Establishing Your Company in Singapore: Incorporation

In the journey of establishing a company in Singapore, meticulous attention to detail and strategic planning are paramount. Navigating through the intricacies of regulatory requirements and operational frameworks requires a comprehensive understanding of the processes involved. Building upon our previous article titled "Establishing a Company in Singapore: From Name Reservation to Incorporation," [https://www.linkedin.com/pulse/establishing-company-singapore-from-name-eh2kc?trk=public_post_feed-article-content].  

Let's delve into the crucial steps following the approval of your chosen company name by the Accounting and Corporate Regulatory Authority (the "ACRA"), marking the initiation of the incorporation process. 

Once the ACRA grants approval for the selected company name, it marks a pivotal moment in the incorporation journey. However, it's crucial to proceed promptly, as the ACRA reserves the chosen name for a period of 120 days. Failure to initiate the registration or incorporation within this timeframe could result in the expiration of the name reservation, potentially leading to the loss of the preferred name.  

Following the approval of the name reservation, appointed officers, including directors, shareholders, and company secretaries, are promptly notified by the ACRA via email. These appointed officers play a crucial role in endorsing their appointments within 60 days of receiving the notification. Timely endorsement is essential, as any delay may lead to the lapse of the application, causing setbacks in the incorporation process. 

Financial considerations also come into play during the incorporation process. Fees associated with name application and company registration must be duly paid to proceed with the process smoothly. The name application fee stands at $15, while the registration fee for the company amounts to $300. Ensuring timely payment of these fees is paramount to maintain momentum and avoid unnecessary delays. 

To proceed with the incorporation process, the transaction number for the name application is a mandatory requirement. The number will be generated after the name reservation application is submitted. This number is mandatory and allows us to access the information submitted during the name reservation process, which will be displayed at this stage. To ensure a seamless process, let's explore some key considerations alongside your incorporation application: 

1. Deciding on a Financial Year End 

2. Determining the Share Capital 

3. Determining the Shares and Shareholders 

4. Determining the Registered Office Address 

5. Constitution 

1. Deciding on a Financial Year End (FYE): 

A company’s FYE represents the final day of its accounting period. The accounting period is the recognized interval to complete an accounting cycle of the business. The periodicity provides perspective about the profitability of the business on an ongoing basis. Records of transactions are kept over this period and reported in the form of financial statements. 

Accounting periods can be 12 months or over 52 weeks. If deciding on a 12-month accounting period starting 1 January 2020, the company’s FYE will be 31 December 2020. But if choosing to have a 52-week accounting period starting Wednesday, 1 January 2020, the company’s FYE will be on Wednesday, 30 December 2020. 

Common choices for a company’s FYE include 31 March, 30 June, 30 September, or 31 December. Deciding on the FYE is very important as it will determine when corporate filings and taxes are due every year. Private companies are required to hold their annual general meetings (the "AGM") within 6 months after FYE and file their annual returns within 7 months after FYE. 

If a company intends to alter the FYE, it must inform the Registrar. Such changes are permissible for the current or immediate previous financial year. However, adjustments cannot be made if statutory deadlines for holding AGM, filing AR, or submitting financial statements have elapsed. The Registrar’s approval to change the FYE will be required if: 

• The change in FYE will result in a financial year of more than 18 months; or 

• The previously changed FYE was changed on or after 31 August 2018 for a financial year ending on or after 31 August 2018 and it is within 5 years from the end of the previously changed FYE. 

2. Share Capital: 

Share capital refers to the amount of money that shareholders have committed to the company. Share capital can be issued with or without full payment from shareholders. The minimum issued share capital is $1 when incorporating a company. “Paid-up capital” refers to the amount shareholders have paid to the company for their shares. Paid-up capital could only be used for business purposes, such as operational fees, subject to any restrictions in the constitution. 

Paid-Up Capital must be deposited into the company’s corporate bank account and must be in cash. When shares are issued for non-cash consideration (e.g., in exchange for a loan agreement), an equivalent dollar-value must still be paid into the company’s bank account. 

