Company Law Consolidation Oct 2024 PDF

Company Law Consolidation – Part A 2024 Table of contents 1. Business Organisations 1.1. Separate Legal Entity 1.2. Types of Business Organisations 1.3. Company Formation 1.4. Corporate Rights and Liabilities 2. Internal Management 2.1. The Company’s Constitution 2.2. Divisions...

Company Law Consolidation – Part A 2024 Table of contents 1. Business Organisations 1.1. Separate Legal Entity 1.2. Types of Business Organisations 1.3. Company Formation 1.4. Corporate Rights and Liabilities 2. Internal Management 2.1. The Company’s Constitution 2.2. Divisions of Power 3. Members’ Rights 3.1. Membership of a Company 3.2. Shareholder Litigation – Personal Actions – Oppression, Disregard Of Members’ Interests And Prejudice (S216 CA) 4. Appointment, Removal and Remuneration of Corporate Officers 4.1. Directors and Other Corporate Officers 4.2. Board of Directors 5. Corporate Governance 5.1. Constraints on Directors’ Exercise of Powers – Directors’ Duties 5.2. Shareholder Litigation – Corporate Wrongs 5.3. Company Administration 6. Suing and being sued 6.1. Corporate Acts and Liabilities 7. Maintenance of capital 7.1. Shares 7.2. Capital Maintenance  Topic 1: Business Organisations SEPARATE LEGAL ENTITY Principle Case Law/Statute Principle of separate legal entity Separate legal entity Incorporated company is a separate legal person at Nagase Singapore Pte Ltd v Ching Kai Huat and law, distinct from those who own the company others SGHC 169 (Aron Salomon v A Salomon & Co Ltd) - Courts were willing to recognise that a Company exists separately and distinctly from its company which was a mouthpiece of its members or shareholders directors could be regarded as having a Corporate status is only from incorporation separate mind from them so that it could be regarded as a co-conspirator with Consequences of separate personality directors Company may: - Company could not be liable for 1. Exercise all the functions of a legal person conspiracy where its assets had been Contractual capacity augmented as a result of an alleged o Company has the full capacity to carry on or conspiracy as that would permit the undertake any business or activity, do any act company to lift the corporate veil as and or enter into any transaction when it suited the company o Company may undertake such business or - There could be conspiracy between a activities as it wishes, may contract for its company and its controlling director to own account (even when dealing with its damage a third party by unlawful means controlling shareholder – Catherine Lee v not withstanding that the director might Lee’s Air Farming Ltd) have been moving the spirit of the company 2. Bring and defend legal actions Foss v Harbottle (1843) 2 Hare 461 To sue and be sued - The proper plaintiff for a wrong done to o When a company owns a legal right, it is the the company is the company itself only person who is entitled to bring legal proceedings to enforce that right Sham/Façade o “Proper plaintiff rule” (Foss v Harbottle) Singapore Tourism Board v Children’s Media Ltd SGHC 77 (High Court, Singapore)[Note: 3. Have perpetual succession affirmed Children’s Media Ltd v Singapore o Company may exist indefinitely Tourism Board SGCA 45 (Court of o Company’s existence is not affected by Appeal, Singapore)] changes to its membership, even if all its - The corporate veil could be lifted where it members have died was a façade or sham o Change in ownership of the shares in the - Company was used by the third defendant company has no effect on the company as a to evade his legal obligations going concern or on the ownership status of the assets that the company holds Company has been used to perpetuate fraud Nagase Singapore Pte Ltd v Ching Kai Huat 4. Have the capacity to own land 1 SLR(R) 80, (High Court) Ownership of business and property - The defendant was responsible for the o A company’s business and property are of its wrongs of the company as its alter ego own, and its members have no direct interest and as the plaintiff’s claim was one for in such business or property deliberately overcharging, it was akin to o Company’s shareholders have neither legal fraud and therefore justified the piercing nor beneficial interests in the company’s of the corporate veil  property (Macaura, Beckkett Pte Ltd v Gabriel Peter & Partners v Wee Chong Jin Deutsche Bank AG) 3 SLR(R) 649 (Court of Appeal) - Note: since a shareholder does not have - The company is liable in tort for all legal or beneficial rights in the company’s wrongful acts and omissions of the property, a shareholder’s creditor can only persons who control the management or go after the shareholder’s own assets – operation of its business undertaking shields company assets from shareholders’ when they are acting within their scope of creditors powers - Members are not liable to be sued in 5. Company is taxed separately from its respect of a breach of the company’s members obligations o Profits are taxed at a corporate tax rate - Where directors order an act by the company which amounts to a tort by the 6. Ability to raise finance company, they may be liable as joint o Companies can raise finance through equity tortfeasors on the ground that they have or debt procured or directed the wrong to be done - A director can, in certain circumstances, Limited Liability be liable for a tort committed by the o Company may be set up such that members company if he directed or procured the are not required to contribute to the company commission thereof to meet the debts of the company, beyond the - A director should not be able to escape amount contributed or agreed to be personal liability for such torts any more contributed in return for shares in the than can an employee acting in the course company of his employment for a company, or an o Company limited by shares agent acting in the course of his agency - Liability of members is limited by the for a company amount that they have agreed to pay on TV Media Pte Ltd v De Cruz Andrea Heidi subscribing for the company’s shares 3 SLR(R) 543 (Court of Appeal) - If company becomes insolvent – members - Was clear that Sermon has absolute are not obliged to make further control of Health Biz and was the person contribution to the company except to the directing its negligent acts or omissions extent of any amount remaining unpaid on - As Sermon was clearly the controlling shares held by them mind and spirit of Health Biz, there was o Company limited by guarantee sufficient reason to lift Health Biz’s - Liability of members is limited to the corporate veil and find Sermon personally specific amount they have agreed to liable for authorising, directing and/or contribute in the event that the company is procuring Health Biz’a negligent acts wound up New Line Productions Inc v Aglow Video Pte Ltd o Importance of limited liability 3 SLR(R) 660 (High Court) 1. Channel valuable resources to the - The companies in the group were really production of beneficial goods and little pieces of mosaic forming a complete services mural, glued together by the four directing 2. Promote efficient diversification minds 3. Facilitate the separation of share - The companies in the group shared many ownership from management by reducing common directors and shareholders, and monitoring costs took instructions from the same person, 4. Assist in the development and operation who appeared to be the beneficial owner of share markets of practically all the companies o Disadvantages of limited liability  - Rule may operate unfairly against - Would be entirely just to lift the corporate creditors by shifting a portion of default veil and regard the companies as business risks to them vehicles of the owner and his family Exceptions to the separate entity rule (lifting/piercing Section 238 Insolvency Act the corporate veil) 238. Responsibility for fraudulent trading Justifications for lifting the veil of incorporation 1) If, in the course of the judicial management or 1. Company is in fact not a separate entity winding up of a company or in any proceedings 2. Corporate form has been abused to further an against a company, it appears that any business of improper purpose the company has been carried on with intent to Statute may sometimes require the company’s defraud creditors of the company or creditors of separate personality to be disregarded so as to any other person or for any fraudulent purpose, ensure its purpose is achieved the Court, on the application of the judicial o When the membership of a company falls manager, liquidator or any creditor or contributory below 2 of the company, may, if it thinks proper to do so, o If a company issues a prospectus, directors declare that any person who was knowingly a may be personally required to refund money party to the carrying on of the business in that to investors under certain circumstances manner is personally responsible, without any o Where a person signs issues or authorises the limitation of liability, for all or any of the debts or signing of issue of certain instruments on other liabilities of the company as the Court which the company’s nae does not appear directs. properly Section 239 Insolvency Act o Where debts are contracted when there is no 