Does your Singapore startup need to alter its Constitution?

Singapore Company Constitution

Following the Companies (Amendment Act) 2014, the Articles of Association and the Memorandum of a company have now been merged into a single document called the Constitution.

So what exactly is this Constitution and why does it affect my company?

In a nutshell, the Constitution is basically a contract between the company and the members of the company. It defines the rules by which a company must operate and outlines the scope of the company’s activities, rules, regulations and procedures which its members must abide by in the conduct of the company’s business.

Legally, the company must at all times act in accordance with its Constitution. As such, the preparation of the company Constitution is a critical task. 

How can my company prepare this Constitution?

The Constitution has to be available at the time of the startup’s incorporation. While there are currently no rules as to what the Constitution can or cannot include, any clauses in the Constitution that contradict the provisions in the Companies Act will not be enforceable.

There are two choices to take into account in preparing the company Constitution:

1). Adopting the Model Constitution.

More often than not, most startups will choose to opt for the Model Constitution as provided for in the Companies (Model Constitutions) Regulations 2015. This is the simplest and easiest way to adopt a Constitution for your company. Fortunately, you have the option of altering the Constitution after adoption, and a company can choose to alter its Constitution by means of a special resolution (passed by not less than 75% of its members).

2). Prepare a customized Constitution

Different businesses have different needs. Depending on your startup’s business needs and requirements, you might prefer to have a customized Constitution prepared instead.

Should my startup alter its Constitution?

It’s difficult to say. As the Constitution will entrench certain rights, it may be a good idea to make sure it is drafted to suit the special needs of your startup. For example, your company may wish to include clauses to limit the number of members or to restrict share transfers.

However, many startups tend to go for the Model Constitution as it’s the cheapest and most convenient alternative. In the event that it’s necessary, you can always change your Constitution at a later stage.

If you would like to have a lawyer familiar with customizing Constitutions draft the Constitution for your startup, please get in touch with us here.