INTRODUCTION TO CORPORATE STRUCTURES IN SINGAPORE 10 May 2010

Businesses 

Under the Business Registration Act, "business" includes every form of trade, commerce, craftsmanship, calling, profession and any activity carried on for the purposes of gain A business firm can be either a sole proprietorship, a partnership or a limited partnership. 

Types of businesses 

Sole Proprietorship A sole proprietorship is a business firm owned by one person or one company. There are no partners. The sole proprietor has absolute say in the running of the business firm. Partnership Partnerships may have between two to twenty partners. Once there are more than twenty partners, the business entity must be registered as a company under the Companies Act, Cap.50

Limited Liability Partnership (LLP) 

A Limited Liability Partnership (LLP) is a vehicle for doing business in Singapore. An LLP gives owners the flexibility of operating as a partnership while having a separate legal identity like a private limited company. This means that the LLP is seen as a body corporate and has a legal personality separate from its partners. The LLP has perpetual succession, which means any change in the partners of a LLP will not affect its existence, rights or liabilities. 

A LLP is capable of: 
  

Suing and being sued in its name; Acquiring and holding property in its name; Having a common seal in its name and Doing such other acts and things in its name, as bodies corporate may lawfully do and suffer.

Limited Liability Partnership 

The partners of the LLP will not be held personally liable for any business debts incurred by the LLP. A partner may, however, be held personally liable for claims from losses resulting from his own wrongful act or omission, but will not be held personally liable for such wrongful acts or omissions of any other partner of the LLP. 

Limited Liability Partnership   

An LLP is required to keep accounting records, profit and loss accounts and balance sheets that will sufficiently explain the transactions and financial position of the LLP. In the event the LLP does not do this, the LLP and every partner shall be prosecuted and the penalty may be a fine or imprisonment, or both. In addition, the LLP shall submit to the Registrar an annual declaration of solvency or insolvency (i.e. being able or unable to pay its debts respectively) which will be made available to the public

What is a company? 

A company is a business entity registered under the Companies Act, Chapter 50. It has a legal personality i.e. it has rights to own properties, it has perpetual succession and it can sue or be sued in its own name. It usually has the words 'Pte Ltd' or 'Ltd' as part of its name 

2 types of companies
Private Company limited by shares This is a locally incorporated company where the number of shareholders is limited to 50. Company limited by guarantee Non-profit company  

Companies 

Exempt Private Company This is a private company:
which has not more than 20 shareholders, and none of the shareholders is a corporation or that is wholly owned by the Government and which the Minister, in the national interest, declares by notification in the Gazette to be an exempt private company

Some info on companies 

Any person above the age of 21 years can incorporate a local company as a shareholder. A company can also be wholly owned by a corporate shareholder. 

Requirements of a company 

Directors With effect from 1 April 2004, a company can have one director who must be ´ordinarily resident in Singaporeµ i.e. a Singaporean Citizen, a Singaporean Permanent Resident, a person who has been issued an Entrepass/Approval-In-Principle letter/Dependant Pass. Any person above the age of 21 years may be appointed as a director. However, some individuals e.g. bankrupts, are disqualified from being directors.

Companies 
   

Secretary Every company must appoint a secretary within 6 months of the date of incorporation. The secretary of a public company must comply with section 171(1AA) of the Companies Act i.e. must possess at least one of the following qualifications: Has been a secretary of a company for at least 3 of the 5 years immediately preceding the date of his appointment as secretary of the company. Is a qualified person under the Legal Profession Act (Cap. 161).

Companies     

Is an accountant registered with the Institute of Certified Public Accountants of Singapore. Is a member of the Singapore Association of the Institute of Chartered Secretaries and Administrators. Is a member of the Association of International Accountants (Singapore Branch). Is a member of the Institute of Company Accountants, Singapore. Is, by virtue of certain prescribed academic or professional qualifications, capable of carrying out the functions of a secretary.

Companies 


Auditor A company shall appoint an auditor within 3 months from the date of incorporation, unless it is exempted from audit requirements under Section 205B, or 205C, of the Companies Act

Roles and Responsibilities of Directors
What is a director? 
 

S. 4(1) CA defines a ´directorµ to include : include any person occupying the position of director of a corporation by whatever name called and includes a person in accordance with whose directions or instructions the directors of a corporation are accustomed to act and an alternate or substitute directorµ ie . Nominal Director, Shadow Director, Nominee Director, Independent Director etc are treated equally in law

Statutory Duties (Duties under Companies Act) 

S.157(1) A director shall at all times act honestly and use reasonable diligence in the discharge of the duties of his office. (2) [a director] shall not make improper use of any information acquired by virtue of his position as an officer or agent of the company to gain« an advantage for himself «. or to cause detriment to the company. A director who breaches these provisions commits a criminal offence and may also be subject to civil liability«  

Be good!  

S.157(1) --director shall at all times act honestly and use reasonable and diligence in the discharge of the duties of his office.µ What does it mean to ´act honestlyµ? act in the company·s interests avoid conflicts of interest(duty as director and own self self-interest) exercise powers for proper purposes

What corporate structure is right for me? 
     

Liability considerations Risk appetite What your clients need / want Taxation considerations Practicality considerations Control considerations Who are you going into business with?

Thank You!
No part of this talk may be reproduced without permission of Samuel Seow Law Corporation No part of this talk shall or is intended to take the place of legal consultation Samuel Seow can be contacted at Samuel Seow Law Corporation 1, Kim Seng Promenade, Unit15-12, Great World City, Singapore 237994 Tel: 6887 3393 Fax: 6887 3303 samuelseow@sslawcorp.com Email:

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