239. Responsibility for wrongful trading reasonable or probably expectation of those (1) If, in the course of the judicial management or debts being paid winding up of a company or in any proceedings o In the case of fraudulent or wrongful trading against a company, it appears that the company o Where dividends are paid when there are no has traded wrongfully, the Court, on the available profits out of which to pay them application of any person mentioned in subsection o Where the company carries on business (5), may, if it thinks proper to do so, declare that without any directors any person who was a party to the company o Artificial or fictitious transactions or trading in that manner is personally responsible, dispositions for evading tax liability without any limitation of liability, for all or any of the debts or other liabilities of the company as the Grounds under common law Court directs, if that person — 1. Company has been used to evade an existing (a) knew that the company was trading legal obligation wrongfully; or o Company’s separate existence may be (b) as an officer of the company, ought, in all the disregarded to prevent the deliberate evasion circumstances, to have known that the company of a pre-existing legal obligation (Gilford was trading wrongfully. Motor Co Ltd v Horne, Jones v Lipman) o Must consider the motive of the alleged Controller of the company guilty of fraudulent perpetrator – relevant motive is that of conduct evading those obligations and constraints that Red Star Marine Consultants Pte Ltd v Personal existed or accrued prior to and independently Representatives of Satwant Kaur d/o Sardara of the company’s involvement Singh 1 SLR 115 o Where a company is used as a cloak for fraud - Corporate suit may fail because the or crime, it is unlikely that the court will controller of the company refuse to hold the true malfeasors liable has been guilty of fraudulent conduct. 2. Company has been used as a mere “sham”, - The principle ex turpi causa non oritur “façade” or “device” actio may preclude the company from  o Document or transaction may be impugned as recovering assets which have been a sham if all the parties to a transaction agree illegally transferred by the controller to a to create a false appearance as to the legal third party effects of that document or transaction o Where the company is a sham or mere façade Where there is no actual lifting of the veil designed to conceal the true state of affairs, The Saudi Al-Jubail’ Asteroid Maritime Co Ltd v the court may disregard its notional The owners of the Saudi Al-Jubail SGHC separateness and treat it as one with the 71 members - Principal shareholder had abused the o Corporate veil should be lifted on the basis companies as a cover for his own trading that the company is a sham or façade only and shipowning activities and he was the where a person uses a company as an beneficial owner of the vessel extension of himself and makes no distinction New Line Productions Inc v Aglow Video Pte Ltd between the company’s business and his own 3 SLR(R) 660 (High Court) 3. Company has been used to perpetuate fraud - Director was warned that the products the o Where the company has been used by those in company had been importing, purportedly control to perpetuate fraud manufactured by another company, were 4. Company has been used as an extension or infringing ones – showed that he knew, or alter ego of its controller at least ought reasonably to know that the o When a person has used a company as his videotapes he was importing had been “alter ego” or as a “mere extension” of made without the consent of the copyright himself owner o Test: whether the company is in fact carrying - No doubt that the director was the alter on the business of its controller ego of the company and that he was its 5. Corporate groups directing mind o The separate entity principle is not displaced even if the companies within a group are Alter ego organised as a single economic unit (PP v Alwie Handoyo v Tjong Very Sumito 4 SLR Lew Syn Pau) 308 (Court of Appeal) o General rule is that each company within a - Ground of alter ego – whether the group is a distinct entity company is carrying on the business of its 6. Giving effect to legislative purpose behind a controller statute - Was evident that there was no distinction o Where it is sought to take advantage of some between the controller and the company – statutorily created right, the court may hence the Judge decided to pierce the veil consider whether it is within the legislative purpose of the statute to treat the company as Groups of Companies being separate from its members Goh Chan Peng v Beyonics Technology Ltd 2 SLR 592 at 7. Where court exercises equitable or analogous - Each incorporated entity is a separate discretion legal entity with separate legal rights and o If a court is asked to exercise an equitable or liabilities – applies to companies within analogous discretion, it may ignore the an ownership group, and to companies technical separate personality of a company if unrelated to each other it is just in the circumstances to do so - Doctrine of separate legal entity is not displaced simply by virtue of the fact that Things to note the companies in question are organised as o Veil piercing is of necessity a limited remedy a single economic unit invoked only in exceptional circumstances - Between a parent and a holding company and its subsidiary, the rights and assets of  o Not sufficient to show merely that the the related companies are treated as company has been involved in wrongdoing – belonging to each discrete company, must be a substantive link between the distinct from those of the other company wrongdoing and the company’s involvement PP v Lew Syn Pau 4 SLR(R) 210 o Veil piercing is a “last-resort” remedy - The company owns its assets o Corporate veil may only be lifted to grant - Each company is a separate legal entity in such remedy as is necessary to redress the its own right wrongdoing of those in control - The doctrine of separate legal personality is not displaced simply by virtue of the Principles that affirm the company’s distinct legal fact that the companies in question are status organised as a single economic unit o Agency Hotel Jaya Puri Bhd v National Union of - Company may act as an agent of its Hotel, Bar & Restaurant Workers 1 shareholder or controller MLJ 109 (High Court, Malaysia) - Test: relationship of agent and principal - A company is an entity separate from its can only be established by consent of the shareholders and a subsidiary and its principal and agent (Garnac Grain parent or holding company are separate Company Inc v H M F Faure & entities having separate existence Fairclough Ltd) - Employees were employees of the hotel - Where this is the case, the principals are because the restaurant was part of the liable for the company’s acts on normal hotel agency principles and such liability is not Win Line (UK) Ltd v Masterpart (Singapore) Pte based on the corporate veil being lifted Ltd 2 SLR(R) 24 (High Court) o Tort - The corporate veil could be lifted if it was - Shareholder acting for or in association established that the corporate structure or with a company may incur personal transactions were a sham in that the acts tortious liability for its activities done or documents executed by the parties - Shareholder is jointly liable with the were intended to appear to third parties company if he conspires with the that legal rights and obligations were company to injure another created which were not the actual legal - Shareholder-cum-director also commits a rights and obligations the parties intended tort if he authorises, directs or procures a to create company to commit a tort - Each company in a group of companies is o Contract a separate legal entity possessed of - Parties are free to contract around the separate legal right and liabilities separate entity rule - Even where one company is a subsidiary o Trusts of another, there is no presumption that - Company may hold property on trust for the subsidiary is the parent company’s the controller alter ego Cavenagh Investment Pte Ltd v Kaushik Rajiv 2 SLR 543 (High Court) - Companies within a group are separate distinct entities and it was open to businessmen to structure their corporate entities to insulate one part of a business from another - In the absence of fraud or serious abuse of the corporate form, the court declined to lift the corporate veil to hold the Plaintiff liable for the wrongs committed  - The shareholder-director was fully entitled to structure her companies the way they were and have separate companies hold different properties Manuchar Steel Hong Kong Ltd v Star Pacific Line Pte Ltd 4 SLR 832 (High Court) - Single economic entity concept was conceptually difficult to reconcile with the established doctrine of separate legal entity - Single economic entity concept has not been recognised in the case law from Singapore and other common law jurisdictions Simgood Pte Ltd v MLC Shipbuilding Sdn Bhd 1 SLR 1129 (High Court) - Companies in question were entirely separate personalities Abuse of the corporate form Tiu Shi Kian v Red Rose Restaurant Sdn Bhd 2 MLJ 313 (High Court, Malaysia) [Note: affirmed on