Singapore Companies Act
By: robertfogartys | Posted: 04th February 2011
Like any other land, Singapore too has its Company Act that governs the businesses incorporated in Singapore. It is known as the Company Act (Cap 50, 1994 Revised Edition of the Singapore Statues). This is the new Act that came into effect on January 30 2006 and forms the basic Act and depending upon the nature of the business and other criteria other Acts too collaborate with this Company Act to form a complete set of rules. E.g. are the Insurance Act (Cap 142, 1994 Rev Ed.) for Insurance Companies and Limited Liabilities Partnership Act (Act 5 of 2005) for Limited Liabilities Partnership Companies etc.
Under Singapore Companies Act, a registered company is considered as an individual entity, thereby giving it the power to hold properties in its name, sue in the court of law and also itself can be sued by others. This also entails the fact that the company shareholders are not identical to the company thereby limiting their financial rights. This implies that in case the company runs into a loss or has accrued huge debts, the burden of it is to be borne by the company alone and not shared by the Directors and Shareholders, except to the extent of loosing the shares.
But this too has a restriction, for the simple reason of safeguarding the company's interest.
(a) And this exception is done under section 339(3) and 340(2) of the Act, which says that in case of knowledgeable yet unjustified availing of debts with improper intention, it would be treated as an offence. The said person of the company would be personally held responsible for repaying the debts, either partly or wholly.
(b) Under Section 340(1) of the Singapore Companies Act, if a company is found to be doing business with a negative intention of swindling money and cheating others and in due course is in the process of winding up due to debts, the persons involved in the entire process of setting up and doing business with a complete knowledge of the fraudulent intentions would be personally liable. The court may direct the person(s) to repay the entire debts personally.
Section 157(A) of the Act clearly puts in a distinction of management and ownership. So according to the Act, if a person has ownership in the business, he is in no way automatically entitled to be in the management. Management is supposed to run independently.
With time, changes the situation and so also is the requirement. In order to keep the contents relevant to the current situation yearly amendments are being done in the Singapore Companies Act. The first one that came into effect was the Companies (Amendment) Act 2001. The latest one was the Companies (Amendment) Act 2005, which incorporated major changes, after the recommendation of CLRFC (Company Legislation and Regulatory Framework Committee).
If with proper understanding and knowledge of the essential Acts under the Singapore Companies Act, a company goes for registration and business operation, it would be a pleasure to know that the Singapore rules are straight forward and clear in their meaning. They are easy and simple to follow too.
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Tags: money, intention, extent, doing business, restriction, offence, acts, debts, insurance, insurance companies, nature of the business, singapore companies