If you own shares in a Singapore company, the person you name as donee in your lasting power of attorney (LPA) may one day vote those shares, receive your dividends and decide whether to sell. Choose someone who can handle that responsibility, who will not be compromised by a conflict with your co-shareholders, and whose authority matches your constitution and any shareholders’ agreement. Remember that an LPA does not let anyone act as a director in your place, so plan board succession separately, especially if you are the only director.
This guide is for founders, family business owners and investors who are making an LPA, or reviewing an existing one, while they still have capacity. It focuses on choosing donees and aligning your company documents in advance. If a director or shareholder has already lost capacity, start with our guide on what happens to a Singapore company when a director loses mental capacity.
What can an LPA donee actually do with my company?
An LPA is made under the Mental Capacity Act 2008. You (the donor) appoint one or more donees to make decisions about your personal welfare, your property and affairs, or both. Your shares are part of your property and affairs. A donee can only act once you lack capacity for the relevant decision, or the donee reasonably believes you do, and must act in your best interests.
| Your role | Can your property and affairs donee step in? | What governs it |
|---|---|---|
| Shareholder: voting at general meetings, signing written resolutions | Usually yes, within the LPA’s scope | The LPA, the Mental Capacity Act and the company’s constitution, which often sets out how a member lacking capacity may vote |
| Shareholder: receiving dividends | Yes, into your account or as the LPA allows | The LPA and the company’s dividend procedure |
| Shareholder: selling or transferring shares | Possibly, subject to the LPA, the best interests duty and any transfer restrictions | The LPA, the constitution and any shareholders’ agreement |
| Director | No. A directorship is a personal office | The Companies Act 1967 and the constitution |
| Bank signatory for the company | No, unless the company separately appoints the person | The company’s bank mandate and board resolutions |
| Employee of your own company | No | Your employment contract |
The practical point is that an LPA protects your ownership but not your management of the business. Our article on powers of attorney for a Singapore company explains how an LPA differs from an ordinary power of attorney granted by the company or by you.
Form 1 or Form 2: which suits a business owner?
The Office of the Public Guardian (OPG) offers two forms. Form 1 gives donees general powers with basic restrictions and can be made online. Form 2 is for customised powers and its clauses must be drafted by a lawyer. You must be at least 21 to make an LPA, and it must be certified by an LPA certificate issuer and registered with the OPG before it can be used. The OPG’s LPA page sets out the current process and fees.
Form 1 works for many owners whose shareholding is straightforward. Consider Form 2 if, for example:
- you want one donee to handle your company shares and a different donee to handle personal assets;
- you want to require the donee to consult a named adviser or co-founder before voting on a sale, a share issue or a winding up;
- you want to restrict the donee from selling your shares except in specified circumstances; or
- your holdings include several companies, a holding structure or overseas assets that need tailored instructions.
Whichever form you use, keep the instructions consistent with your company documents. A restriction that the constitution or shareholders’ agreement makes impossible to follow will cause delay when the donee most needs to act.
Who makes a good donee for a company owner?
Family members are the usual choice, but a donee for business assets needs more than loyalty. Consider these questions for each candidate.
- Can they read company documents? The donee may have to review accounts, understand a funding proposal or decide whether to accept an offer for your shares.
- Do they have a conflict? A co-shareholder, business partner or a child who works in the company may face decisions where their interests differ from yours. The best interests duty still applies, but a conflicted donee invites disputes from other family members or shareholders.
- Are they eligible? A donee must be at least 21. A bankrupt cannot be appointed as a donee for property and affairs, and a donee who later becomes bankrupt loses those powers.
- Will they be available? A donee who lives overseas can still act, but meetings, signatures and bank requirements are harder to manage across time zones.
- Will the other shareholders work with them? If your co-founders distrust the person you choose, decisions may stall even where the donee’s authority is clear.
Joint, or joint and several?
If you appoint more than one donee, you choose how they act. Under a joint appointment, all donees must agree, and if they cannot agree on a matter, none of them can act on it. Under a joint and several appointment, any one donee can make the decision. For company shares, joint and several appointment is faster, while joint appointment adds a check on a single donee. Some owners combine the two, for example requiring joint decisions for a share sale but allowing either donee to vote on routine resolutions, which is the kind of tailored arrangement that normally needs Form 2.
Replacement donee
A replacement donee steps in if an original donee disclaims, dies, becomes bankrupt (for property and affairs), divorces you or loses capacity. For a company owner, naming a replacement avoids the risk that your shares are left without anyone able to vote them.
Professional donees
Under the Professional Deputies and Donees scheme administered by the OPG, you can appoint a registered professional as donee, with fees agreed between you and the professional. This may suit an owner without suitable family members, or one who wants an independent person alongside a family donee. Details are on the OPG website.
How should the constitution and shareholders’ agreement fit with the LPA?
Your LPA gives the donee authority over your property. Your company documents decide what that property allows the holder to do. Review them together.
- Voting by a member who lacks capacity. Many constitutions, including the model constitution, allow a person managing a member’s estate to vote on the member’s behalf, usually after producing evidence of authority. Check your own constitution’s wording and what evidence the directors may ask for.
