Every company incorporated in Singapore must have a company constitution — a document that sets out the fundamental rules governing the company’s internal management, the rights of its shareholders, and the powers of its directors. Introduced by the Companies (Amendment) Act 2014 to replace the old Memorandum and Articles of Association (M&A), the constitution is simultaneously a public document lodged with ACRA and a binding contract between the company and each of its members.
Yet for many directors and shareholders — particularly those who incorporated using ACRA’s default model constitution — the actual contents of their company’s constitution remain largely unfamiliar. This can lead to costly mistakes when disputes arise, corporate actions are taken incorrectly, or the constitution imposes constraints that no one remembered were there.
This guide explains what the company constitution is, what it must contain, what common clauses to watch for, and how to amend it when your business needs change.
Legal Basis: Section 22 of the Companies Act
Under Section 22 of the Companies Act (Cap. 50), every company must lodge a constitution with ACRA at the time of incorporation. The constitution must conform to the Act and any regulations made under it. Where the constitution is silent on a matter, the default rules in the Companies Act apply.
ACRA provides Model Constitutions under the Companies (Model Constitutions) Regulations 2015 for two types of companies:
- Private companies limited by shares
- Companies limited by guarantee
Companies that adopt the Model Constitution without modifications need not file a separate constitution document — they simply indicate their choice of Model Constitution at the point of incorporation on BizFile+. Companies that modify the Model Constitution or draft their own must file the customised document.
Mandatory Clauses
Every Singapore company constitution must contain, at a minimum, the following provisions:
1. Name Clause
The company’s registered name as approved by ACRA. This is the company’s legal identity for all official documents, contracts, and filings.
2. Liability Clause
For companies limited by shares, the constitution must state that the liability of members is limited to the unpaid amount (if any) on their shares. This clause defines the fundamental protection that shareholders enjoy — they cannot be called upon to contribute beyond their share subscription amount.
3. Share Capital and Classes of Shares
The constitution sets out the company’s share capital structure — the types of shares issued (ordinary, preference, redeemable, etc.) and, where relevant, the rights attached to each class (voting rights, dividend priority, liquidation preference). Changes to share capital — such as issuing new classes of shares — require constitutional amendments or specific authorising resolutions.
4. Subscriber Clause
The names, addresses, and share subscriptions of the company’s founding members at the time of incorporation.
Key Operational Clauses to Review
Beyond the mandatory clauses, the constitution typically contains a range of operational provisions that directors and shareholders should understand:
Share Transfer Restrictions (Pre-Emption Rights)
For private companies, the constitution almost always restricts the free transfer of shares. Typically, before a shareholder can sell their shares to a third party, they must first offer those shares to existing shareholders on equivalent terms — a right of first refusal known as a pre-emption right. Failing to follow this procedure when transferring shares can render the transfer void. Directors should review any proposed share transaction against the pre-emption provisions in the constitution before proceeding.
Director Appointment and Removal
The constitution sets out how directors are appointed and removed. Typically, directors are appointed by an ordinary resolution of shareholders (simple majority), and may be removed by an ordinary resolution with special notice under Section 152 of the Companies Act. The constitution may provide additional protections — for example, requiring a higher threshold for removal of certain directors, or giving specific shareholders the right to appoint a director.
Directors’ Meetings: Quorum and Voting
The constitution specifies the quorum required for a valid board meeting and how votes are counted. The Model Constitution requires a quorum of two directors for board meetings. Where the constitution is silent, the Companies Act defaults apply. Directors should ensure that board decisions are only made at properly constituted meetings — resolutions passed without quorum may be invalid.
Written Resolutions
Under Section 184A of the Companies Act, private companies may pass resolutions in writing (without holding a meeting) if all directors (or all shareholders, for members’ resolutions) sign the resolution. The constitution may modify the requirements for written resolutions — for instance, requiring physical signatures rather than electronic ones for certain categories of decision.
Dividend Declaration
The constitution typically provides that dividends are declared by ordinary resolution of shareholders, but may not exceed the amount recommended by the directors. Directors should understand this provision clearly: dividends cannot be paid simply by a board decision — a members’ resolution is required unless the constitution specifically authorises interim dividends at the board’s discretion.
Company Secretary Appointment
Under Section 171 of the Companies Act, every Singapore private company must appoint a qualified company secretary within six months of incorporation and maintain the office at all times. The constitution typically vests authority for appointing and removing the company secretary in the board of directors.
Amending the Company Constitution
A company’s constitution may be amended by passing a special resolution under Section 26 of the Companies Act — requiring a majority of at least 75% of members voting in favour at a general meeting (or via written resolution signed by all members). The amendment must be lodged with ACRA via BizFile+ within 14 days of passing the resolution.
Entrenched Provisions
Under Section 26A, the constitution may contain entrenched provisions — clauses that require a higher threshold than a special resolution to amend (for example, unanimous consent of all shareholders). Entrenched provisions are useful for protecting the rights of minority shareholders or preserving specific governance arrangements agreed at incorporation. If you have a shareholders’ agreement that contains such protections, ensure they are also reflected in the constitution to bind future shareholders and the company itself.
Constitution vs Shareholders’ Agreement: Understanding the Difference
Many Singapore companies — particularly those with venture capital investors or multiple co-founders — have both a company constitution and a separate shareholders’ agreement. These serve different but complementary roles:
- The constitution is a public document filed with ACRA, binding on all current and future members and the company. It cannot contain provisions that conflict with the Companies Act.
- A shareholders’ agreement is a private contract between specific shareholders. It can contain commercially sensitive terms (such as tag-along and drag-along rights, information rights, and anti-dilution provisions) that parties may not wish to make public. It binds only the parties who sign it.
Where there is a conflict between the two documents, the position depends on the nature of the conflict. Provisions in a shareholders’ agreement that are inconsistent with the Companies Act are void. It is important to ensure that constitutional provisions and the shareholders’ agreement are aligned — particularly on share transfer mechanics, board composition, and reserved matters.
Common Mistakes Directors Make with the Company Constitution
- Using an outdated or generic constitution: Many companies still operate under constitutions drafted at incorporation that have never been reviewed. As the company grows, the original provisions may no longer reflect the current ownership structure or governance needs.
- Ignoring pre-emption obligations: Directors sometimes arrange share transfers without checking the constitution’s pre-emption provisions — potentially rendering the transfer void or exposing the company to disputes.
- Passing resolutions without quorum: Board or members’ meetings conducted without proper quorum produce invalid resolutions. Always check quorum requirements before convening a meeting.
- Failing to lodge amendments: Constitutional amendments must be filed with ACRA within 14 days of being passed. Late lodgement is a statutory offence.
- Overlooking entrenched provisions: If the constitution contains entrenched clauses, directors may discover too late that a proposed course of action requires unanimous shareholder approval rather than a simple special resolution.
Conclusion
The company constitution is the foundation of every Singapore company’s governance framework. Directors and shareholders alike should read it carefully, understand its key provisions, and ensure it reflects the company’s current needs. When in doubt — particularly before undertaking corporate actions such as share issuances, director changes, or dividend declarations — consult the constitution and seek professional advice.
For assistance reviewing, updating, or drafting a company constitution, or for ongoing corporate secretarial support, contact Raffles Corporate Services. Our team of qualified company secretaries can ensure your governance documents are robust and compliant with Singapore’s Companies Act.
— The Editorial Team, Raffles Corporate Services