may be used. If time is of the essence, the model constitution could be used first and amended or replaced later.
4. Restriction on the transfer of shares
The constitution can stipulate restrictions relating to the company. Exact restrictions vary across companies.
A common restriction among private companies is known as a pre-emptive right. This right demands that shares must be offered to existing shareholders for purchase before non-shareholders can do so.
Another form of restriction is a grant to the directors of the discretion to refuse to file a transfer of shares with the Registrar, which effectively allows directors to exclude certain outsiders.
5. Company name
Generally, the name of the company must not be undesirable, identical to the name of another company or business or a name of a kind directed by the Minister not to be registered, and must contain the words “Private” (or “Sendirian”) and “Limited” (or “Berhad”).
The first step in the incorporation process would be to submit an application to ACRA to reserve the name of choice. If approved, the name can then be used to incorporate the company.
6. Office address and office hours
The address of the registered office, operating days and hours must be provided to the Registrar when lodging the constitution. The registered office address must be a physical address and not a post-office box.
7. Share Capital
In Singapore, the minimum share capital to register a company is S$1.
8. Shareholders
There must be at least one shareholder in a company. Shareholders can be individuals or corporations. Usually, there are no restrictions on foreign ownership of a private limited company. Under the Companies Act, the maximum number of shareholders in a private limited company is fifty.
9. Directors
The company must have at least one director who is ordinarily a resident of Singapore, is at least 18 years old and has full legal capacity to be a director.
10. Secretary
A company must appoint a secretary who is ordinarily a resident in Singapore and possesses the requisite knowledge and experience to assist the company directors in ensuring that the company meets all its regulatory obligations.
11. Management Board
There is no requirement to appoint a chief executive officer who is employed to manage and conduct the company’s business. However, if the company decides to make such an appointment, a director can also assume the role of a chief executive officer.
12. Timeline
Assuming the chosen name is available for use and all necessary information has been compiled, the company can be incorporated in a number of days.
Gerald regularly advises clients in the digital business space, including clients involved in artificial intelligence, cyber-security, FinTech, data processing, fraud detection and Big Data analysis. He also regularly advises telecommunications clients on their procurement and customer contracts. Connect with him on LinkedIn.
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