appeal, see Datuk Hong Kim Sui v Tiu Shi Kian 1 MLJ 345 (Privy Council on appeal from Malaysia)] - Looking at the realities of the situation, the Red Rose Restaurant and Hotel Berjaya were actually one single entity. There was also unity as the directors of Hotel Berjaya are also the directors of the Red Rose Restaurant Aspatra Sdn Bhd v Bank Bumiputra Malaysia Bhd 1 MLJ 97 (Supreme Court of Malaysia) [cf Pek Seng Co Pte Ltd v Low Tin Kee SGHC 83 (High Court)] - The court could generally lift the corporate veil in order to do justice particularly where an element of fraud is involved Raffles Town Club Pte Ltd v Lim Eng Hock Peter 1 SLR 374 (Court of Appeal) - Did not see any reason why they should allow the separate legal personality of the company to assist the directors in such a manner as to unjustly enrich them Ownership and control of the company Simgood Pte Ltd v MLC Barging Pte Ltd SGCA 46 (Court of Appeal)  - Evidence did not establish that the interconnectedness between the companies rose to the level necessary to pierce the veil General veil piercing cases Prest v Petrodel Resources Ltd 2 AC 415 (UK Supreme Court) - A company is a legal entity distinct from its shareholders – has rights and liabilities of its own which are distinct from those of its shareholders - Court may be justified in piercing the corporate veil if a company’s separate legal personality is being abused for the purpose of some relevant wrongdoing Sun Electric Pte Ltd and another v Menrva Solutions Pte Ltd SGHC 264 (Court of Appeal) - Well-established at common law that the court may lift the corporate veil if a company’s separate legal personality is being abused for the purpose of some relevant wrongdoing - Corporate veil not lifted Mohamed Shiyam v Tuff Offshore Engineering Services Pte Ltd 5 SLR 188 at (High Court). - Not necessary to decide the application of Prest in Singapore Limited Liability Section 125(1)(e) Insolvency Act 125.—(1) The Court may order the winding up of a company if — (e) the company is unable to pay its debts Lai Ah Kau v Public Prosecutor 2 SLR(R) 128 - A person in total control of a limited liability company, by reason of his shareholding and directorship or two or more such persons acting in concert, are capable in law of stealing the property of the company - Scheme was improper, dishonest and illegal and was designed to benefit all of them and the 2 companies suffered wrongful loss  TYPES OF BUSINESS ORGANISATIONS Sole proprietorships o Oldest and simplest of the different business structures available in Singapore o Lack of formality o Does not have to maintain accounts for auditing purposes o Sole proprietor has exclusive control and management of the business o Bears all responsibilities under the law Partnership o Co-owners are personally liable for the debts and obligations of the business o Profits it gains are attributed to the partners who will then be taxed on an individual basis o Each member has equal managerial right and authority to act for the firm o New partners cannot be introduced without the consent of all the existing partners o Partnership will be bound by the acts of a partner when those dealing with the firm do not have notice of any agreement restricting the power of one or more partners to bind the firm o Not required by law to have its accounts audited or filed with regulators – only required to keep proper accounting records that will enable true and fair financial statements to be prepared Limited partnership o Liabilities of limited partners are limited to their individual contributions to the venture in accordance with what had been agreed at the outset o Partners forgo their rights to be involved in the management of the business in return for their limited liability protection o Must be registered with ACRA o Not required by law to have its accounts audited or filed with regulators – only required to keep proper accounting records that will enable true and fair financial statements to be prepared Limited Liability partnership  o Offers flexibility of a partnership whilst limiting their liabilities to what they had contributed in terms of capital to the venture o Required to have “LLP” as part of name o Can be sued and own property in its own name o Liable for its own debts o Created by registration o Must have at least one manager who is a natural person of full age and capacity and who is ordinarily resident in Singapore Business trusts o Business enterprise structured as a trust created by a trust deed and with the trustee legally owning the assets of the underlying business and the unit-holders assuming beneficial ownership of the trust assets o May be publicly listed or privately held o Trustee-manager runs the venture much like a director of a company o Rights of unit-holders - Right to vote via special resolution for the removal of the trustee-manager who has not dutifully fulfilled its obligations to them - Right to vote via special resolution on amendments to the trust deed COMPANY FORMATION Sources of Company Law Definition of company and corporation Companies Act Section 4(1) Companies Act Case Law Definition of company “company” means a company incorporated under Legal and Regulatory Regime this Act or under any corresponding previous ACRA written law; o ACRA is the body responsible for providing Definition of corporation system of registration for companies and is “corporation” means any body corporate formed responsible for their compliance with or incorporated or existing in Singapore or outside statutory disclosure and other requirements Singapore and includes any foreign company but MAS does not include — o Responsible for public fundraising and other (a) any body corporate that is incorporated in securities market activities that companies Singapore and is by notification of the may need to engage in Minister in the Gazette declared to be a public SGX authority or an instrumentality or agency of o Regulator over all listed companies – polices the Government or to be a body corporate compliance with its listing requirements and which is not incorporated for commercial rules purposes; Corporate Service Providers (b) any corporation sole; o Provides services such as incorporation, (c) any cooperative society; corporate secretarial services, registered (d) any registered trade union; or offices and statutory filings with ACRA (e) any limited liability partnership; o Required to register as registered filing agents and be supervised under a registered qualified Types of companies individual to carry out transactions with Section 17 Companies Act ACRA 17.—(1) Subject to the provisions of this Act, any person may, whether alone or together with Forms of incorporation another person, by subscribing the person’s name 1. Registration under the Companies Act or their names to a constitution and complying 2. Incorporation by special Act of Parliament with the requirements as to registration, form an incorporated company. Classification of companies Limited company (2) A company may be — o Limited by shares (a) a company limited by shares; - Members contribute, or agree to (b) a company limited by guarantee; or contribute when called upon to do so, (c) an unlimited company. money or property as share capital – in Section 18 Companies Act return issued with shares in the company Definition of private company - Member cannot be asked to pay more than 18.—(1) A company having a share capital may be the amount unpaid on his shares when the incorporated as a private company if its company is wound up [if shares are fully constitution — paid up, he cannot be asked for any (a) restricts the right to transfer its shares; further contribution] and o Limited by guarantee (b) limits to not more than 50 the number of - Does not require members to make any its members (counting joint holders of shares payment upon subscription as members as one person and not counting any person in - Each member undertakes to contribute a the employment of the company or of its specific amount to the company’s assets in subsidiary or any person who while the event that it is wound up, stated in previously in the employment of the company Constitution or of its subsidiary was and thereafter has - Amount guaranteed is usually nominal continued to be a member of the company). - Usually incorporated for charitable or Section 19 Companies Act not-for-profit purposes 19.—(1) A person desiring the incorporation of a - Prohibited from having share capital company must — - By definition a public company, but (a) submit to the Registrar the constitution of cannot be listed on stock exchange the proposed company and such other because no share capital documents as may be prescribed; - Cannot be converted into a company (b) furnish the Registrar with the last day of limited by shares and vice versa the proposed company’s first financial year Unlimited company and such other information as may be o Places no limit on the liability of members prescribed; and o When a company is wound up, every present (c) pay the Registrar the prescribed fee. and past member is generally liable to Section 30 Companies Act contribute to the assets of the company on 30.