Startup FAQs: Should a company specify its business activity when incorporating?

May 26

Startup FAQs: Should a company specify its business activity when incorporating?

Question: Should we have a particular set of business activity or objects when incorporating a company in Singapore?

Answer: The 2004 Amendment Act of Singapore removed the need to specify Objects (i.e. specific activities) in the memorandum of association. This is in line with changes that took place around the same time in the UK as well.

As it stands today, companies in Singapore do not need a Memorandum of Association, as this has been merged with the Articles Of Association into a document called the Constitution. And nowhere in the Constitution does the company have to specify activities of what the business plans to be involved in. Singapore companies have the right to participate in anything and everything that is legal!

Question: What are those two activities we must mandatorily specify when incorporating a company (or Partnership) in Singapore?

Answer: As you go through the process of incorporating a company in Singapore, you will be asked to specify up to two principal activities. These activities can be chosen from the list specified in the Singapore Standard Industrial Classification (SSIC). Here is a freely downloadable copy of the full SSIC codes, courtesy of the Department Of Statistics Singapore.

It is important to understand that while these are your two primary declared activities, your company is free to do other nature of business in an unfettered manner, regardless of whether such business is related to your primary declared activities.

Where the two SSIC codes chosen during incorporation matter are when you seek a further government license, e.g., a Recruitment firm must choose ‘SSIC code 78104 – Employment agencies’ to receive the Employment Agency licence from MOM and during your bank account opening.
Answer: Here are some tips for you:

Question: What are some of the things to keep in mind when choosing SSIC codes for our company?

  • Choose an SSIC code associated with licensed activities discriminately. An example of which is ‘SSIC Code 64994 Remittance services’, a code chosen by one of Futurebooks’ fintech clients, because they then applied to Monetary Authority Of Singapore for a remittance licence.
  • Select ‘SSIC Code 64202 – Other Holding Companies’ only if that accurately describes your primary activity. Holding companies are taxed more restrictively by the Inland Revenue of Singapore (IRAS) and do not receive most of the regular tax deductions. Banks are also more likely to scrutinise Holding companies during their corporate account openings.
  • Write a one-sentence custom description of your business activity for your Business Profile. You do not have to stick to the SSIC code standard description; you can write something that describes your business more accurately for your Business Profile on ACRA.

 


Futurebooks business activity
Futurebooks’ activity listing on our ACRA Business Profile. Note the custom descriptions we have created for Futurebooks.


 

Question: Do Singapore companies have a choice of having an Objects clause in their Memorandum/Constitution?

Answer: Yes, a company can choose to have an Objects clause specifying the nature of activities the business will be involved in.

A company can also choose to have a restricted activities list, i.e. nature of activities the company will never be involved in. Both of these can be entrenched in the Constitution of the company, thus mandating the Directors to stick to the allowed Objects list or stay away from activities in the restrictions list.

However do note, even for a company which has an Objects list/ restricted activities clause in its Constitution, the Ultra Vires doctrine does not apply in Singapore. In effect, any contracts the company enters into are considered valid even if they contradict the allowed/disallowed list of activities in the Constitution as third parties are not expected to be aware of this. The Directors of the company, however, can be held accountable for violating the Company’s constitution in such a case.

 

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