- Incapacity as a transfer event. Some shareholders’ agreements treat a shareholder’s incapacity as a trigger for a compulsory sale of shares to the other shareholders at a set valuation. If yours does, your donee may not be able to keep the shares, and the price formula matters more than the identity of the donee.
- Pre-emption and consent rights. A donee who wants to sell your shares will usually have to offer them first to the other shareholders.
- Reserved matters. If your shares carry veto rights, decide whether you want a donee to exercise them freely or only after consultation.
Our guide to key clauses in a Singapore shareholders’ agreement explains transfer and incapacity provisions in more detail.
What if I am the only director?
This is the gap an LPA cannot close. Section 145 of the Companies Act 1967 requires every company to have at least one director who is ordinarily resident in Singapore, and a director must be a natural person of full legal capacity. Many constitutions also provide that a director’s office becomes vacant on mental incapacity. If you are the sole director and you lose capacity, the company may have no one able to sign contracts, approve payroll or operate the bank account, even though your donee can vote your shares to appoint a new director.
Plan for this now:
- Appoint a second director you trust, ideally one who understands the business. Our article on why a company needs directors of its own discusses board composition.
- Check whether your constitution allows alternate directors, and who may appoint them. Under many constitutions an alternate’s appointment ends when the appointing director stops being a director, so an alternate is not a substitute for a second director.
- Review the bank mandate so that more than one authorised signatory can operate the account.
- Record your wishes in a letter to your donee and co-directors: who should be appointed to the board, which advisers to call and where the company records are kept.
What happens if I do not make an LPA?
If you lose capacity without a registered LPA, no family member automatically gains authority over your shares. Someone must apply to the Family Justice Courts to be appointed as your deputy under the Mental Capacity Act. The application requires a medical report and other documents, and the court decides the scope of the deputy’s powers, which may be narrower than you would have chosen. While the application is pending, decisions needing your vote can be delayed, which can matter if the company needs funding or a shareholder resolution. Our article on a shareholder becoming incapacitated during an urgent funding decision shows how that delay plays out.
Example: a two-founder company with one sole director
Example (hypothetical): Mei owns 70% of a Singapore trading company and is its only director. Her co-founder, Arjun, owns 30% and works overseas. Mei’s adult son works in the finance team, and her daughter is a lawyer abroad.
- Mei appoints her son and daughter as property and affairs donees, with her daughter as the one who must agree to any share sale. Because this split needs tailored wording, she uses Form 2.
- She names her sister as replacement donee.
- The shareholders’ agreement treats incapacity as a transfer event. Mei and Arjun agree to amend it so that the compulsory sale applies only if incapacity lasts a set period, and the valuation method is updated.
- The company appoints the finance manager, a Singapore resident, as a second director, and adds a second bank signatory.
- Mei leaves a letter of wishes with her company secretary and donees.
If Mei later loses capacity, the company still has a resident director, her donees can vote her shares, and Arjun knows the rules in advance.
Checklist for business owners making an LPA
- List every company in which you hold shares, with the percentage held and your roles.
- Read each constitution for incapacity, member voting and director vacancy provisions.
- Read any shareholders’ agreement for incapacity, transfer and valuation clauses.
- Choose donees and a replacement donee, and decide on joint or joint and several.
- Decide whether Form 1 is enough or whether you need Form 2.
- Appoint an additional director where you are the sole director, and update the bank mandate.
- Prepare a letter of wishes and tell your donees where the company records are kept.
- Review the LPA whenever you sell, buy or restructure a company.
Frequently asked questions
Can my donee become a director of my company automatically?
No. A donee may be able to vote your shares to appoint a director, including the donee personally if they are eligible and consent, but the appointment is made through the company’s normal process and lodged with ACRA.
Should my business partner be my donee?
It can work, but it creates a built-in conflict: decisions about your shares may affect your partner’s own interests. Many owners prefer a family member or professional donee, with an obligation to consult the partner on business matters.
Does the company need a copy of my LPA?
Not while you have capacity. Once your donee needs to act, the company, its bank and the company secretary will usually ask to see the registered LPA and evidence of your incapacity before acting on the donee’s instructions.
Is an LPA the same as a will for my shares?
No. An LPA operates only during your lifetime while you lack capacity, and ends on death. Who inherits your shares depends on your will or the intestacy rules and on the company’s transfer provisions. Our guide on a will that conflicts with a shareholders’ agreement covers that issue.
Can a foreign owner of a Singapore company make a Singapore LPA?
The LPA scheme is administered by the OPG, which publishes eligibility and process requirements for applicants. Foreign owners with assets in several countries should check with the OPG and their advisers whether a Singapore LPA, an instrument in their home country, or both are appropriate.
Need help with planning for incapacity as a company owner?
If your company, or you as a director or shareholder, is dealing with planning for incapacity as a company owner, contact the Raffles Corporate Services team at [email protected] or on WhatsApp at +65 8501 7133 or +65 9018 0072. We will help you understand the documents and deadlines. Where your matter needs a lawyer, we will refer you to a firm on our panel of Singapore law firms that regularly handles lasting powers of attorney, mental capacity and succession matters. Raffles Corporate Services is a corporate services provider, not a law firm, and this article is general information, not legal advice.
The Raffles Corporate Services Editorial Team, Raffles Corporate Services