—(1) Subject to this section — winding up (a) an unlimited company may convert to a o Rare limited company if it was not previously a Private company (s18(1) CA) limited company that became an unlimited o Restricts the right to transfer its shares company pursuant to paragraph (b); and - Giving other members right to buy the (b) a limited company may convert to an shares first before they can be transferred unlimited company if it was not previously an to non-members (pre-emptive rights) unlimited company that became a limited - Transfer can only take place if approved company pursuant to paragraph (a) or any by Board corresponding previous written law. o Limits to not more than 50 members Section 31 Companies Act o Incorporates the word “private” into its name 31.—(1) A public company having a share capital o Only requires 14 days’ written notice of a may convert to a private company meeting at which a special resolution is by lodging with the Registrar — proposed to be passed (a) a copy of a special resolution — o Not required to appoint a professionally (i) determining to convert to a private qualified person as its company secretary company and specifying an appropriate alteration to its name; and  o Can dispense with the need to hold AGM 1. (ii) altering the provisions of its (s175A CA) and need not lay financial constitution so far as is necessary to statements before members impose the restrictions and limitations o Can pass resolutions by written means referred to in section 18(1); without having to hold actual meetings (b) a list of persons holding shares in the (s184A-184F CA) company in the prescribed form; and o Need only give 14 days’ written notice for the (c) such other information relating to the passing of a special resolution (s184 CA) company or its members and officers as may Exempt private company be prescribed. o Private company with not more than 20 Section 32 Companies Act members (2) A private company may, subject to its o Shares of which are not beneficially owned by constitution, convert to a public company by a corporation lodging with the Registrar — o Not required to file any financial statements (a) a copy of a special resolution determining with its annual return (but must still be to convert to a public company and specifying maintained) an appropriate alteration to its name; o Not restricted from providing loans or other (b) a statement in lieu of prospectus; and financial assistance to directors and director- (c) a declaration in the prescribed form related companies verifying that section 61(2)(b) has been Public company complied with, o Requires 21 days’ written notice of a meeting and thereupon the restrictions and limitations at which a special resolution is proposed to be referred to in section 18(1) as included in or passed deemed to be included in the constitution of such o Required to hold a statutory meeting within a company cease to form part of the constitution. period of not less than 1 month and not more than 3 months after the date on which the Groups of companies company is entitled to commence business Section 5 Companies Act o Required to appoint a company secretary who Definition of subsidiary and holding company meets the qualifications identified by the CA 5.—(1) For the purposes of this Act, a corporation o Required to devise and maintain an adequate is, subject to subsection (3), system of internal accounting control deemed to be a subsidiary of another corporation, o (Public company limited by shares) Restricted if — from commencing business or exercising (a) that other corporation — borrowing powers unless it has first issued a (i) controls the composition of the board of prospectus/statement in lieu of prospectus directors of the firstmentioned corporation; o Usually incorporated as a prelude to the or (ii) controls more than half of the voting public offer and listing of its shares on a stock power of the firstmentioned corporation; exchange or [Can convert private company to public company and (b) the firstmentioned corporation is a vice versa] subsidiary of any corporation which is that Small company (s205C CA) other corporation’s subsidiary. o Exempts a company from audit in respect of a Section 5A Companies Act financial year in which it qualified as a small Definition of ultimate holding company company 5A. For the purposes of this Act, a corporation is o Must be a private company throughout the ultimate holding company of financial year another corporation if — o Must satisfy any 2 of the following: (a) the other corporation is a subsidiary of the 1. the revenue of the company for each firstmentioned corporation; and financial year does not exceed $10 (b) the firstmentioned corporation is not itself million; a subsidiary of any corporation.  2. the value of the company’s total assets at Section 5B Companies Act the end of each financial year does not Definition of wholly owned subsidiary exceed $10 million; 5B. For the purposes of this Act, a corporation is a 3. it has at the end of each financial year not wholly owned subsidiary of another corporation if more than 50 employees. none of the members of the firstmentioned o Exempted from audit until it ceases to qualify corporation is a person other than — as a small company (happens when it ceases (a) that other corporation; to be a private company or does not satisfy (b) a nominee of that other corporation; the criteria for 2 consecutive financial years) (c) a subsidiary of that other corporation o New companies in the 1st or 2nd year of being a subsidiary none of the members of incorporation will qualify as small companies which is a person other than that other provided they meet the relevant criteria in that corporation or a nominee of that other financial year corporation; or Small group (d) a nominee of such subsidiary. o Group of entities constitutes a small group Section 6 Companies Act from a financial year if the group meets the Definition of related companies criteria of a small company on a consolidated 6. Where a corporation — basis (a) is the holding company of another o Ceases to qualify when it fails to satisfy the corporation; criteria for 2 consecutive financial years (b) is a subsidiary of another corporation; or o New group in the 1st or 2nd year of (c) is a subsidiary of the holding company of incorporation will qualify as small companies another corporation, provided they meet the relevant criteria in that that firstmentioned corporation and that other financial year corporation are for the purposes of this Act Listed and public interest companies deemed to be related to each other. o Listed – company that has offered its shares or security interests to the public, such shares Section 201(5) Companies Act or security interests are listed on a recognised 201. (5) Subject to subsections (12) to (15), the stock exchange directors of a company that is a parent company at - Has been admitted to the official list of a the end of its financial year need not comply with securities exchange in Singapore and has subsection (1) but must cause to be made out and not been removed from that official list laid before the company at its annual general o Non-public interest company meeting — - Auditor may resign from a non-public 1. (a) consolidated financial statements dealing interest company by giving notice of his with the financial position and performance of resignation the group for the financial year in respect of o Public-interest company which the annual general meeting is held; and - Auditor may only resign before the expiry 2. (b) a balance sheet dealing with the state of of his term of office after having sought affairs of the parent company at the end of its and obtained consent of the Registrar of financial year, Companies each of which complies with the requirements of Corporate groups and related companies the Accounting Standards and gives a true and fair o Subsidiary company (s5 CA) view of the matters referred to in paragraph (a) or - May be partly or wholly owned (b) (as the case may be) so far as it concerns - Not permitted to hold shares in holding members of the parent company. company Manuchar Steel Hong Kong Ltd v Star Pacific o Related company (s6 CA) Line Pte Ltd 4 SLR 832 (High Court) - Where there is a holding-subsidiary - Single economic entity concept was relationship or if it is a subsidiary of a conceptually difficult to reconcile with the common holding company  o Corporate group established doctrine of separate legal - 2 or more companies related to each other entity in the manner described in s6 - Single economic entity concept has not - Holding company controls all the other been recognised in the case law from companies within the group and is not Singapore and other common law itself a subsidiary of another company jurisdictions - Directors of parent company are required - Company within a group may enjoy the to present to shareholders the group’s benefits arising from the exercise of a consolidated financial statements at its right vested in another company, but that AGM did not make the 2 companies one legal entity Foreign Companies Goh Chan Peng v Beyonics Technology Ltd Company, corporation, society, association or 2 SLR 592 other body incorporated outside Singapore - Well-established doctrine that each An unincorporated society, association or