Company constitution is one of those formal things every entrepreneur needs while starting a company.
Many founders create a company constitution by simply using a template without much thought. However, this legal document is the backbone of your business, so understanding it is a big deal for your future success.
In this guide, you’ll learn what a company constitution is and why it matters.
What is a company constitution in Singapore?
In Singapore, a company constitution is a legal document required by ACRA when registering a private limited company under the Companies Act 1967.
Think of a company constitution as the official rulebook for your business. It sets out how your company will be run, managed, and owned. It governs the relationship between:
- The company
- Its shareholders
- Its directors
This single document outlines the key procedures and regulations, including everything from appointing directors to share issuance. In other words, it is a binding contract between the company members and the company itself, defining each party’s rights, responsibilities, and powers.
Historically, companies had two separate documents:
- The Memorandum of Association
- The Articles of Association
The company constitution now combines these into one streamlined document. It creates a clear framework for making important decisions and helps manage expectations among everyone involved, making it much more than just a requirement for the company incorporation process.
Why a strong company constitution matters in Singapore
Many new business owners see the constitution as a simple box-ticking exercise during company registration. They download a standard template, sign it, and file it away. But this approach is a huge mistake.
A well-drafted constitution is your first line of defense. It helps prevent future disputes between shareholders or directors. By setting clear rules from the start, you avoid confusion and disagreement down the road.
Company constitution can prevent founder disputes
It’s sad but true; many successful startups fall apart due to founder conflicts. People who were once best friends can become bitter rivals. Common issues include:
- Misunderstandings about roles
- Conflicts over equity
- Disagreements on decision-making power
A strong constitution avoids these disputes by:
- Defining each person’s role
- Outlining how disagreements are resolved (e.g., mediation or arbitration)
This saves a lot of time, money, and heartache, creating a stable business structure.
Do investors check your company constitution?
Investors are looking for more than just a great idea. They want to see a well-run company with solid foundations. A clear and professional company constitution gives them confidence.
It shows that you are serious about your business. It demonstrates that you have thought about governance and the rights of existing shareholders. A sloppy or non-existent constitution is a major red flag for any potential investor, signaling potential risks and internal chaos.
They will review your constitution carefully during due diligence. They want to understand their rights as a shareholder. They also want to know how the company is controlled and how critical business decisions are made before they commit capital.
Unsure if your constitution is investor-ready?
Key components of a strong company constitution
So, what should actually be in this important document? A standard template might cover the basics. But a good constitution is adapted to your specific business needs. So, let’s look at the critical sections and mandatory clauses you need to get right.
1. Company name, registered office, and objectives
This part seems simple, but it’s important. It states your company’s official registered name and the location of its registered office. The registered office address must be declared during incorporation and kept updated with ACRA, though it need not be included as a fixed clause in the constitution unless the company chooses to do so.
This office clause is crucial because it’s where the corporate regulatory body will send legal notices and correspondence. It also outlines the primary business activities your company will conduct. While modern company law often gives companies broad powers, being clear about your business objectives is good practice, especially for regulated industries.
2. Share capital and shareholder rights
This is one of the most crucial sections. It details the company’s share capital. This includes:
- Total number of shares
- Classes of shares (e.g., ordinary, preference)
- Voting rights
- Dividend rights
- Capital return rights
Getting this right protects shareholder value and prevents dilution disputes. The liability clause is also key here, affirming the limited liability of members, which is a core benefit of incorporating a company. The subscriber clause, listing the initial shareholders, is another foundational element.
3. The role and powers of directors
Your constitution needs to outline the rules for your company’s directors. How are directors appointed and removed? What are their specific powers and responsibilities?
This section establishes the authority of the board. It can set limits on their power, like needing shareholder approval for major transactions. While appointing a company secretary is a statutory requirement, companies may also choose to include details about this role in their constitution.
A good overview from Forbes on director responsibilities can inform what your constitution should reflect. This ensures directors act in the company’s best interest. Proper governance structures are vital for long-term health.
4. Rules for meetings and voting
How will your company make big decisions? This section lays out the procedures for calling and holding shareholder and board meetings. This includes the annual general meeting and any special general meeting convened for urgent matters.
This includes notice periods and quorum requirements, which is the minimum number of people needed for the meeting to be valid. It also specifies voting procedures. For instance, some decisions might need a simple majority, while others might need a special resolution with a 75% majority.
These rules make sure decision-making is orderly and fair. This clarity is essential for managing annual returns and other compliance tasks. It prevents procedural challenges to important decisions.
5. How profits are distributed (dividends)
Every shareholder wants to know how and when they might see a return on their investment. The constitution explains the policy on distributing profits. This is usually done through dividends declared from the company’s profits.
The document will state who has the power to declare dividends, which is usually the directors, subject to the company’s solvency. It may also specify if certain share classes have priority for dividend payments. Clarity here is vital to avoid future arguments about money and profit sharing among members.
6. Procedures for amending the constitution
Your business will grow and change. Your constitution needs to be able to adapt with it. This final key section explains how the original constitution itself can be changed.
Amending the constitution requires passing a special resolution (with at least 75% shareholder approval) and filing a ‘Notice of Resolution’ and updated constitution with ACRA within 14 days.
