COMPANY LAW (Pg 139 RC)

Sole Proprietorship
Registration
Business Registration Act s5, in order to carry out business as a sole proprietor, the business
must be registered under the Business Registration Act. People exempted from the act are taxi
drivers and licensed hawkers. (First Schedule) Professionals such as accountants, doctors,
lawyers and architects who are governed by other statutes are exempted from the provisions of the
Business Registration Act, (s4).
Effet of
non!
registration
s23, this would amount to an offence
s17, any contracts entered in the course of the business cannot be enforced by him
Registration
proess
s6, the person intending to register the business must provide a name for the business, describe
the nature of the business and must name the principle place of the business
s11, the name for the intended business must not be identical or in some circumstance similar to
that of another corporation, and must not be undesirable. xcept for technology based business,
!"B would not allow flats to be used as a place for carrying out business.
s(2), #nce the business has been granted the certificate of business registration has to be
displayed in a conspicuous place.
s(3) $he business registration is valid for a certain period of time, which is currently three years,
renewable after that. %f the business has to be licensed under another statue, then it would also
need to obtain that.
Not a
separate
entit"
$he sole proprietorship is not separate from its creator. Rights of business belongs to the sole
proprietor. Personal assets may be sei&ed to satisfy business debts.
#issol$tion
$he sole proprietorship can be dissolved voluntarily 'giving notice to the Registr! o" Business
s13( or involuntarily 'when the sole proprietor dies or is made a bankrupt. %f he dies his assets
including business ones would pass in accordance to his will. %f he does not have a will, then under
the #nterstate Succession Act, there are provisions as to who 'such as spouse or children( should
get what.
E%al$ation
)ole proprietor is not protected or shielded from business debts and thus there could be some risk
involved.
Co&panies
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Propert"
- the partnership can own property
- property belongs to the company and not the firm
- if a member or director takes property belonging to the company otherwise than as allowed by law,
that could amount to the offence of theft.
- companies assets will not be sei&ed to pay off personal debts.
Lia'ilit" for o&pan" (e'ts
- Salo$an % Salo$an & 'o (td (1)7) the court held that the company was a separate entity,
different from )aloman and its debts were not )aloman*s debts.
- $here are exceptions to this rule.
o s34*(1) of the +A provides that the company is being wound up or is being sued and it
appears that business of the company was carried on with the intention to defraud creditors,
the persons responsible could be make personally liable for the debts of the company
o s33(3) provides that a person who has incurred debts on behalf of the company when there
is no reasonable or probable expectation of the debts being settled, would be guilty of an
offence. %f convicted, under s34*(2), that person could also be made personally liable for
those debts. $hus if the debts were incurred irresponsibly, though there may be an absent of
fraudulent intent, there could also be personal liability.
S$ing an( 'eing s$e(
- +ompanies liabilities cannot be enforce against the personal assets of the member.
- %f there were rights or actions to be instituted, it would only be against the company.
- xceptions if
o ,a-ority committed some fraud on the company and use their power to prevent the company
from bringing an action against them, the minority may be able to bring an action on behalf of
the company 'oo+s % ,ee+s (116).
o s216A allows a minority shareholder to bring an action on behalf of the company and the
court may allow it if it considers it in the company*s interest that such action should continue.
'.ot applicable to public listed companies( but this section is not limited to situations of
fraud.
Perpet$al s$ession
- A company has perpetual succession until it is li/uidated. 0egally, in the case of a company, there is
no disruption of the business when an event such as the death or bankruptcy of a member or director
occurs.
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s17(2) of the +A provides that a company may be
- limited by share
- limited by guarantee
- an unlimited company
limited by share the liability of the members of the company is limited to the values of their share. s25*
provides that if the share are not fully paid up for, and the companies has gone into li/uidation, the member
who has not fully paid up for the shares may be called upon to do so.
limited by guarantee liability of the company is limited to the amount guaranteed. 'usually charitable
organi&ations or non1profit(
unlimited companies
engineering and architecture firms, if the authori&ed capital falls below a certain limit, such companies have to
be unlimited.