other incorporated entity is a separate legal body which under the law of its place of origin entity with separate legal rights and may sue or be sued, or hold property in the name liabilities – applies as much to companies of the secretary or other officer of the body or within an ownership group as it does to association duly appointed for that purpose and companies unrelated to each other which does not have its head office or principal - Between a parent or holding company and place of business in Singapore its subsidiary, the rights and assets of the Foreign company that establishes a place of related companies are treated as belonging business or carries on business in Singapore, or to each discrete company, distinct from which intends to do so, has to comply with the the other company regulations set out in Part 11 Div 2 CA - The mere fact that accounts are Required to register with the Registrar under s368 consolidated on a group basis for before it establishes a place of business or reporting purposes does not detract from commences to carry on business in Singapore the reality that the profits of each separate Must have registered office in Singapore that is company are still that company’s own open and accessible to the public for at least 5 profits and losses hours each business day - Does not matter that the holding company Must appoint at least one authorised was wholly comprised of the businesses representative who is a natural person resident in of its subsidiaries and that it was in a Singapore and who is authorised to accept on its position to control and direct the profits of behalf service of process or other notices served its subsidiaries – Singapore law does not on the company recognise the invocation of the single o Must ensure that the company complies with economic entity concept its obligations under the CA and is personally - To recognise the single economic entity liable for any penalties imposed on the would be contrary to principle and company in respect of any contravention authority CA does not generally apply to foreign company – only sections that apply to “corporations” apply to foreign company High Court has jurisdiction to hear and try any action where the Def is served with a writ or other originating process in Singapore under the ROC The incorporation process Obligation to incorporate  o Any business organisation (except for partnership carrying on a profession) must be incorporated as a company Definition of company o Company incorporated pursuant to the CA or pursuant to any corresponding previous written law o Reference in the CA are to a Singapore- incorporated company Definition of corporation o Refers to both Singapore-incorporated and foreign companies Incorporation o Involves registering the company with the Registrar by submitting various prescribed documents and paying a prescribed fee o CA mandates that a company be registered in certain circumstances (s17(3) CA – association or partnership of not more than 20 persons may not carry on business for the purposes of gain unless registered as a company o Company name - Reservation of a company name is a prerequisite of incorporation - S27(1) CA – Registrar is obliged to refuse to register a proposed name under certain circumstances (where name is undesirable, identical to the name of any other company or where the Minister has directed the Registrar not to accept) - Registrar may direct a company to change its name if it is registered with a name that ought to have been rejected, or where the company’s name is similar to that of a foreign company - Any person may apply to Registrar to direct company to change name, but application based on s27(2)(b) must be made within 12 months o Registration and incorporation - Once a proposed company name has been reserved, a person may proceed to register the company by lodging with the Registrar: 1. Constitution of proposed company 2. Form of incorporation 3. Prescribed fee 4. Declaration made in compliance with s19(2) of the CA  - Upon registration of the memorandum, the Registrar will issue a certificate of incorporation certifying that the company is incorporated from the date specified - Company must have at least 1 member and 1 director ordinarily resident in Singapore - Only a natural person who has attained the age of 18 years may act as a director of a company - If company has only 1 member, the sole member may also be the sole director of the company - A person who has agreed to subscribe for shares in a company is deemed to be a member of the company and his name shall be entered into the company’s register upon incorporation of the company - Registrar has power to refuse registration under certain circumstances e.g. where documents are erroneous, where constitution does not comply etc - Can appeal against Registrar’s refusal to register within 30 days of date of decision Corporate seal o No longer compulsory with effect from March 31 2017 o Company may execute deeds and share certificates: - By a director of the company and a secretary of the company - By at least 2 directors of the company or - By a director of the company in the presence of a witness who attests the signature Corporate changes o ACRA needs to be notified of certain corporate changes Promoters o Someone who undertakes to form a company with reference to a given project and to set it going, and who takes the necessary steps to accomplish that purpose o Has obligations of fiduciary – obligated to act in good faith in the company’s interests o Must not place himself in a position of conflicting interests and duties, nor make a profit from his position without full  o Company may, upon incorporation disclosure to the company o May transact with the company he promotes and benefit from the transaction if full disclosure is made of his interests o If a promoter procures a company to transact without adequate disclosure of his interests in the transaction, company may rescind the contract, or seek an account of the promoter’s profits or both o Not entitled to remuneration unless company has agreed by way of binding contract o Pre-incorporation contracts, ratify a pre- incorporation contract Company register and other forms Companies are required to maintain certain registers and records of other forms o Company secretary is in charge of the registers S173 CA – electronic register of directors, CEOs, secretaries and auditors is to be maintained by ACRA o Company is to provide and keep details of the appointments of particular directors, CEOs, secretaries and auditors up to date Company must also keep the following records at their registered office: o Signed copy of director’s consent to act as director and a statement that he is not disqualified to act as director under this Act or any other written law o Documentary evidence of director’s change in name (if any) o Signed copy of secretary’s consent to act as secretary Minute books Minutes of all proceedings of meetings of directors and CEOs and general meetings must be entered in books kept for that purpose within 1 month of the meeting date Meeting minutes must be signed by the chairman of the meeting at which the proceedings were had or by the chairman of the succeeding meeting Records must be kept at the company’s registered office or principal place of business in Singapore Register of members (Part 5, Division 4 and 4A)  Every company is required to file information pertaining to share ownership and changes in share ownership in the company Private companies o From 3 Jan 2016, Registrar will maintain an electronic register of members of all private companies on ACRA o Contains the following: - Names of members - Addresses of members - In companies with share capital: ▪ Statement of shares held by each member of the amount paid or agreed to be considered as paid on the shares of each member and ▪ Date of every allotment of shares to members - Date on which the name of each person was entered in the register as a member - Date on which any person who ceased to be a member during the previous 7 years so ceased to be a member Public companies o Must contain: - Names and addresses of members - Date at which the name of each person was entered in the register as a member - Date at which any person who ceased to be a member during the previous 7 years so ceased to be a member - Statement of shares held by each member (public company limited by shares but not converted into stock) - Amount of stock or number of stock units held by each member (public company limited by shares and converted shares into stock) o Public companies with more than 50 members are required to keep an index of members and make changes to the index within 14 days of any alterations o Register of members and index shall be kept at the registered office of the public company o Public companies may keep outside Singapore a branch register of members, which should have the same type of particulars as the main register – forms part of the company’s register Register of director’s and CEO’s shareholdings (s164 CA) Should include: o Shares in that company or in a related corporation o Debentures of or any participatory interests made available by the company or a relate corporation which are held by the