Directors, Secretary, Auditor and Shareholder of a Singapore Company
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As a licenced company secretarial services provider, we are often asked by clients on the specific requirements for setting up their Singapore company. These questions range from matters such as:
- Who can be appointed as a director/shareholder of my Singapore company?
- Do I actually need a company secretary, or can I carry out these functions?
- Does my company need a Singapore business address before it can commence its operations?
- What accounting requirements do I need to be aware of when running my Singapore company?
In this blog, we will provide answers to all the above questions and much more besides. Let us begin by looking at the steps which need to be worked out before you set up your Singapore company: 4 key roles, i.e. director, company secretary, auditor and shareholders.
Before a Singapore company can be incorporated under the Companies Act, it must appoint at least 1’ resident’ director.
A resident director is an individual of at least 18 years of age who is either a Singapore Citizen, Singapore Permanent Resident or who otherwise has a valid work permit to allow residence in Singapore.
Since many of our clients are based overseas, a common arrangement is for our company to provide a local ‘nominee’ director to fulfil the above legal requirement and be appointed to the board of directors of a Singapore company.
Subject to the written constitution of a Singapore company, there is no limit on the number of director who can be appointed as directors of a Singapore company so there would, for example, be no issue with a foreign director being appointed alongside a local director.
Where a company hasn’t appointed a local director, the shareholders of the company will be liable for all liabilities of the company!
The term company secretary shouldn’t be confused with the layman’s meaning of office secretary. Rather, a company secretary is an individual who is qualified to handle all administrative matters relating to the running of the Singapore company. These tasks can include, for example:
- Attending, overseeing and preparing minutes of board of directors and shareholders meetings;
- Ensuring all company registers required to be maintained under Singapore law are accurate and up-to-date;
- Advising the directors on their various duties of office (for example, the various fiduciary duties directors owe to their company and shareholders); and
- Drafting board/shareholder resolutions required for day-to-day business matters (for example, opening corporate bank accounts, share transactions, appointments/resignations from the board of directors and so on)
Similarly to the requirement for director’s above, every Singapore company must also appoint at least 1 resident company secretary.
Perhaps due to an innocent misunderstanding of the responsibilities and functions of the role of the company secretary, many of our clients ask why if they can be appointed to this function. However, once their company is up and running, they soon come to realise that the role of the company secretary being outsourced releases the directors/owners of the company to carry out their own important functions to pursue to the aims of the business.
An individual who occupies both positions as director and company secretary of a Singapore company cannot carry out both functions at the same time (for example, a document required to be signed by a director and company secretary cannot be signed by the same individual who is both a director and company secretary).
It goes without saying that a company cannot be run without having owners. After all, they are the one’s who have the company life of its own and provide finance in return for shares.
Singapore allows any individual or company to become a shareholder of a local company (In other words, there are no foreign ownership restrictions of any kind).
Before an individual can legally become a shareholder, however, the company must firstly prepare a legal document known as its Constitution.
A Constitution is a written set of rules governing the relationship between the directors and shareholders of the company and is signed by all the initial shareholders of the company before the company is incorporated in Singapore.
A Singapore company can issue shares for a value of SGD 0.00
The one officer for a company which is not necessary a mandatory obligation to appoint is a firm of auditors.
Nevertheless, since the board of directors of a Singapore company have an obligation within 3 months from the incorporation of the Singapore company to appoint a firm of auditors (where required) we find it is always preferable for the shareholders of a company to check from the outset whether they will at some point be required to appoint a firm of auditors for their Singapore company.
The answer to this question depends on whether or not the Singapore company will or is expected to meet at least 2/3 of the following criteria within its first financial year:
- The Singapore company will generate an annual turnover of over SGD 10,000,000;
- The Singapore company will hold assets collectively valued at over SGD 10,000,000; or
- The Singapore company will employ over 50 employees.
But this is only one side of the story: for many of our clients who also own other companies which the new Singapore company will join as part of a corporate group there is one more important question which must be addressed.
That question is whether the corporate group of companies’ revenue, assets and employees meet 2/3 our of the above criteria above. If they do, the Singapore company will still be required to appoint a firm of auditors even if it does not meet the criteria itself.
It is therefore important to decide before incorporating a Singapore company on the proposed shareholding structure.
In conclusion, every Singapore company must appoint at least 1 director, 1 company secretary and 1 shareholder before it can begin its operations. As well as this, each Singapore company must decide whether it also needs to appoint a firm of auditors.
In our upcoming blog, we will be discussing the powers, duties and responsibilities of directors and chief executive officers of a Singapore company, highly important for any individuals who need to know the do’s and don’ts when acting as a local/foreign director of a Singapore company.