S1&2: Intro to coy law and legal nature
of companies
Company: registered under Companies Act and is incorporated in Singapore
Corporation: When used in Companies Act means any body corporate formed or incorporated
or existing in Singapore or outside Singapore and includes any foreign company
Salomon v Salomon benefits of incorporation were capable of extending to small private
companies. Confirmed the availability of the limited company as a vehicle for both large and
small business whether or not it involved public investors
In Singapore, it is possible to form a company that has only 1 member and 1 director and the
sole director may be the sole member of the company
Function of company law
1. Provides for the formation and dissolution of companies
Conferring on companies particular legal characteristics
Companies have separate legal personality, corporate capacity and limited liability of
members
2. Regulates the relationships between participants in companies (shareholders, directors)
Between the company and its participants (share capital, member rights, director
duties)
3. Facilitates dealings between companies and outsiders
Rules to help determine when the actions of the officer will be treated as the actions of
the company so that company is liable to the person affected by crime or act of
negligence
Sources of company law
Primary legislation:
1. Companies Act
Main statute regulating companies which deals with registration of companies,
membership and internal management, debt capital
The statutory source of company law
2. Securities and Futures Act
Applies to only listed companies that issues securities and futures
3. Singapore code on takeovers and mergers
MAS is empowered to promulgate and the Securities Industry Council to administer
A form of delegated rule making (pg 28)
,Secondary legislation:
1. For matters which require frequent updating, disadvantageous to provide for those
rules in the primary legislation
2. Includes rules which relate to more mechanical, technical or administrative matters that
does not require scrutiny in Parliament
3. Companies regulation, Companies (winding up) rules
Delegated rule making:
1. more desirable to have experts to formulate the rules persons in the same industry
as those to who rules apply to
2. Singapore Code on Takeovers and Mergers, Accounting Standards Council
Case law:
1. Additional rules governing companies that are not contained in the Companies Act
2. Recorded decisions of courts operate as binding statements of the way statutory
provisions are interpreted
3. Stare decisis highly persuasive
4. Operates as a guide to what the law is, or how it should be applied when the facts in
issue are similar to the ones on which binding decision has been made
SGX Listing Manual:
1. When listed, companies agree as part of a contract with SGX that they will comply with
the rules imposed under the manual
2. SGX is a commercial, for profit company and not a governmental or regulatory agency
Company’s constitution:
1. Regulation of internal affairs of the company to the company itself through rules laid
down in its constitution
Separate legal personality:
1. Law treats a company as being a separate and distinct person from its members and
those who manage its operations
2. Key distinguishing characteristic of a company as a business form is that it is treated as a
separate legal ‘person’ from its participants
S19(5) CA states that on and from the date of incorporation specified in the notice
issue under s4 but subject to this Act, subscribers to the constitution together with
such other persons as may from time to time become members of the company
shall be a body corporate by the name contained in the constitution capable
immediately of exercising all functions of an incorporated company and of suing and
being sued and having perpetual succession and a common seal with power to hold
land but with such liability on the part of members to contribute to the assets of the
company in the event it is wound up
, 3. A company is a separate entity from its controller Miller Freeman Exhibitions v
Singapore Industrial Automation Association
Practical consequences: (pg 39-40)
1. A company’s obligations and liabilities are its own and not those of its participants
Creditors cannot look at participants in company to pay the company’s debts
2. A company’s rights are its own and not those of its participants
Individuals are not permitted to enforce or enjoy rights that belong to company in
personal capacity
3. A company can sue and be sued in its own name
Not necessary for members or officers to be named as parties to legal proceedings
4. A company has perpetual succession
Continues in existence until it is deregistered under the statutory procedure set out
in CA
5. A company’s property is not the property of its participants
6. A company can contract with its controlling participants since they are separate legal
entities
Lifting the corporate veil: (pg 42)
Under general law
1. corporate form is being used to avoid an existing legal duty
should not be confused with the use of corporate form as a means to provide
limited liability in the ordinary course of business
one of the reasons of business is to take advantage of the protection a company
provides against personal liability for obligations or liability incurred i n the
future by company carrying on that business
company should not be allowed to be formed for purposes of avoiding a public
law obligation
2. where the company is being used to perpetrate a fraud or to enter into a sham
transaction
if the company is a sham or a façade designed to conceal the true states of
affairs
a person will not be permitted to commit a wrong through a company that the
person controls and then asset that it is the company and not its controllers to
bear responsibility for the wrong
court will also life the corporate veil where there is a lack of bona fide when
entering contract
3. where company is alter ego of its controllers
Depends on whether or not the company is carrying on the business of its
controllers
Strong evidences would be where the controllers do not make any distinction
between company and themselves in relation to business being carried on
, 1 controlling shareholder does not convince that company is an alter ego of
another company
4. Where company is agent of its controllers
If a company were treated as the agent of a person who controlled it, any rights
or obligations of the company arising under the scope of the agency would be
treated as rights or obligations of the controller and have the effect of piercing
the corporate veil
Generally if the company is clearly under resourced such that it cannot run
independently from its controllers, English courts will treat the company as
agent of controller
Indicative factors:
Indication of consent to agency relationship?
Are there any differences between the 2 businesses
Is there any separateness?
Whether one is I the controlling mind of another?
Genuine commercial reason?
