Ways of incorporation for Singaporean Associations
The increasing trend in Singapore is for associations and other not-for-profit organisations to be set up as companies limited by guarantee.
An association in Singapore can be set up as a Company Limited by Guarantee (“CLG”) under the Companies Act or a society under the Societies Act. While historically, associations used to be set up as societies, the increasing trend in Singapore is for associations and other not-for-profit organisations to be set up as CLGs instead.
CLG associations are able to hold assets directly in their own name without the need for trustees, and can more easily carry out commercial operations.
Arguably, a CLG is better able to have members delegate powers to its board of directors and for the board to delegate responsibility to management. Conversely, the members of a society have greater power and control over the affairs of the society than the members of a CLG.
While a CLG is subject to ongoing public disclosure requirements and greater annual reporting requirements, these are not particularly onerous.
We set out in the table below, a comparison of the salient features of a registered society and a CLG:-
CLG | Registered Society | |
---|---|---|
Governing legislation |
Companies Act (Cap. 50) |
Societies Act (Cap. 311) |
Regulating authority |
Accounting and Corporate Regulatory Authority (“ACRA”) |
Registrar of Societies (“ROS”) |
Registration requirements |
|
|
Constitutional documents |
Memorandum and Articles of Association |
Constitution - The ROS provides a suggested form of Constitution but parties may adopt their own Constitution. |
Governing bodies |
|
|
Duties and liabilities of members of the governing body |
Directors owe a duty of care and fiduciary duties to the CLG, which include a duty to act in the best interests of the company, duty to act for a proper purpose, etc. |
No clear duties prescribed by law, although it would be expected that Committee Members act in the best interests of the society. Generally office bearers will be responsible in dealings with outside persons (for president), for record keeping (for Secretary), collecting and disbursing funds and keeping records of the same (for Treasurer). Trustees holding immovable properties will owe fiduciary duty to the society. |
Ongoing requirements |
Audit- accounts need to be audited by external certified accountants Annual general meetings required. Information relating to directors and personal particulars of officers also have to be provided to ACRA. |
Audit- proper accounts and records to be kept. External auditor required where the gross income or expenditure of the society exceeds $500,000 in that financial year. Annual general meetings also required. |
Legal personality Members’ liabilities |
|
|
Amendment of constitutional documents |
Members may by special resolution alter its memorandum and articles of association (approval of ACRA not required) |
Members need to seek ROS approval to amend its Constitution |
Dissolution |
|
|
Abdul Jabbar is Equity Partner at Rajah & Tann LLP, Singapore. He holds a LLB (Honours) & NUS Diploma in Islamic Banking & Finance. Abdul can be contacted at abdul.jabbar@rajahtann.com
This article first appeared in Associations, Edition 26 – September 2010