(a) What are the main form of business organisation for medium and large scale enterprises in this economy?

Under Singapore law, businesses can be organised in any of the following forms:

(i) Company;

(ii) Partnership; or

(iii) Sole proprietorship.

The main form of business organisation for medium and large scale enterprises in Singapore is the company. Sole-proprietorships and partnerships are not suitable as the principal form of business organisation for such enterprises because of: (a) the inherent limitations in the raising of capital; (b) the inability in law to limit the liability of the owners of the enterprise; and (c) the lack of a legally prescribed framework for separating ownership of the enterprise from its management.

However, under existing law certain professions, notably lawyers and accountants, prohibit their practitioners from providing their professional services using the corporate form.

(b) Is there a system of registration for these business organizations? If so, briefly describe.

(i) Sole proprietorships

Under the Business Registration Act (Cap 32, 1985 Ed), any person who carries on business in Singapore must register that business with the Registrar of Businesses. Registration is required even if the person intends to carry on business in his own name. The principal exemption under the statute is for a foreign or local company which is registered under the Companies Act (Cap 50, 1994 Ed) and which carries on business under a name which consists of its corporate name without any additions.

The application for registration must be made in the prescribed form and must be made before the applicant commences carrying on business. The particulars required to be supplied to the Registrar include the name of the business, the general nature of the business, the principal place of the business and the names and particulars of the owners of the business. The Registrar can reject the proposed name if it is identical or misleadingly similar to that of another business or corporate name or is otherwise undesirable. The registration must be renewed annually. The register is open to the public and can be examined physically or electronically via remote access upon payment of a nominal fee.

Default in the registration requirements is an offence and renders any contract entered into by the defaulter unenforceable by the defaulter unless the Court otherwise orders.

(ii) Partnerships

Partnerships must also be registered under the Business Registration Act. The procedures, requirements and consequences of registration are the same as in the case of a sole proprietorship, save that partners need only make a single joint application for registration. In addition, the rights and liabilities of partnerships both internal and external are governed by the Partnership Act, in pari materia with the English Partnership Act 1890. Singapore however has not enacted an equivalent to the English Limited Partnership Act 1904.

(iii) Local companies

Under the Companies Act (Cap 50, 1994 Ed), two or more persons associated for any lawful purpose may by subscribing their names to a memorandum and complying with the requirements as to registration under that Act form an incorporated company.

The requirements as to registration stipulate that the persons desiring the incorporation of a company shall lodge with the Registrar of Companies: (a) the Memorandum and Articles of association of the company; (b) a statutory declaration from a solicitor or an accountant or from a proposed director or secretary of the company that all of the requirements of the Companies Act have been complied with; (c) a certificate from a notary public, a solicitor or an approved company auditor as to the identity of the subscribers to the memorandum and as to the identity of any persons named as officers of the proposed company.

Upon registration, the Registrar issues a certificate of incorporation and on and from the date of that certificate, the subscribers to the memorandum and the future members of the company constitute a body corporate by the name contained in the memorandum capable forthwith of exercising all the functions of an incorporated company and of suing and being sued and having perpetual succession and a common seal with power to hold land.

he members' liability for the debts of the company in its insolvency is determined by the type of company it is. There are three types: (a) a company limited by shares; (b) a company limited by guarantee; or (c) an unlimited company. Virtually all business enterprises are registered as companies limited by shares, in which case the liability of a member is limited to the amount, if any, unpaid on the shares held by him.

Furthermore, a company can be registered as a private company or a public company and can be converted easily from one to the other during its existence. A private company is one that has the following restrictions in its Articles of Association:-

(i) restriction on the right to transfer its shares;

(ii) restriction on the number of members to not more than 50;

(iii) prohibition on the public subscription for its shares or debentures; and

(iv) prohibition on an invitation to the public to deposit money with it. Any company that is not a private company is a public company.

An exempt private company is one where none of its shareholders is a company and where the number of shareholders does not exceed twenty.

The register of companies is open to the public and can be examined physically or electronically via remote access upon payment of a nominal fee.

(iv) Foreign companies

A company incorporated outside Singapore and which either establishes a place of business in Singapore or carries on business in Singapore must lodge with the Registrar of Companies the particulars prescribed under Division 2 of Part XI of the Companies Act. These particulars include evidence of its corporate status, its corporate constitution, a list of its officers, the names of two or more natural persons resident in Singapore who are authorised to accept service of process on behalf of the company and the address of its registered office in Singapore.

The register of foreign companies is open to the public and can be examined physically or via electronic access upon payment of a nominal fee.

 

(c) Are there any minimal capitalisation requirements for these enterprises?

There is no minimum capitalisation requirement for any of the forms of business organisation referred to above. However, it is common to find companies with a paid up capital of $2. This is because a company must have at least two members initially, and $1 is a convenient unit into which to divide a company's share capital.

 

(d) Briefly describe the main features of each type of these business organisations, by reference to public/private/state ownership and management; accounting and auditing responsibilities (particularly the standards which apply to accounting and auditing practices); director and management responsibility (including, if relevant, possible liability for debts); and the role of regulatory authorities regarding these enterprises.

 

(i) Public/Private/State ownership

There is no restriction on the composition of the ownership of any form of business organisation described above. Thus, there is no requirement of a minimum local ownership participation in enterprises established by foreign entities. Furthermore, the same corporate form used by private business enterprises can be and is used by the State for profit for example Temasek Holdings Ltd. The State also has a majority or controlling interest in several medium and large scale business enterprises, known informally as government linked companies ("GLCs"), some of which are listed on the Stock Exchange of Singapore.