Pri%ate o&pan"*
s1). '2( A company having a share capital may be incorporated as a private company if its memorandum or
articles 3
'a( restricts the right to transfer its shares4
'b( limits to not more than 56 the number of its members 'counting -oint holders of shares as one person and
not counting any person in the employment of the company or of its subsidiary or any person who while
previously in the employment of the company or of its subsidiary was and thereafter has continued to be a
member of the company(4
'c( prohibits any invitation to the public to subscribe for any shares in or debentures of the company4 and
'd( prohibits any invitation to the public to deposit money with the company for fixed periods or payable at
call, whether bearing or not bearing interest.
E+e&pt pri%ate o&pan" &eans 3
'a( a private company in the shares of which no beneficial interest is held directly or indirectly by any
corporation and which has not more than 76 members4 or
'b( any private company, being a private company that is wholly owned by the 8overnment, which the
,inister, in the national interest, declares by notification in the Gazette to be an exempt private company4
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$he registration process for a company is more complicated and costly compared to that of a partnership.
s1 of the +A provides that 7 important documents have to be submitted. $he first is the memorandum of
association. $he matters that must be addressed in the memorandum are set out in s22.$his is usually
drafted very widely to give the company the flexibility. A company may also rely on s23(1c) on the -hird
Schedule to the +A .
$he second document is the articles of association. $he AA contains matters relating to the internal
management of the company. A company may also rely on the articles set out in the Fourth schedule to the
+A 'a.k.a. $able A(. #nce the necessary documents are lodged, the Registrar may allow the registration.
!owever, under s2*, the registrar may refuse registration on certain ground, such as when the company
would be used for unlawful purposes or for purposes pre-udicial to public peace. #nce successful the
registrar would issue a certificate of registration.
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$he process which the company is dissolved is known as li/uidation or winding up. 0i/uidation may be
voluntary or may be ordered by the court s247. $o carry out a voluntary winding up, a special resolution of the
members is re/uired (s2*). $o be wind up by the court, first a petition has to be presented. $he creditors, the
,inster of 9inance and members are given rights to make this petition s253. $he petitioner must establish at
least one ground for the winding up. $he statutory grounds are marked out in s254(1). $hese grounds
include:

Cir$&stanes in ,hih o&pan" &a" 'e ,o$n( $p '" Co$rt*
s254. 3'2( $he +ourt may order the winding up if 3
(a) the company has by special resolution resolved that it be wound up by the +ourt4
(.) default is made by the company in lodging the statutory report or in holding the statutory meeting4
(c) the company does not commence business within a year from its incorporation or suspends its
business for a whole year4
(d) the number of members is reduced, in the case of a company other than a company the whole of the
issued shares in which are held by a holding company, below two4
(e) the company is unable to pay its debts4
(") the directors have acted in the affairs of the company in their own interests rather than in the interests
of the members as a whole, or in any other manner whatever which appears to be unfair or un-ust to other
members4
(g) an inspector appointed under Part %; has reported that he is of opinion
'i( that the company cannot pay its debts and should be wound up4 or
'ii( that it is in the interests of the public or of the shareholders or of the creditors that the company should
be wound up4
(h) when the period, if any, fixed for the duration of the company by the memorandum or articles expires
or the event, if any, happens on the occurrence of which the memorandum or articles provide that the
company is to be dissolved4
(i) the +ourt is of opinion that it is -ust and e/uitable that the company be wound up4
(/) the company has held a license under any written law relating to banking, and that license has been
revoked or has expired and has not been renewed4
(+) the company has carried on banking business in )ingapore in contravention of the provisions of any
written law relating to banking4
(l) the company has carried on multi1level marketing or pyramid selling in contravention of any written law
that prohibits multi1level marketing or pyramid selling4 or
($) the company is being used for an unlawful purpose or for purposes pre-udicial to public peace,
welfare or good order in )ingapore or against national security or interest.
s227A,B <udicial ,anagement Pg 25= R+
A li/uidator is usually an accountant and he has the duty of gathering the assets of the company, paying up
the liabilities owed to creditors and distributing the surplus if any to the members.