This high threshold prevents the rules from being changed on a whim. It protects the original agreement you all made, though in some cases, a court order might be necessary for certain changes.
Model vs. Custom Constitution: Which is right for you?
When you complete the company incorporation, you’ll face a choice. Do you use one of the standard model constitutions provided by the authorities? Or do you create a custom one from scratch?
The model constitution, like the model constitution ACRA offers for a Singapore company, is a generic template. It is designed to be a one-size-fits-all solution for a simple business structure. But businesses are not one-size-fits-all, and what works for one may not work for another.
A custom constitution, on the other hand, is built specifically for your company. It reflects your agreements and future plans, providing a better framework for complex business entities. A professional corporate service provider can assist in drafting a document that fits your specific needs.
For many startups, especially those with multiple founders or plans to seek investment, a custom constitution is a smart move. The upfront cost is a small price to pay for the long-term security it provides. It lets you build the rules that truly fit your vision and prevent potential registrar issues during filing.
Common mistakes to avoid when creating your company constitution in Singapore
Creating your company constitution can seem tricky. It is easy to make mistakes, especially if you’re trying to do it quickly. Here are some common traps that founders fall into.
Being aware of these issues can help you create a much stronger document. Avoiding them will save you a lot of trouble later on. A little bit of foresight goes a long way.
Mistake #1: Using vague language
Using unclear language is a recipe for disaster. Phrases like “reasonable efforts” or “acting in good faith” can be interpreted in many ways. This ambiguity can fuel disputes.
Be as specific as possible. Your company’s constitution defines rules that need to be clear. Define key terms and processes clearly to leave no room for misunderstanding.
Mistake #2: Not planning for future growth
Your company today might just be you and a co-founder. But what happens when you hire key employees? What about when you bring in your first angel investor?
Your constitution should be forward-looking. Think about future scenarios, like issuing stock options or raising a new funding round. A good document anticipates these events and includes mechanisms to handle them smoothly, protecting all company members.
Mistake #3: Ignoring minority shareholder rights
If you have a majority stake, it’s easy to overlook the needs of minority shareholders. But protecting their rights is essential for a healthy company. It’s also a legal requirement for companies incorporated in most jurisdictions.
Your constitution should include provisions that protect minority owners. These could consist of tag-along rights, which let them sell their shares if a majority owner sells. It might also include reserved matters that need their approval, building trust, and a positive company culture.
How Sleek helps with crafting a company constitution
Your company constitution is more than just a piece of paper you file and forget. It is the living blueprint for your business. It shapes your company’s culture, guides its decisions, and protects everyone involved.
Crafting a thoughtful Singapore company constitution is one of the smartest investments you can make. The rules it contains are fundamental to your operations and governance. For all companies limited by shares, this is not an optional step.
That’s where Sleek can make life a lot easier. We work with thousands of startups in Singapore and know where new founders get stuck or blindsided later.
Here’s how we help:
- Clear terms, no complexity. We break down each clause in plain language so you know exactly what you’re agreeing to.
- Tailored to your structure. Whether you’re a founder-led startup or preparing for external investment, we customise your constitution to suit your needs.
- End-to-end support. From drafting to ACRA submission, we manage the full process with precision.
- Built for growth. As your business evolves, we’re here to help you update your constitution and stay compliant.
At Sleek, we understand you’re building something that lasts. Let’s make sure the structure behind it is just as solid.
Need help drafting or updating your company constitution in Singapore?
FAQs on creating a company constitution in Singapore
Can I just use the standard template everyone else uses?
You can, but it might not fit your business. Templates don’t account for co-founder dynamics, funding plans, or unique roles. If you’re serious about scaling or raising funds, a custom constitution is worth the effort.
We’re just a small team. Do we still need a proper constitution?
Absolutely. Many founder fallouts happen early, not later. A well-written constitution helps clarify roles, ownership, and exit terms so everyone knows what’s fair, even when things get tough.
What happens if we don’t update our constitution as the business grows?
Outdated constitutions can lead to shareholder disputes, confusion over voting rights, or red flags during due diligence. It’s like running your business with rules from a completely different game.
Can I update the constitution later if things change?
Yes, but it is not as simple as editing a document. You will usually need shareholder approval and formal filings. That is why it is smarter to get it right from the start, especially if your company structure is more than just you.
I’ve already incorporated. Can I still change my constitution?
Yes, you can. If your business has changed direction or structure, updating your constitution is a smart move. Sleek can help review your existing document and guide you through the update process smoothly.
Do I need a lawyer to create a custom constitution?
Not necessarily. If your setup is relatively straightforward, Sleek’s incorporation and corporate secretary team can help you create a tailored constitution without expensive legal fees or guesswork.
Is the constitution the same as a shareholder agreement?
No, but they work together. The constitution lays out the company’s overall rules. A shareholder agreement covers more specific arrangements between shareholders, like rights, responsibilities, or what happens if someone wants to exit. If you have co-founders or investors, you may need both.
Can I change from a model to a custom constitution after incorporation?
Yes. You’ll need a special resolution and ACRA submission. Sleek can help you draft and file the new constitution to reflect your business’s evolving needs.
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