In Singapore, forming a Company Limited by Guarantee (CLG) is a simple and cost-effective process. For foreign nationals or entities in the city, starting a CLG is one of the most popular options for a non-profit organisation.
CLGs are not suited for members seeking a return on their assets through distributions such as dividends because they are forbidden from paying dividends or distributing the surplus to their members. Instead, the surplus will be used to further the entity’s ‘non-profit’ goals.
Incorporating a CLG, on the other hand, provides many advantages to a business, including the previously mentioned limited liabilities as well as tax advantages.
As a result, the first step in forming this type of business is to register a new business name and then incorporate a CLG. To register with the Accounting and Corporate Regulatory Authority (ACRA) under the Singapore Companies Act, it is advisable to get expert guidance.
Depending on the circumstances, the approval of the company name could take up to 14 days or longer; however, the incorporation could take as little as 15 minutes after all expenses have been paid. The cost of reserving a company name is S$15 (USD 10), while the cost of registering a CLG is S$300 (USD 217).
Definition Of A Company Limited By Guarantee
Starting at the very top, there are three primary sorts of businesses in Singapore. A sole proprietorship, a limited liability company, or a partnership are all viable options.
Find out more about business structures in Singapore.
In Singapore, a company limited by guarantee belongs to the second group of incorporations (LLCs). According to the Singapore Companies Act, a corporation limited by guarantee (CLG) is essentially a non-profit organisation engaging in public-interest activities. Charities, societies, and clubs are a few examples.
However, ACRA permits both citizens and foreigners to establish a CLG in Singapore. It also provides them with many exceptional perks that distinguish CLGs from the rest of Singapore’s business landscape.
Understanding A Company Limited By Guarantee
Non-profit organisations should use this type of business entity. A CLG is registered with ACRA, just like any other company entity. It must also comply with the Companies Act if charitable and non-profit organisations require corporate status.
When compared to a Company Limited by Shares, CLG firms are unique. The following are some distinguishing characteristics:
- CLGs are not permitted to provide profits or dividends to their members.
- Share capital isn’t required for CLGs. Instead, the liability of the company’s members is limited to the number of assets they commit.
- CLGs are regarded as public corporations.
The Main Characteristics Of A CLG In Singapore
For starters, registering a CLG in Singapore allows you to separate the company’s liabilities from your commitments. ACRA recognises all CLGs in the country as separate legal bodies that operate independently.
As a result, legal actions stemming from the company’s debts will not affect your assets. That is also true for both private and public limited companies.
A CLG, unlike other Singapore limited liability companies, does not have a share capital. Instead, as a member of a CLG in Singapore, your liability will be restricted to the amount of your contribution. All CLG applications must be supported by company constitutions that state the sum guaranteed by each member, as noted by ACRA.
Overall, a CLG would not be the ideal choice if you require dividend payouts. This is because ACRA prohibits you from distributing any type of return among members of a CLG in Singapore.
Don’t get this wrong, though. You’ll be able to earn money on your own time. The only catch is that you’ll have to put the money into the company’s non-profit operations after that.
But don’t become discouraged. There are still many compelling reasons to choose a CLG in the country.
Advantages Of A Singapore’s Company Limited By Guarantee
- You are free to have as many members as you like. In Singapore, there are no restrictions on how many people can join a CLG.
- During the incorporation process, the company’s members might guarantee as little as S$1.00.
- Corporate income tax is not applied to any surplus funds you generate from the company’s members.
- There are no share capital obligations with the corporation.
- Personal assets of all members are safeguarded from the company’s obligations. Any obligations incurred along the road can only be repaid with the company’s assets.
- Within three months of incorporation, a CLG can petition for charity status.
- Corporate companies, as well as foreign and local individuals, are welcome to join.
Singapore’s Company Limited By Guarantee Registration Documents and Requirements
ACRA requires the following information in your application to be included when registering a CLG in Singapore:
- At least three members of the governing board, two of whom should be Singapore residents.
- The company’s goals are stated here. This section of the charter defines what you want to accomplish with the organisation.
- A constitution (also known as a Memorandum and Articles of Association) spells out all of the company’s bylaws as well as the guaranteed amounts for its members.
- The members’ restricted liability is stated explicitly.
- A $300 registration fee is required.
- A unique business name.
- At least one individual.
The Company Limited By Guarantee Application Process In Singapore
- Begin by applying for a new company name through ACRA’s BizFile+. Then, select a one-of-a-kind item and reserve it for S$15.
- Proceed to the website’s local company incorporation area and apply for a CLG using the reserved company name. The entire cost should be around S$300.
- Include any needed paperwork, such as the company’s constitution and address, as well as all members’ personal information and a liability declaration.
- The approval procedure should take anywhere from 15 minutes to 14 days. When ACRA has finished reviewing all the submissions, it will contact you.
- Meanwhile, you can go to the official License One website and apply for the company’s operational licenses.
- If you want to start a charity, you must apply for charity status with the Commissioner of Charities within three months of forming the organisation.
What Next After A Company Limited By Guarantee Is Registered?
The first step is to register and incorporate your business. So, don’t get things twisted. There’s a lot more to running and maintaining a CLG than meets the eye. In general, you’ll be expected to:
- Within three months of incorporation, appoint a company auditor.
- Within six months of incorporation, appoint a company secretary.
- Every year on December 15th, file the company’s tax returns.
- In the seven months following the conclusion of the financial year, file the company’s annual returns with ACRA.
- If your company’s taxable goods and services exceed S$1 million per year, you should apply for GST (Goods and Services Tax).
- Conduct annual general meetings and audits of the company.
Need help with company incorporation? Check out our company incorporation services.
How Do You Dissolve A Company Limited By Guarantee?
Apart from ensuring that the Commissioner approves revisions to the M&A of Charities or the appropriate Sector Administrator, the company must also ensure that the M&A specifies the circumstances under which the company can be dissolved.
More crucially, after the CLG is dissolved, its members cannot give any residual monies and/or assets. Instead, after settling the debts and legal obligations, the leftover funds and assets should be donated to other charitable organisations or charities with similar goals. After three months of operation, the company may be qualified to petition for charity status.
In the case that you need to dissolve a CLG, you have two options:
A Wind Up
Suppose your business is unable to pay its bills. Wind-ups can be voluntarily or involuntarily induced.
A Strike Off
ACRA will need the company director to apply for a company strike-off.
Conclusion
The public company limited by guarantee option is used by the majority of charities and non-profit organisations in Singapore.
A Singapore public company limited by guarantee is a non-profit organisation that engages in national or public interest activities, such as promoting art or charity.
According to data from the Singapore Commissioner of Charities (COC), the number of registered charities in Singapore has continuously increased in the recent past.