)etting up a company may be tedious but it has its advantages. #ne of them is the limited liability concept. A
company would also be in a better position to obtain financing.
Partnership
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s1, -he 0artnershi1 Act defines a partnership as a relation that subsists between persons carrying on
business in common with a view for profit.
s45, the term business is defined widely to include every trade, occupation and profession and the term
person includes companies. $hus two companies can for a partnership together.
s2
(1) <oint tenancy, tenancy in common, -oint property, common property, or part ownership (oes not of
itself create a partnership as to anything so held or owned, whether the tenants or owners do or do
not share any profits made by the use thereof.
(2) $he sharing of gross ret$rns does not of itself create a partnership, whether the persons sharing
such returns have or have not a -oint or common right or interest in any property from which or from
the use of which the returns are derived. 'o2 % 'oulson (116)
(3) $he receipt by a person of a share of the profits of a '$siness is pri&a faie e%i(ene that he is
a partner in the business, but the receipt of such a share, or of a payment contingent on or varying
with the profits of a business, (oes not of itself &a.e hi& a partner in the '$siness4 and in
particular
'a( the receipt by a person of a debt or other li/uidated amount by installments or otherwise out
of the accruing profits of a business does not of itself make him a partner in the business or
liable as such4
'b( a contract for the remuneration of a servant or agent of a person engaged in a business by
a share of the profits of the business does not of itself make the servant or agent a partner
in the business or liable as such4
'c( a person being the widow or child of a deceased partner, and receiving by way of annuity a
portion of the profits made in the business in which the deceased person was a partner, is
not by reason only of such receipt a partner in the business or liable as such4
'd( the advance of money by way of loan to a person engaged or about to engage in any
business on a contract with that person that the lender shall receive a rate of interest
varying with the profits, or shall receive a share of the profits arising from carrying on the
business, does not of itself make the lender a partner with the person or persons carrying on
the business or liable as such: Provided that the contract is in writing, and signed by or on
behalf of all the parties thereto4
'e( a person receiving by way of annuity or otherwise a portion of the profits of a business in
consideration of the sale by him of the goodwill of the business is not by reason only of such
receipt a partner in the business or liable as such.
/or&alities
an( other
&atters
A partnership agreement can be entered into orally. $here is a need to register it under the Business
Registration Act. $he minimum number is two and maximum is generally 76 as s17 'o$1anies
Act. 0awyers and Accountants are allowed to carry on partnerships even if there are more than 76
partners.
s4 o" the 0artnershi1 Act provides that persons who are running a partnership together can be
collectively referred to a firm.
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Partner0s lia'ilit" for the ations of other partners
A partner of a firm may have actually authority or apparent authority to enter into contracts on behalf of the
partnership.
- At$al a$thorit" refers to authority that the partner has been expressly conferred with by the other
partners. s6 provides that if the partner does something he is expressly authori&ed to do, the other
partners would be liable.
- Apparent a$thorit" refers to authority that a partner would usually have. s5 provides that every
partner is an agent of the firm and the other partners and any act done by him in the usual way of
business will bind the partnership and the other partners, unless he has no authority to do the act in
/uestion and the persons with whom he was dealing knew of that or did not believe him to be a
partner. 3ercantile 'redit 'o (td % 4arrot (162) the court held that the firm is bound because
the partner had the usual authority to do what he did.
- )imilarly all partners have the $s$al a$thorit"
o to employ employees or agents such as solicitors in respect of the firm*s activities.
o to receive money in respect of debt due to the firm.
o to enter into a deed or guarantee on behalf of the firm without the consent of the other
partners.
- s1* (tortuous lia.ilit!) provides that any wrongful act or omission done by the partner in the
course of business of the firm binds the other partners.