(ii) Accounting and Audit Responsibilities

Other than the requirements of the revenue legislation, there are no statutory provisions imposing accounting or audit responsibilities on sole proprietorships or partnerships.

The accounting and audit duties of companies are set out in Part VI of the Companies Act. All companies are required to keep and retain for 7 years thereafter such accounting and other records as will sufficiently explain the transactions and financial position of the company and enable true and fair profit and loss accounts and balance-sheets to be prepared from time to time. All companies are also required to appoint an auditor whose duty it is to examine the accounts prepared by the directors and to report on whether they present a true and fair view of the matters they comprise.

The directors of all companies must at least once in every calendar year and at intervals of not more than 15 months lay before the company at its annual general meeting a profit and loss statement for the period since the preceding account and a balance sheet, both made up to a date not more than 6 months before the date of the meeting, and both giving a true and fair view of the profit and loss of the company or of the true state of the company, as the case may be, as at that date. The profit and loss statement and the balance sheet must be audited and must be circulated together with the auditors' report thereon and the directors' report thereon to the members of the company at least 14 days before the annual general meeting at which the accounts are to be laid before the members. The directors' report is required to make substantial disclosure of various matters enumerated in the Act, most of which relate to events during the preceding year which could have a material impact on the accounts. If the company is a holding company, consolidated accounts for the holding company and its subsidiaries over the same period must also be prepared and presented together with an auditors' report and a directors' report thereon.

Since 1989, every listed company has been required by law to have an audit committee. The committee must have at least 3 members, a majority of whom are independent of the company.

All companies except exempt private companies must lodge their audited accounts with the Registrar of Companies where the accounts are available for examination by the public upon payment of a nominal fee.

(iii) Director and Management Responsibility

As ownership of the enterprise and its management are not separated by law in sole proprietorships and partnerships, there are no statutory provisions regulating management responsbility in either form of business organisation.

Director and management responsibility for companies are regulated by Division 2 of Part V of the Companies Act. Every company is required to have at least two directors, all of whom are natural persons and at least one of whom is resident in Singapore. A director is prohibited by statute from resigning or vacating his office unless there remain at least two directors, at least one of whom is resident in Singapore.

The Articles of Association of a company normally charge the directors with the function of managing the business of the company and give the directors the power to exercise all such powers of the company other than those that the Companies Act or the Memorandum and Articles of Association of the company reserve to the members. The Companies Act requires a director at all times to act honestly and use reasonable diligence in the discharge of the duties of his office. At common law, a director must act towards the company at all times in good faith and in the company's best interests. This is supplemented by the Companies Act, which allows directors to have regard to, inter alia, the interests of the company's employees generally. He must not place himself in a position where his duty to the company and his personal interest may conflict. Further, he must employ the powers and assets that he is entrusted with for the purposes for which they were given, and not for any collateral purpose.

These duties are buttressed by extensive disclosure requirements and by restrictions on a company's ability to extend loans to its directors or to enter into substantial property transactions with directors.

Undischarged bankrupts may not take part in the management of a business registered under the Business Registration Act and may not act as a director of a company registered under the Companies Act.

(iv) Role of Regulatory Authorities

The Registry of Businesses is the only regulatory authority which oversees sole-proprietorships and partnerships. Its powers of oversight are limited to ensuring that the registration and renewal requirements are complied with.

There are various regulatory authorities which oversee companies. The Registry of Companies oversees the registration of companies and the continuing obligations of companies of a regulatory nature, for example the obligation to hold annual general meetings and to lodge annual returns.

The Securities Industry Council oversees the practice to be followed in takeovers and mergers.

The Stock Exchange of Singapore regulates companies which have been admitted to the official list of the Stock Exchange of Singapore and whose shares are therefore publicly traded. In general, listed companies have to comply with stricter rules as to disclosure than unlisted companies.

he Minister of Finance plays a residual role in the regulation of companies. He is empowered under Part IX of the Companies Act to initiate investigations into the affairs of a company where a prima facie case has been established that such investigations are desirable for the protection of the public, the members, the creditors or those having an interest in the company otherwise than by shares or debentures; or where such investigations are in the public interest. The investigations are undertaken by an inspector appointed by the Minister. The inspector has very wide powers to take possession of the company's books, interview present or former officers and to demand production of documents by present or former officers.

Officers of the Commercial Affairs Department, which is a department of the Ministry of Finance, are clothed with all the powers of police officers when investigating criminal offences under the Companies Act or under the Securities Industry Act.

(a) Are there any relevant observations to make concerning political, social (powerful family), financier (bank equity or involvement) or cultural controls or influences in respect of these types of business organisation?

 

In addition to establishing and maintaining a legal, economic and administrative framework conducive to business enterprise, the Government of Singapore itself is actively involved in the economy through statutory boards engaged in public and social infrastructures and through its for-profit GLCs.

The government-linked Development Bank of Singapore is an active player in the financial market. It is not only a major source of credit to corporations but also actively finances other financial institutions. Over the past decade, through equity participation, it has helped to introduce new lines of business in Singapore. For example, it has participated in the establishment of several merchant banks, a discount house, a leasing company and a factoring company. The Government of Singapore also formed the Government of Singapore Investment Corporation which together with Temasek Holdings (a Government owned holding company) manages the Government's long term investments.