If capital is not fully paid-up, it remains as sums owed by the shareholder to the company. The company’s constitution may disallow a shareholder from voting until fully paying for the shares. The company may also, subject to its constitution, make provisions for the amount, manner, and time by which the unpaid portion must be repaid. 

Even though the minimum issued share capital is $1 when incorporating a company, companies with paid-up share capital of $500,000 and above will automatically become members of the Singapore Business Federation (SBF). 

Increasing Paid-Up Capital or Reducing Paid-Up Capital involves issuing new shares, adhering to various legal requirements. These include giving notice, obtaining shareholder approvals, and fulfilling directors' duties. Failure to comply may result in civil or criminal liability. Reducing a company’s paid-up capital and returning it to shareholders is more complex than increasing it. Concerns arise regarding potential disadvantages to creditors if shareholders can freely withdraw their investments. Creditors risk having their loans misused, such as for paying dividends instead of business growth, leading to potential insolvency issues. Capital reduction rules are technical and may require court approval. Share buybacks, for instance, are generally restricted unless specific exceptions are met under the Companies Act. Overall, both processes involve careful consideration of legal obligations and potential consequences to stakeholders. 

When a company closes down, a liquidator is appointed to oversee the winding-up process. The liquidator's primary task is to realize all of the company’s assets, including the paid-up capital. These assets are then used to settle any outstanding debts owed to creditors. If there are funds remaining after creditors have been paid, these funds are distributed to the shareholders in proportion to their shareholdings. This process ensures that all stakeholders are treated fairly and that any remaining assets are distributed appropriately. 

3. Shares and Shareholders: 

A share represents a portion of ownership in a company, obtained in exchange for a financial contribution towards the company’s share capital. Shares may be fully or partially paid up. 

By paying for the shares, an investor is buying partial ownership of a company. A shareholder can be an individual, a company or a limited liability partnership. 

A company may issue different types of shares for various purposes, including: 

• Maintaining control of the company among specific individuals. 

• Offering shares with preferential dividend rights to attract investment. 

• Providing different entitlements to company funds in the event of liquidation. 

• Accommodating the diverse needs and preferences of various investors. 

Different types (or classes) of shares that a company may issue include: 

Ordinary Shares 

Ordinary shares are the most common type of shares. They typically carry voting rights but do not give shareholders rights to receive or demand for dividends. 

Ordinary shareholders also receive less dividends compared to shareholders who hold preference shares. Companies may divide their ordinary shares into different classes (e.g. “A” and “B”) with different rights attached to each class. 

Preference Shares 

Preference shares confer some preferential rights on the holder, superior to ordinary shares. Normally, the preferential rights are the rights to fixed dividends, priority to dividends over ordinary shares and to a return of capital when the company goes into liquidation. 

Redeemable Preference Shares 

Redeemable preference shares allow for the repayment of the principal share capital to shareholders. The company may redeem these shares at an agreed value on a specified date or at the discretion of the directors. This is on the condition that the company is a going concern. 

Any redemptions can be paid out of the company’s capital using proceeds from a fresh issue of shares. The directors must lodge a solvency statement with ACRA under the “Notice of Redemption of Redeemable Preference Shares” eService via BizFile+. 

Convertible Preference Shares 

Convertible preference shares usually carry rights to a fixed dividend for a particular term. At the end of the term, the company can choose to convert it into ordinary shares or leave them as they are. Conversion prices must be specified in the company’s constitution. If the price of an ordinary share rises, the conversion prices will not follow. It is essentially allowing the shareholder to purchase ordinary shares at a lower price. The relevant transaction in BizFile+ is “Conversion of Shares”. 

Treasury Shares 

Treasury shares are ordinary shares which the company acquired from shareholders. While the company is listed as the owner of the treasury shares, it is not allowed to exercise the right to attend or vote at meetings, and no dividends may be paid to the company. 

The total number of treasury shares held by the company is capped at 10% of the total number of ordinary shares issued. Any excess treasury shares (i.e. more than 10% of the total number of ordinary shares) must be cancelled or disposed of within 6 months. 

The company may sell, cancel or transfer the treasury shares under the "Notice of Cancellation or Disposal of Treasury Shares under S76K" eService via Bizfile+. 