S$ing an( 'eing s$e(
- s 0iability of partners in contract or debt is -oint. $he effect of this rule is that there can only be one
action regarding particular claim in contract or debt. $he claimant cannot seek to sue the other
partners when the partner he sued turns out to be unable to pay.
- s12 %n respect of tort, liability is -oint and several. $he effect of this rule is that once a partner is
sued, the unpaid claimant may still seek to sue the other partners. %t may also be noted that in the
event that one partner is sued and that partner personally pays the creditor of the firm, that partner
can claim a contribution from the other partners.
- #nce the partner is held liable, the -udgement can be enforced against the firm. %f the firm*s assets
are insufficient, the personal property of the individual partners may also be sei&ed to satisfy the
partnership debts. $here is a possibility of unlimited liability in the case of partnerships -ust as the
case in sole proprietorships.
1no&ing an( o$tgoing partners
s26 provides that any partner may retire by giving notice. #nce retired, s17 provides that the retiring partner
will still be liable for partnership debts incurred by the partnership before his retirement. %n order to get out of
this, the retiring partner may get the consent from other partners and the creditors involved to release him
from his liabilities. $his agreement is known as novation.
s24(7) sub-ect to contrary agreement, a new partner may only be appointed if there is unanimous consent of
all the partners. #nce a partner is appointed, the new partner ,o$l( not be liable for debts incurred by the
partnership prior to that time, unless the contrary is provided.
s36(1) provides that where there has been a change in the constitution of the firm such as would be the
case where a partner has left the partnership, the person dealing with the partnership is generally entitled to
assume that all the apparent members of the old firm are still members of the new firm until he has notice of
this change. $o avoid such liability, notice must be given. s36(2) %n cases where there is no previous dealing
with the third party, an advertisement placed in the 8overnment 8a&ette would suffice. s36(3) %n cases
where there has been a previous dealing between a third party and the firm, the third party must receive
actual notice of such a change such as in the form of a letter. %f a third party is unaware of such a partner,
then such liability cannot arise.
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>nless there are provisions made by the parties, if not the Partnership Act provisions would be adopted.
Propert"
%f the property belongs to the partnership, the partners may not use it for their individual needs unconnected
to the partnership business. >pon dissolution, if there is a surplus, the partners may be able to get a share of
it.
s2*(1) provides that all property originally brought into the partnership and all property ac/uired on account
of the firm or for the purpose of the partnership business, shall be deemed partnership property and be
applied by the partners exclusively for the purposes of the partnership. %f one partner misappropriates
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partnership property, the other partners may be able to sue him under the tort of conversion or if he uses it
for his own purposes and makes profits out of it, he may have to account for those profits.
s2*(1)refers to property which is brought into the partnership and all property ac/uired by the partnership, it
may not always be clear what items of property are indeed partnership property. 3iles % 'lar+s (153)
$he court held that the stock in trade like films bought with profits belonged to the partnership. $he lease
and e/uipment supplied by +larks was +larks* and not the partnership.
Profit an( Losses
s24(1) states that unless there is agreement to the contrary, profit and losses are to share e/ually.
1n(e&nit"
s24(2) provides that the firm must indemnify every partner in respect of payments made or liabilities incurred
by him in the ordinary and proper course of business of the firm. %9 ; order books on behalf of the firm, he
has a right to claim back such expenses.
Manage&ent
s24(5) provides that every partner has the right to take part in the management of the firm. >nless the
contrary is provided, the rights of the partners are e/ual.
Re&$neration
s24(6) provides that every partner is not entitled to any remuneration for his services. $his is because there
will be a distribution of profits, thus there is no presumption that the partners will also be given a regular
salary.
2t&ost goo( faith
s2 provides that one partner should not make a gain in the course of the partnership business without the
consent of the other partners.
s3* provides that one partner should not compete with the partnership by carrying on a similar business. %f
these sections are breached the partner would have to return any profits made Bentle! % 'ra%en (1)53)
the court held that +raven had to account for the profit.