director/CEO or in which he has an interest o Rights or options of the director/CEO or of the director/CEO and another person or other persons in respect of the acquisition or disposal of shares in the company or a related corporation o Contracts to which the director/CEO is a party to under which he is entitled to a benefit Register of substantial shareholders (s88 CA) Companies listed on the SGX or companies to which Div 4, Part 4 CA applies are required to keep registers of substantial shareholders Register of charges (s134 CA) Must be kept at the registered office of the company Must contain all the charges specifically affecting property of the company and all floating charges on the undertaking or any property of the company Companies must also keep copies of the instruments creating the charge at their registered office Register of debenture holders (s93 CA) Companies which issue non-negotiable debentures have to keep a register of holders Registers have to include particulars of names and addresses of the debenture holders and the amount of debentures held by them Registrable controllers (s386 AKA) Most Singapore incorporated and foreign companies registered in Singapore have to comply with the registrable controller provisions unless exempted Controllers include individuals and corporations who have either significant interest in, or significant control of a Singapore or foreign company  o Interest in more than 25% of the shares in the company or foreign company o Interest in one or more voting shares in the company or foreign company and the total votes attached to that share, or those shares is more than 25% of the total voting power in the company o If the company does not have a share capital, the person has a significant interest in the company if the person holds a right to share in more than 25% of the capital, or more than 25% of the profits Obligations of companies with registrable controllers o Maintain a register of registrable controllers containing the particulars of the company’s registrable controllers o Take reasonable steps to identify the company’s registrable controllers o Keep the particulars in its register of registrable controllers up to date o Produce the register of registrable controllers and any related document to ACRA or public agency upon request Register of nominee directors Companies with nominee directors are also expected to keep and maintain registers of nominee directors Others Listed companies have to concern themselves with numerous reporting and disclosure requirements of the SGX The various registers maintained by companies may be subject to inspection rights by various stakeholders Registered office o The official address of the company for which to effect service of official correspondence/documents o Must be open for a minimum of 3 hours for Singapore companies and 5 hours for foreign companies during normal business hours every business day Penalties General penalty o Where the penalty or punishment for an offence is not expressly mentioned in the  relevant section, any person who is guilty of the offence shall be liable on conviction to a fine not exceeding SGD$1,000 Default penalty o Where a default penalty is provided in any section of the CA, any person who is convicted of an offence thereunder shall be liable, for each day during which the offence continues, to an additional penalty of an amount not exceeding that specified in the section or, if not specified, of not more than SGD$200 CORPORATE RIGHTS AND LIABILITIES Corporate Rights and Liabilities Proper Plaintiff Rule (Foss v Harbottle) o Company has the right to take action in respect of the infringement Decision to enforce the company’s rights o Usually the person/body that is vested with the general management powers of the company who may bring an action in the company’s name o Decision as to whether or not to commence proceedings must be made in accordance with directors’ fiduciary duties - Decision taken in good faith and without breaching fiduciary duty generally cannot be overridden by members without express provision in the company’s constitution o Where the board is in breach of their fiduciary duties, members may arrange to commence proceedings by authorising someone to do so by passing the required resolution Derivative action Power to decide whether or not to commence legal proceedings for the company vests in the board Members/individual directors can intervene/decide on legal action in limited circumstances Common law derivative action o Where the person bringing it relies on a cause of action belonging to someone else – cause of action which the company has rather than one belonging to the member themselves o Members may bring derivative action where there is “fraud on the minority”  - Legal wrong has been committed against the company - Majority or controllers of the company obtained some form of benefit at the expense of the company pursuant to the legal wrong and - The majority or controllers of the company abused their controlling power to prevent an action from being taken against themselves o Requirements to be fulfilled for the court to grant leave to a member to proceed with a common law derivative action 1. The company is entitled, prima facie, to the relief claimed 2. There has been a “fraud on the minority” 3. The action is bona fide in the best interest of the company rather than for some ulterior or purely self-service purpose o Shareholder bears the costs of the action Statutory Derivative Action (s216A and s216B CA) o Eligibility - Members - Any other person who is a proper person o Pre-requisites - Complainant has given 14 days’ notice to the board of his/her intention to make the application if the board does not bring, diligently prosecute or defend, or discontinue the action - The complainant is bringing the action in good faith and ▪ The purpose for which the application is brought must have an obvious nexus with the company’s benefit or interest - It appears to be prima facie in the interests of the company that the action be brought, prosecuted, defended or discontinued ▪ There should be a reasonable basis for the complaint and the action sought should be a legitimate/arguable one o Application to court for permission to: - Bring an action or arbitration in the name and on behalf of the company or - Intervene in an action or arbitration to which the company is a party for the purpose of prosecuting, defending or  discontinuing the action on behalf of the company Corporate liability Civil Liability o Can assume liability through rules of agency o Company is strictly liable for breach of contract lawfully entered into by its agents o Vicarious liability where the company’s employee’s commit a tort while acting in the course of their employment o Directly responsible where it can be shown that the wrong was committed by the “directing mind and will” of the company in the course of the company’s operation through the rules of attribution Criminal Liability o Company cannot be made vicariously liable for an offence committed by its servants (unless the offence is a strict liability one) Topic 2: Internal Management THE COMPANY’S CONSTITUTION Principle Case Law/Statute What is the constitution? Section 22 Companies Act Document or set of documents that sets out the Requirements as to the constitution basic structure by which a company is organised (1) The constitution of every company must Previously made up of memorandum of comply with such requirements as may be association and articles of association prescribed, must be dated and must state, in addition to other requirements — Memorandum and articles of association (a) the name of the company; Memorandum (b) if the company is a company limited by o Set out the important statutorily mandated shares — that the liability of the members is information limited; Articles (c) if the company is a company limited by o Regulates the relationship between the guarantee — that the liability of the members company and its members, as well as among is limited and that each member undertakes to members themselves contribute to the assets of the company, in the event of its being wound up while he or she is Prescribed content a member or within one year after he or she Company’s name ceases to be a member, for payment of the If the company is a company limited by shares, a debts and liabilities of the company statement that the liability of its members is contracted before he or she ceases to be a limited member and of the costs, charges and If the company is a company limited by guarantee, expenses of winding up and for adjustment of a statement that the members are liable to the rights of the contributories among contribute to the assets of the company such themselves, such amount as may be required amount not exceeding a specified amount when not exceeding a specified amount; the company is being wound up  If the company is an unlimited company, a (d) if the company is an unlimited company statement that the liability of its members is — that the liability of the members is unlimited unlimited; If the company is an unlimited company or (e) if the company is an unlimited company company limited by guarantee, the number of its or a company limited by guarantee — the members at the time of its application for number of members with which the company registration is applying to be registered; The full names, addresses and occupations of the (f) the full names, addresses and occupations subscribers to the constitution of the subscribers to the constitution of the Statement that such subscribers wish to form a company; and company on the terms of the constitution and they (g) that such subscribers are desirous of agree to subscribe for a stated number of shares being formed into a company in pursuance of Company is not required to state its objects in its the constitution and (where the company is to constitution have a share capital) respectively agree to take the number of shares in the capital of the Internal regulations company set out opposite their respective Every company is required to adopt in its names. constitution regulations that govern its internal Section 4(1) Companies Act affairs Definition of constitution Model constitutions prescribed under s36(1) only “constitution”, in relation to a company, means — apply to private companies and companies limited (a) the constitution of the company which is by guarantee registered with the Registrar under section 19, - Under s37(2) CA, private company as may be amended from time to time; and limited by shares or company limited by (b) in the case of a company incorporated guarantee may adopt, in whole or in part, before 3 January 2016, the memorandum of the model constitution prescribed for the association of the company, the articles of type of which it belongs association of the company, or both, in force immediately before that date; Company may adopt the relevant model constitution in whole or in part Section 35(3) Companies Act (3) Despite subsection (2), where immediately Legal effects of the constitution before 3 January 2016, regulations were in force for a company, whether the regulations were The constitution as a contract (s39(1) CA) prescribed in the company’s registered articles, or o S39(1) has the effect of creating a contract were applicable in lieu of or in addition to the between the company and all its members, company’s registered articles by virtue of section and between the members inter se 36(2) in force before that date, such regulations o Confers upon a member the personal right to bring an action to enforce a regulation of the are deemed to be the regulations for the company constitution, or to restrain its breach contained in the company’s constitution for the o Member may also institute legal actions purposes of subsection (1) until such time as the constitution of the company is amended to replace directly against another member without or amend those regulations. joining the company as a party o No member shall be bound by a subsequent Section 23 Companies Act amendment to the constitution if it requires (1) Subject to the provisions of this Act and any him to take or subscribe for more shares or in other written law and its any way increases his liability to contribute to constitution, a company has — the share capital than what he has agreed at (a) full capacity to carry on or undertake any the time when he became a member unless he business or activity, do any act or enter into agrees in writing to be bound by the any transaction; and agreement (b) for the purposes of paragraph (a), full rights, powers and privileges.  o Restrictions on member’s right to enforce a Section 25 Companies Act provision of the constitution (1) No act or purported act of a company - May not enforce a right that is conferred (including the entering into of an agreement by upon him in his capacity as outsider rather the company and including any act done on behalf than member of a company by an officer or agent of the - May not enforce regulation that does not company under any purported authority, whether confer upon him personal rights but express or implied, of the company) and no merely imposes an obligation on the conveyance or transfer of property, whether real company or personal, to or by a company is invalid by - May be barred from recovering damages reason only of the fact that the company was for loss sustained by operation of the no- without capacity or power to do such act or to reflective loss rule execute or take such conveyance or transfer. o Differences between constitution and regular Section 25A Companies Act contract Despite anything in the constitution of a company, - Contractual status is derived from the a person is not affected by, or deemed to have terms of the statute and is constituted by notice or knowledge of the contents of, the the act of registration constitution of, or any other document relating to, - Long-term relational contract the company merely because — - May be altered by special resolution (a) the constitution or document is registered by - May not be vitiated on the grounds of the Registrar; or misrepresentation, mistake, undue (b) the constitution or document is available for influence or duress inspection at the registered - May not be rectified on the ground of office of the company. mistake Section 35 Companies Act - Document of “public” character” (1) Subject to this section, a company’s - Not all provisions are directly enforceable constitution must contain the regulations for the by members company. Member and outsider rights Section 37 Companies Act o Constitution is binding only on persons (1) A specified company may adopt as its who are parties to it constitution the whole or any part of the model o Person who is not a member of the company constitution prescribed under section 36(1) for the would usually have no standing to sue, or be type of company to which it belongs. sued against, in connection with rights or (2) A specified company may in its constitution obligations conferred by the constitution adopt the whole model constitution for the type of o Qua-member rule – only those rights company to which it belongs by reference to the conferred upon him in his capacity as a title of the model constitution. member are enforceable Section 39(1) Companies Act Internal irregularities (1) Subject to this Act, the constitution of a o No personal action may lie in respect of a company, when registered, binds the company and breach of the constitution that amounts only the members thereof to the same extent as if it to an “internal irregularity” respectively had been signed and sealed by each - Such breach is for the company to remedy member and contained covenants on the part of o S392(2) – proceedings under the Act are not each member to observe all the provisions of the invalidated by any procedural irregularity constitution. “unless the Court is of the opinion that the Section 26(1) Companies Act irregularity has caused or may cause (1) Unless otherwise provided in this Act, the substantial injustice that cannot be remedied constitution of a company may be by any order of Court and by order declares altered or added to by special resolution. the proceeding to be invalid” Section 33(1) Companies Act Interpreting the constitution (1) Subject to this section, a company may by Starting point: give effect to the intention of the special resolution alter the parties as objectively ascertained provisions of its constitution with respect to the Objective approach objects of the company, if any. o To give effect to the intention of the parties as Tong Kok Chai v Ocean Front Pte Ltd SLR objectively ascertained 642 o Meaning of constitutional regulation is found - Dicta that amendments to the constitution in what its language would convey to a must be bona fide in the interest of the reasonable person company – not adopted yet o “contextual approach” Section 74 Companies Act Parol evidence rule (1) If, in the case of a company the share capital o Prohibits the use of extrinsic evidence to of which is divided into different classes of shares, prove or vary a written document that provision is made by the constitution for contains, on its face all the terms of an authorising the variation or abrogation of the agreement rights attached to any class of shares in the - Extrinsic evidence may be admitted to aid company, subject to the consent of any specified in the interpretation of a document (s94(f) proportion of the holders of the issued shares of Evidence Act) that class or the sanction of a resolution passed at - proviso may be invoked to admit a separate meeting of the holders of those shares, contextual evidence provided that such and pursuant to that provision, the rights attached evidence is relevant, reasonably available to any such class of shares are at any time varied to all the contracting parties, and relates to or abrogated, the holders of not less in the a clear and obvious context (Zurich aggregate than 5% of the total number of issued Insurance v B-Gold Interior Design & shares of that class may apply to the Court to have Construction Pte Ltd) the variation or abrogation cancelled, and, if any - Courts should usually be reluctant to such application is made, the variation or admit extrinsic background evidence abrogation does not have effect until confirmed by where the document in question is the Court. intended for use not only by its original (2) An application is