Ordinary shares are the most common type and typically carry voting rights. They receive dividends after shareholders holding preference shares have been paid. Companies may categorize their ordinary shares into different classes, each with distinct rights attached. 

4. Registered Office Address: 

All companies are mandated to maintain an accessible registered office in Singapore, open to the public for at least three hours during ordinary business days. A business day excludes Saturdays, Sundays, and public holidays. This requirement facilitates public access and ensures the delivery of legal documents. Non-compliance by companies or directors may result in fines of up to S$5,000. 

The registered office must be located in Singapore, although it need not be the operational site. For instance, the registered office address could be in Raffles Place while the company's operations are situated in Tuas. 

For small-scale businesses operating from home, the residential address may be used as the office address under the Home Office Scheme, managed by the Housing Development Board (for HDB flats) and Urban Redevelopment Authority (for private residential properties). Approval under the Home Office Scheme must be obtained before incorporating the company. 

Under the Companies Act, companies must ensure that information in ACRA’s registers, including the registered office address, is up-to-date. This ensures continued accessibility for government agencies, business partners, and stakeholders. Failure to comply may result in fines of up to S$5,000 for companies and directors. 

5. Constitution: 

The company's constitution forms the bedrock of its governance structure, delineating the rights, obligations, and duties of key stakeholders such as directors, shareholders, and the company secretary. It encompasses crucial elements including business activities, share capital structure, governance rules, and procedures for shareholder meetings. Submission of the constitution during incorporation and adherence to subsequent amendments are essential for legal compliance, transparent governance, and stakeholder accountability. Moreover, the constitution establishes a robust framework for decision-making, conflict resolution, and long-term strategic planning, ensuring the company's adaptability and longevity in a dynamic business landscape. 

The constitution must include the following details: 

• Company’s name and registered office address 

• Description of business activities and operational procedures 

• Liabilities of company members 

• Total share capital and number of issued shares 

• Governance regulations covering aspects such as share transfers, AGM/EGM procedures, and director/secretary appointments/resignations. 

Upon incorporation, a signed copy of the constitution by the shareholders (referred to as 'subscribers') must be maintained at the company’s registered office address.  

Any amendments to the constitution require the passing of a special resolution in a general meeting. The company must submit a copy of the special resolution and the altered constitution to ACRA within 14 days of the alteration. 

Incorporating a company in Singapore demands meticulous attention to detail, strategic foresight, and unwavering commitment to regulatory compliance and corporate governance. From setting the FYE to crafting the constitution, each decision shapes the company's trajectory and regulatory compliance, underscoring its commitment to excellence and long-term success. Our dedicated team stands ready to provide guidance and support at every stage of the incorporation process, ensuring a seamless experience and adherence to legal obligations. 

---

TVS Corporate Services Pte. Ltd.

At TVS Corporate Services Pte. Ltd., we provide professional advisory services to help you navigate the complexities of corporate governance and ensure that your company complies with all statutory obligations. Whether you need assistance with director appointments, secretarial services, or understanding the roles of various company officers, we are here to support your business.

For more information or personalized guidance, please contact us via WhatsApp at http://wa.me/+6588693738 or via email at chloe@tvscorporation.com. We look forward to assisting you in achieving your business goals.

Disclaimer

The information provided in this article is intended solely for general informational purposes and does not constitute professional advice. While every effort has been made to ensure the accuracy, completeness, and reliability of the information, TVS Corporate Services Pte. Ltd. makes no representations or warranties, either express or implied, regarding the adequacy, accuracy, reliability, completeness, or suitability of the information contained herein.

This article is not a substitute for professional consultation or advice. Readers are strongly encouraged to seek independent professional advice tailored to their specific circumstances before making any decisions based on the information presented.

TVS Corporate Services Pte. Ltd., its affiliates, and its representatives shall not be liable for any loss, damage, or injury, whether direct, indirect, incidental, consequential, or otherwise, arising from the use of, or reliance on, the information contained in this article.

Any references to third-party products, services, or companies are for informational purposes only and do not constitute an endorsement or recommendation by TVS Corporate Services Pte. Ltd.