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Singapore is a popular incorporation destination for first-time entrepreneurs due to its simple incorporation process and distinctive business climate.
We will go over the essential characteristics of a Singapore limited company, including the roles of shareholders, directors, and company secretaries, the incorporation process, and ongoing compliance duties.
This guide is aimed towards Singapore’s first-time entrepreneurs.
What is a limited company?
A limited company is a commercial form that gives a company its own legal personality.
When a business is first established in Singapore, it is incorporated as a limited company.
The corporation is ‘limited’ because the financial obligation of the company’s shareholders is limited by their shareholdings.
The key features of limited companies include that:
- They have one or more shareholders. Once registered, these individuals are known as the ‘members’ of the company
- They are owned by one or more shareholders. These individuals are known as the company’s ‘members’ once they have been registered.
- They have at least one director. The board of directors is in charge of the company’s overall operations.
- They can engage into contracts in their own name and exist indefinitely, regardless of whether specific directors quit or shareholders sell their shares.
- The company constitution (more on this below) and applicable law, such as the Singapore Companies Act, control the operation of a Singapore company.
- Private companies limited by shares (20-50 shareholders), exempt private companies (for those with less than 20 shareholders), and public limited companies are all available in Singapore (with more than 50 shareholders).
Before looking at the incorporation process, we’ll go through the important positions of a Singapore business: directors, shareholders, and the company secretary.
In Singapore, a private limited company must have at least one director.
All directors must be natural individuals with full legal capacity, over the age of 18, and not otherwise disqualified (such as having a conviction for a dishonesty offense).
Singapore does not allow companies to be directors of other Singapore companies.
Furthermore, one of the directors must be a Singapore resident with Singapore citizenship, permanent residency, an employment pass, or an EntrePass.
To meet this requirement, some companies prefer to nominate a professional director in Singapore (also known as a ‘nominee director’).
The board of directors is in charge of the company’s overall operations.
They can either manage the business themselves or hire expert managers to do so.
The law in Singapore imposes a number of requirements on directors.
- A duty to act in good faith, and in the interests of the company as a whole
- A duty not to delegate their powers without due authorization
- A duty to exercise care, skill, and diligence
- A duty not to improperly profit from their position as a director of the company
- A duty not to allow the company to trade while insolvent.
Directors who violate their responsibilities may face legal or criminal penalties, as well as being barred from serving as a director.
Note that if a director has personally guaranteed the company’s debts, they will be liable for those debts as well.
Shares and shareholders
In Singapore, a private limited company must have at least one ordinary shareholder.
A shareholder pays a defined sum for a share of the company’s ownership.
A ‘share’ is a type of ownership interest.
A Singapore company’s minimum share capital must be at least S$1.
The capacity to choose directors, change directors, and convene a general meeting and vote on important corporate affairs gives shareholders ultimate control over a firm (such as whether it should be wound up).
They have a right to dividends in the event that a profit is distributed, as well as a right to proceeds in the event that the company is liquidated.
The ‘company constitution,’ which is the firm’s fundamental document, lays out the precise responsibilities of shareholders and directors in their interaction.
A company secretary must be a Singapore resident for all private limited companies.
Under the Companies Act and under the company’s constitution, the company secretary has important obligations.
The company secretary is in charge of the following:
- Scheduling general meetings
- Recording the minutes of general meetings
- Ensuring the company maintains communication between the directors and shareholders of the company
- Recording share transfers.
In Singapore, the company secretary must be appointed within 6-months of incorporating the company.
The company constitution
Previously, companies in Singapore had to file two different legal documents: the ‘articles of association’ and the ‘memorandum of association.’
These documents have been superseded by the ‘company constitution’ since 2014.
The company constitution outlines the firm’s basic rules, such as the interaction between directors and shareholders.
It will specify the procedures for having general meetings as well as the process for appointing and replacing directors.
At the time of company incorporation, the proposed company constitution must be filed with the Accounting and Corporate Regulatory Authority (ACRA).
The Singapore Incorporation Process
A first-time entrepreneur should follow these steps to form a Singapore company:
Determine the following critical characteristics of the proposed company: For example, the number of shareholders and directors, the physical address, the initial share capital, and who will serve as a local director;
Select a company name and submit an application for approval.
The name must not infringe on other companies’ intellectual property in Singapore.
With the relevant forms, including ‘consent to act’ forms for directors and the company secretary, apply for company incorporation with ACRA.
For a full break-down of the incorporation process, check out this article.
An entrepreneur’s compliance requirements do not cease with the formation of his or her company.
The company must next examine the following factors:
Registration for the Goods and Services Tax (GST).
For companies in Singapore with annual turnover of more than $1 million, this is usually a necessity.
Licensing for companies
If the company operates in specific industries, such as travel or real estate, a special license tax may be required.
You must make certain that company income taxes are filed on time and that suitable records are kept.
Annual returns. Every year, ACRA must receive these compliance returns, which explain the company’s major changes.
For first-time entrepreneurs, the procedure of forming a Singapore company is simple and user-friendly.
When forming a Singapore company, however, it’s crucial to keep in mind the aspects that differ from those in other jurisdictions, such as the necessity that corporations have a local Singapore director or the requirement to register for GST if a particular turnover is reached.
If you’re interested in registering your business in Singapore, contact us at Air Corporate, and one of our incorporation experts will help walk you through the process.
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