not invalid by reason of the drafters and parties, but also by third applicants or any of them having consented to or parties who may in future rely on it (Foo voted in favour of the resolution for the variation Jong Peng v Phua Kiah Mai) or abrogation if the Court is satisfied that any - Restrictive approach in Zurich Insurance material fact was not disclosed by the company to is equally applicable to company those applicants before they so consented or constitutions voted. “Gaps” in the constitution – express or implicit (3) The application must be made within one incorporation of terms contained in sources other month after the date on which the consent was than the Constitution given or the resolution was passed or such further o Court held that where the articles of time as the Court allows, and may be made on association are silent on the procedure for behalf of the shareholders entitled to make the appointing the chairman of the board, the application by such one or more of their number procedure set out in the shareholders’ as they appoint in writing for the purpose. agreement may be incorporated to fill the gap if the shareholders have by their conduct Enforcing the provisions of the Constitution demonstrated a clear intention to abide by it Section 39(1) Companies Act (obiter: court accepted that the gap could also (1) Subject to this Act, the constitution of a have been bridged by evidence of past company, when registered, binds the company and practice alone) (Golden Harvest Films the members thereof to the same extent as if it Distribution (Pte) Ltd v Golden Village respectively had been signed and sealed by each Multiplex Pte Ltd) member and contained covenants on the part of  “Gaps” in the constitution – implied terms each member to observe all the provisions of the o Contractual term may be implied either in fact constitution. or in law, but no such term will be implied to Wong Kim Fatt v Leong & Co Sdn Bhd 1 contradict an express term MLJ 140 o Rationale: give effect to the parties’ presumed - Empowering the requisition of shares of intention the only other holder is not repugnant to o term may only be implied if there was a the CA – merely a matter of contractual “true” gap – the gap has to relate to a matter obligation and the plaintiff had to be held that the parties failed to consider at the time to the obligation he had taken of contracting (Sembcorp Marine Ltd v PPL Sembcorp Marine Ltd v PPL Holdings Pte Ltd Holdings Pte Ltd) 4 SLR 193 - Main issue was whether a term could be - Interpretation of the Constitution is like implied into a company’s articles of the interpretation of other contracts association as well as a shareholder’s - Interpretation – the process of ascertaining agreement the meaning of expressions in contract to objectively ascertain the parties’ intentions Remedies for breach of constitution as expressed in the contract Declaratory and injunctive relief - No principle of contract law that every o Discretionary in nature gap must be filled, but the law provides that in some cases, the gap ought to be Altering the constitution (s26 CA) filled because the parties are presumed to Company can alter constitution by special have intended that to be so resolution - Interpretation of terms is the process by o Special resolution is one that is passed by ¾ which the court fills a gap in the contract or higher majority of votes cast at a general to give effect to the parties’ presumed meeting intentions o Company must lodge a copy of the resolution, - Not all gaps in a contract can be remedied order or document and the amended by an implication of a term – in the court’s constitution with the Registrar within 14 days view, it is only where the parties did not after the date of the said resolution, order or contemplate the issue at all and so left a document gap where it would be appropriate for the o Company may not, by altering its court to consider if it will imply a term constitution, undermine or otherwise into the parties’ contract adversely affect any legal right or interest that Malayan Banking Ltd v Raffles Hotel Ltd [1965– has accrued under the constitution prior to the 1967] SLR(R) 161 (Federal Court of Malaysia in alteration Singapore) o Company may not contract to deprive itself of - Provision in the constitution empowering the statutory power to amend its constitution the lessors and their assigns to appoint a Restraints on alteration director of the plaintiff company o Company that has voluntarily adopted object - Articles of association did not, as between clauses in its constitution may amend them by the company and a person who is not a special resolution member, constitute a contract of which - Requires at least 21 days’ written notice of that person could take advantage the proposal to table the resolution at a - The article in the constitution was not general meeting binding on the plaintiff company as - Notice must be sent to all members and between the plaintiff company and an trustees for debenture holders outsider o Provision entrenched by the memorandum - Defendant, as an outsider, could not take before 1 April 2004 may only be altered by advantage of a power purporting to be given by the constitution  unanimous agreement of the company’s Independent State of Papua New Guinea v PNG members Sustainable Development Program Ltd o Entrenching provisions (s26A(4) CA) SGHC 19 (High Court) [(3),(4),(2),(1)] - Non-members derive no rights under a - Provision of the constitution to the effect company’s constitution that some other provision can’t be altered Southern Foundries (1926) Ltd v Shirlaw or can only be altered by special AC 701 resolution (75% or more majority) or - Company cannot justify the breach of a where other specified conditions are met contract with a third party by amending its - Enables shareholders to safeguard certain constitution constitutional rights by setting more Thio Keng Poon v Thio Syn Pyn 3 SLR stringent requirements for their alteration 143 (Court of Appeal) - Must be included into the constitution at - Only if it is shown that the non- the time of incorporation or added with compliance has caused substantial the agreement of all company members injustice or prejudice to an interested - May not be removed or altered except party, should the proceeding be held to be with the agreement of all the company’s invalid by the court members - Irregularity has to be procedural to fall o Bona fide in the company’s interests within the scope of s392 - Where a company is altering the - Substantial injustice: constitution, the alteration has to be made 1. There must be. Direct link between the "bona fide for the benefit of the company procedural irregularity in question and as a whole” the injustice suffered - Alteration is presumed to be valid unless 2. The injustice must be of a substantial there is evidence of bad faith nature - Alteration will not be upheld if it is one 3. The aggrieved partu had to show that which no reasonable person would there might or could have been a consider to be for the company’s benefit different result, if not for the - Constitutional alteration that discriminates occurrence of the procedural between shareholders but which has no irregularity obvious adverse impact on the company Chang Benety v Tang Kin Fei 1 SLR 274 itself will not be impeached on a (Court of Appeal) conventional application of the bona fide - Lack of quorum is a procedural test unless the majority is proven to have irregularity acted in bad faith - Where such a quorum requirement is - Alteration of the constitution may be breached, there will prima facie be a invalided pursuant to application under substantial injustice to the side which s216 CA – where a shareholder adversely exercised its deadlock rights affected by the alteration is able to Section 25(2) Companies Act establish that the majority has conducted (2) Any such lack of capacity or power may be the company’s affairs in a manner that asserted or relied upon only in — constitutes commercial unfairness (a) proceedings against the company by any member of the company or, where the Ultra vires doctrine company has issued debentures secured by a “beyond the power” floating charge over all or any of the Abolished by s25 CA company’s property, by the holder of any of Since foreign companies do not fall under s 25, those debentures or the trustee for the holders the common law ultra vires doctrine may apply. In of those debentures to restrain the doing of other words, transactions entered into by a any act or acts or the conveyance or transfer of any property to or by the company;  company outside its objects clause were ultra vires Section 409A Companies Act and void. (1) Where a person has engaged, is engaging or is proposing to engage in any conduct that Shareholders’ agreements constituted, constitutes or would constitute a Regulates shareholder relationships, separate from contravention of this Act, the Court may, on the the constitution application of — Parties are free to stipulate terms as they deem fit (a) the Registrar; or (b) any person whose interests have been, are or would be affected by the conduct, grant an injunction restraining the firstmentioned person from engaging in the conduct and, if in the