Not a
separate
entit"
Partners would be made personally liable for the debt of the firm. %t is also the reason that a
partnership cannot buy land in its own name. %f a partnership wishes to buy a piece of land, it would
have to buy it in the name of one or more of the partners who would then hold it on trust or hold it on
behalf of the partnership.
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3$(iial (issol$tion
,issolution .! court.
s35* #n application by a partner, the court may decree a dissolution of the partnership in any of the following
cases:
(a) when a partner, other than the partner suing, becomes in any way permanently incapable of
performing his part of the partnership contract4
(.) when a partner, other than the partner suing, has been guilty of such conduct as, in the opinion of
the court, regard being had to the nature of the business, is calculated to pre-udicially affect the
carrying on of the business4 5hite6ell % Arthur (1)65)
(c) when a partner, other than the partner suing, willfully or persistently commits a breach of the
partnership agreement, or otherwise so conducts himself in matters relating to the partnership
business that it is not reasonably practicable for the other partner or partners to carry on the
business in partnership with him4 7ssell % 8a!6ard (1)6*)
(d) when the business of the partnership can only be carried on at a loss4 'heese$sn % 0rice (1)65)
(e) whenever in any case circumstances have arisen, which, in the opinion of the court, render it -ust
and e/uitable that the partnership be dissolved.
Non 3$(iial (issol$tion
,issolution .! e21iration or notice.
s32.
(1) )ub-ect to any agreement between the partners, a partnership is dissolved 3
'a( if entered into for a fixed term, by the expiration of that term4
'b( if entered into for a single adventure or undertaking, by the termination of that adventure or
undertaking4
'c( if entered into for an undefined time, by any partner giving notice to the other or others of his
intention to dissolve the partnership.
(2) %n the case mentioned in subsection '2( 'c(, the partnership is dissolved as from the date mentioned in
the notice as the date of dissolution, or, if no date is so mentioned, as from the date of the communication of
the notice.
,issolution .! .an+ru1tc!, death or charge.
s33* 3
(1) )ub-ect to any agreement between the partners, every partnership is dissolved as regards all the
partners by the death or bankruptcy of any partner.
(2) A partnership may, at the option of the other partners, be dissolved if any partner suffers his share of the
partnership property to be charged under this Act for his separate debt.
,issolution .! illegalit! o" 1artnershi1.
s34* A partnership is in every case dissolved by the happening of any event which makes it unlawful for the
business of the firm to be carried on or for the members of the firm to carry it on in partnership.
#istri'$tion of assets on (issol$tion
Rights o" 1artners as to a11lication o" 1artnershi1 1ro1ert!.
s3* #n the dissolution of a partnership, every partner is entitled, as against the other partners in the firm,
and all persons claiming through them in respect of their interests as partners, to have the property of the
partnership applied in payment of the debts and liabilities of the firm, and to have the surplus assets after
such payment applied in payment of what may be due to the partners, respectively, after deducting what
may be due from them as partners to the firm4 and for that purpose any partner or his representatives may,
on the termination of the partnership, apply to the court to wind up the business and affairs of the firm.
R$le for (istri'$tion of assets on final settle&ent of ao$nts*
s44* %n settling accounts between the partners after a dissolution of partnership, the following rules shall,
sub-ect to any agreement, be observed:
'a( losses, including losses and deficiencies of capital, shall be paid first out of profits, next out of
capital, and lastly, if necessary, by the partners individually in the proportion in which they were
entitled to share profits4 and
'b( the assets of the firm, including the sums, if any, contributed by the partners to make up losses or
deficiencies of capital, shall be applied in the following manner and order:
'i( in paying the debts and liabilities of the firm to persons who are not partners therein4
'ii( in paying to each partner ratea'l" what is due from the firm to him for advances as
distinguished from capital4
'iii( in paying to each partner ratea'l" what is due from the firm to him in respect of capital4
'iv( the ultimate residue, if any, shall be divided among the partners in the proportion in which profits
are divisible.