Summarize the steps required to register Kreative Korner Pvt Ltd as a private company limited by shares and the costs involved, if any.
Name of the company:
In the way of registering Kreative Korner Pvt Ltd, the applicants have to file an application to the registrar for reserving the name (Kreative Korner Pvt Ltd) for them. This shall be done by filling out the prescribed form for a period of 60 days. During this period, no other applicant can use or register the reserved name. However, it should be noted that the name that has been chosen should not be identical to any other company, Limited Liability Partnership (LLP) or corporation or any other business name. The cost for this will amount to S$15 per name reserved.
Registration of the company:
Since, in the above step, the applicant has reserved the name for 60 days, during that period, the applicants will be required to submit a number of documents with the Registrar of Companies along with the payment of the prescribed fees. Following documents are required to be lodged:
- Memorandum of association (MOA)
- The Articles of association (AOA)
Both of these documents are the company’s constitutional documents. The memorandum of association includes the following details:
- Name of the company
- Objectives of the company
- The amount of the share capital
- A private company limited by shares
On the other hand, the articles of association are known to be the by-laws of the company that directs the company for efficient and effective management. It will act as a guide map for the company deal with the following matters:
- The issue of share capital
- The rights attached to the shares
- the mechanics of meetings
- Appointment of directors
- Power of directors
- dividends and capitalisation of profits and other subsidiary matters
The other documents required are:
- Capital structure of the company in which all the details regarding the common stock and paid up share capital will be mentioned.
- The list of the directors of the company
- Documents regarding the place of the registered office of the company.
After submitting all these documents along with the prescribed fees, the registrar, if satisfied, will issue a certificate of incorporation (Mishra, 2011). The date mentioned on the certificate is known to be the date of incorporation. The certificate of incorporation acts as evidence that it has been duly attested and registered by undergoing the proper process. A certificate of incorporation can also be considered as a birth certificate of the company.
In the event that a promoter is involved in the registration of the company, any profit or benefit that will directly affect the company should be disclosed in a proper manner. He is not allowed to make any secret profit out of the company or at the cost of the company.
The cost of incorporation amounts to S$300.
Anthony and Bella would like the articles of KreativeKorner Pte Ltd to stipulate that each is entitled to be a director of the company, and they cannot be removed against their wishes. They would also like to include a provision that all business decisions involving amounts more than $50,000 must be agreed to by both directors. Please advise Anthony and Bella if they can do so. If so, what is required? Is there anything else that they can do to safeguard their interest?
Yes, they can do so because both of these clauses relate to the following matters:
- The respective rights and obligations of members: Here in this matter, the members are notified about the respective rights and obligations that they hold in regard to the company. Anthony and bella would be considered as permanent partners and they cannot be removed against their wish. They are the prime owners of the company and none of the special resolutions to remove them are not considerable.
- The division of powers and the relationship between the general meeting of shareholders and board of directors: in this matter, it is decided that how the powers for taking decisions and solving matters is divided. Here in this case, Anthony and Bella want that all the decision making power for making decision worth more than $50000 will be concentrated with them. Any decision that involves more than $50000 cannot be taken without the prior agreement of both the partners. In case any of the two partners deny to take a decision, then the decision taken by only one partner is not acceptable and it will be considered null and void.
However, they are required to fulfil the following requirements to add the above mentioned clauses in the Articles Of Association. (Han, 2009).
In order to add these clauses, they are required to:
- Pass a special resolution in the General meeting where 75% of the members present will agree to these additions.
- While voting for the alteration of the articles, one of the members should vote ‘bona fide for the benefit of the company as a whole’. In other words, it has to be decided that will this addition be useful and benefit the company or not.
- In the case, the memorandum of association prohibits the alteration or addition of the articles of association, then it is not possible to alter the articles of association.
Thus, from the above 2 clauses:
- Anthony and Bella would be the director of the company and cannot be removed.
- The decisions exceeding the capital outlay of $50,000 should be approved by both the directors.
Can be made unalterable, or the interest can be safeguarded by adding both the clauses to the Memorandum of Association. Memorandum of association is known to be the most important and prime document for the company. It states all the objectives and the purposes of the company. It governs the relationship of the company with the outside world. In simple words, it is called as a constitution for the company. Hence by adding these clauses in the MOA, none of the members will not be able to alter it. Anthony and Bella will mention in the MOA that these two clauses are prohibited to be altered because the company has an inherent right to alter the articles but when it is prohibited by the memorandum of association, it will become impossible to alter those articles, and their interests will be safeguarded Peters’ American Delicacy Co Ltd v Heath (1939) 61 CLR 457
Assuming that KreativeKorner Pte Ltd want to subsequently amend its memorandum and articles, please advise Anthony and Bella on the necessary procedures.
If Anthony and Bella want to subsequently amend its memorandum and articles, then they can do so by passing a special resolution Sec 26(1). The amendment of memorandum was prohibited till 2004 but now by passing a special resolution in the annual general meeting, Bella and Anthony can amend it. However, they cannot amend a provision that was entrenched prior to 2004 or a provision affecting by the “entrenching provision”. A resolution with 75% majority has to be passed, and a copy of the resolution should be submitted to the registrar along with the copy of the amended memorandum within the stipulated period of 14 days. A company that fails to do so will be penalised (Yang, 2004).
They are also allowed to make the following alterations in the memorandum as per the respective clauses.
- If they want to change the name of the company, the as per Sec. 28, they can do so by passing a special resolution and by notifying it to the registrar of the companies.
- Sec 30 applies to convert a company from Unlimited company to Limited company or Vice Versa.
- 33 and Sec. 71 applies to alter the object clause and share capital respectively.
- However, if they want to alter the object clause, as per S.33, they require a special resolution, a prior notice for 21 days to all the shareholders and debenture holders and a grace period of 21 days should also be provided after passing the resolution to bring the object clause into effect without any denial.
On the other hand, Articles can be easily altered unless there is a restriction in the memorandum regarding it alteration. Any clause or article is categorised as unalterable in the memorandum cannot be altered even by passing a special resolution. For other amendments, a resolution can be passed with 75% majority votes. As per Sec.37 (1) “
(in particular section 26A and any provision included in its articles in accordance with that section) and to any conditions in its memorandum, a company may by special resolution alter or add to its articles. However, the voting should be done in a bonafide manner, i.e. for the benefit of the company as a whole. Also, in case, if the memorandum prohibits the alteration of any article, then it is not possible to alter them at any cost.
Moreover, the copies of the amended articles need not be submitted to the registrar of the companies.