Founder Institute Incorporation - Samuel Seow (10 May 2010)

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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 activitycarried 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 byone 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 twentypartners. Once there are more than twenty

partners, the business entity must be registered as acompany under the Companies Act, Cap.50



Limited Liabilit y Partnershi p (LLP)

A Limited Liability Partnership (LLP) is a vehicle for doing business in Singapore. An LLP gives ownersthe flexibility of operating as a partnership whilehaving a separate legal identity like a private

limited company.

This means that the LLP is seen as a body corporateand has a legal personality separate from itspartners. The LLP has perpetual succession, whichmeans any change in the partners of a LLP will not

affect its existence, rights or liabilities.



A LLP is ca pable 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, asbodies corporate may lawfully do and suffer.



Limited Liabilit y Partnershi p

The partners of the LLP will not be held personallyliable for any business debts incurred by the LLP.

A partner may, however, be held personally liablefor claims from losses resulting from his own wrongfulact or omission, but will not be held personally liablefor such wrongful acts or omissions of any other partner of the LLP.



Limited Liabilit y Partnershi p

An LLP is required to keep accounting records,profit and loss accounts and balance sheets thatwill sufficiently explain the transactions and financialposition of the LLP.

In the event the LLP does not do this, the LLP andevery partner shall be prosecuted and the penaltymay be a fine or imprisonment, or both.

In addition, the LLP shall submit to the Registrar anannual 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 com pan y?

A company is a business entity registered under theCompanies Act, Chapter 50. It has a legalpersonality i.e. it has rights to own properties, it has

perpetual succession and it can sue or be sued in itsown name.

It usually has the words 'Pte Ltd' or 'Ltd' as part of itsname



2 t ypes of com panies

Private Company limited by sharesThis is a locally incorporated company where the

number of shareholders is limited to 50.

Company limited by guaranteeNon-profit company



Com panies

Exempt Private CompanyThis is a private company:

which has not more than 20 shareholders, andnone of the shareholders is a corporation or

that is wholly owned by the Government andwhich the Minister, in the national interest,

declares by notification in the Gazette to be anexempt private company



Some info on com panies

Any person above the age of 21 years canincorporate a local company as a shareholder.

A company can also be wholly owned by acorporate shareholder.



R equirements of a com pan y

Directors

With effect from 1 April 2004, a company can haveone director who must be ´ordinarily resident inSingaporeµ i.e. a Singaporean Citizen, a

Singaporean Permanent Resident, a person whohas been issued an Entrepass/Approval-In-Principleletter/Dependant Pass.

Any person above the age of 21 years may beappointed as a director. However, some individualse.g. bankrupts, are disqualified from being directors.



Com panies

Secretary

Every company must appoint a secretary within 6months 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 followingqualifications:

Has been a secretary of a company for at least 3 ofthe 5 years immediately preceding the date of hisappointment as secretary of the company.

Is a qualified person under the Legal Profession Act(Cap. 161).



Com panies

Is an accountant registered with the Institute ofCertified Public Accountants of Singapore.

Is a member of the Singapore Association of theInstitute 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 outthe functions of a secretary.



Companies

Auditor

A company shall appoint an auditor within 3 monthsfrom the date of incorporation, unless it is exempted

from audit requirements under Section 205B, or 205C, of the Companies Act



R oles and R es ponsibilities of Directors

What is a director?

S. 4(1) CA defines a ´directorµ to include : include

any person occupying the position of director of acorporation by whatever name called and includes

a person in accordance with whose directions or instructions the directors of a corporation areaccustomed to act and an alternate or substitutedirectorµ

ie . Nominal Director, Shadow Director, Nominee

Director, Independent Director etc are treatedequally in law



Statutor y Duties

(Duties under Com panies A ct)

S.157(1) A director shall at all times act honestly anduse reasonable diligence in the discharge of theduties of his office.

(2) [a director] shall not make improper use of anyinformation acquired by virtue of his position as anofficer or agent of the company to gain« anadvantage for himself «. or to cause detriment tothe company.

A director who breaches these provisions commits acriminal offence and may also be subject to civilliability«



Be good!

S.157(1) --director shall at all times act honestly anduse reasonable and diligence in the discharge ofthe 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 andown self self-interest)

exercise powers for proper purposes



What cor porate 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 SamuelSeow Law Corporation

No part of this talk shall or is intended to take the place of legalconsultation

Samuel Seow can be contacted at

Samuel Seow Law Corporation1, Kim Seng Promenade, Unit15-12, Great World City, Singapore

237994Tel: 6887 3393

Fax: 6887 3303Email: [email protected]

Founder Institute Incorporation - Samuel Seow (10 May 2010)

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