Subsidiary does not mean it is an agent (must have indications that
parent company wants to use subsidiary to sign contracts)
In adherence to general principles of piercing the veil
1. There is a need to scrutinize the motives behind a particular act or where justice of case
requires it
2. To prevent a company’s controllers from using the company to bring a suit which is
disguising what in fact should be an action by its controllers
3. General trend would be the presence of abuse
Under Companies Act to lift the veil
1. S340(1) enables the court to make anyone who was knowingly a party to the carrying on
of a business by a company, with intent to defraud its creditors, personally responsible
for any debts or liabilities of the company invoked when company is wound up or
sued
2. S339(3) makes it an offence for an officer of company to knowingly be a party to the
contracting of a debt by the company where at that time, there was no reasonable
expectation of the company being able to pay the debt
3. S145(10) states that all companies must have at least 1 director who is ordinarily
resident in Singapore
Any member who knows that company is carrying on business without a director
shall be liable for payment of all the debts of the company
4. S144(2) states that where an officer of a company authorizes to be signed on behalf of
company a bill of exchange, cheque, order for goods in which company’s name does not
appear, officer is liable for fine
5. S403(2) states that directors who wilfully pay or permit to be paid dividends when there
are no profits available for distribution as such may be held personally liable to creditors
of the company for amounts of debt due by company to them
of companies
Company: registered under Companies Act and is incorporated in Singapore
Corporation: When used in Companies Act means any body corporate formed or incorporated
or existing in Singapore or outside Singapore and includes any foreign company
Salomon v Salomon benefits of incorporation were capable of extending to small private
companies. Confirmed the availability of the limited company as a vehicle for both large and
small business whether or not it involved public investors
In Singapore, it is possible to form a company that has only 1 member and 1 director and the
sole director may be the sole member of the company
Function of company law
1. Provides for the formation and dissolution of companies
Conferring on companies particular legal characteristics
Companies have separate legal personality, corporate capacity and limited liability of
members
2. Regulates the relationships between participants in companies (shareholders, directors)
Between the company and its participants (share capital, member rights, director
duties)
3. Facilitates dealings between companies and outsiders
Rules to help determine when the actions of the officer will be treated as the actions of
the company so that company is liable to the person affected by crime or act of
negligence
Sources of company law
Primary legislation:
1. Companies Act
Main statute regulating companies which deals with registration of companies,
membership and internal management, debt capital
The statutory source of company law
2. Securities and Futures Act
Applies to only listed companies that issues securities and futures
3. Singapore code on takeovers and mergers
MAS is empowered to promulgate and the Securities Industry Council to administer
A form of delegated rule making (pg 28)
,Secondary legislation:
1. For matters which require frequent updating, disadvantageous to provide for those
rules in the primary legislation
2. Includes rules which relate to more mechanical, technical or administrative matters that
does not require scrutiny in Parliament
3. Companies regulation, Companies (winding up) rules
Delegated rule making:
1. more desirable to have experts to formulate the rules persons in the same industry
as those to who rules apply to
2. Singapore Code on Takeovers and Mergers, Accounting Standards Council
Case law:
1. Additional rules governing companies that are not contained in the Companies Act
2. Recorded decisions of courts operate as binding statements of the way statutory
provisions are interpreted
3. Stare decisis highly persuasive
4. Operates as a guide to what the law is, or how it should be applied when the facts in
issue are similar to the ones on which binding decision has been made
SGX Listing Manual:
1. When listed, companies agree as part of a contract with SGX that they will comply with
the rules imposed under the manual
2. SGX is a commercial, for profit company and not a governmental or regulatory agency
Company’s constitution:
1. Regulation of internal affairs of the company to the company itself through rules laid
down in its constitution
Separate legal personality:
1. Law treats a company as being a separate and distinct person from its members and
those who manage its operations
2. Key distinguishing characteristic of a company as a business form is that it is treated as a
separate legal ‘person’ from its participants
S19(5) CA states that on and from the date of incorporation specified in the notice
issue under s4 but subject to this Act, subscribers to the constitution together with
such other persons as may from time to time become members of the company
shall be a body corporate by the name contained in the constitution capable
immediately of exercising all functions of an incorporated company and of suing and
being sued and having perpetual succession and a common seal with power to hold
land but with such liability on the part of members to contribute to the assets of the
company in the event it is wound up
, 3. A company is a separate entity from its controller Miller Freeman Exhibitions v
Singapore Industrial Automation Association
Practical consequences: (pg 39-40)
1. A company’s obligations and liabilities are its own and not those of its participants
Creditors cannot look at participants in company to pay the company’s debts
2. A company’s rights are its own and not those of its participants
Individuals are not permitted to enforce or enjoy rights that belong to company in
personal capacity
3. A company can sue and be sued in its own name
Not necessary for members or officers to be named as parties to legal proceedings
4. A company has perpetual succession
Continues in existence until it is deregistered under the statutory procedure set out
in CA
5. A company’s property is not the property of its participants
6. A company can contract with its controlling participants since they are separate legal
entities
Lifting the corporate veil: (pg 42)
Under general law
1. corporate form is being used to avoid an existing legal duty
should not be confused with the use of corporate form as a means to provide
limited liability in the ordinary course of business
one of the reasons of business is to take advantage of the protection a company
provides against personal liability for obligations or liability incurred i n the
future by company carrying on that business
company should not be allowed to be formed for purposes of avoiding a public
law obligation
2. where the company is being used to perpetrate a fraud or to enter into a sham
transaction
if the company is a sham or a façade designed to conceal the true states of
affairs
a person will not be permitted to commit a wrong through a company that the
person controls and then asset that it is the company and not its controllers to
bear responsibility for the wrong
court will also life the corporate veil where there is a lack of bona fide when
entering contract
3. where company is alter ego of its controllers
Depends on whether or not the company is carrying on the business of its
controllers
Strong evidences would be where the controllers do not make any distinction
between company and themselves in relation to business being carried on
, 1 controlling shareholder does not convince that company is an alter ego of
another company
4. Where company is agent of its controllers
If a company were treated as the agent of a person who controlled it, any rights
or obligations of the company arising under the scope of the agency would be
treated as rights or obligations of the controller and have the effect of piercing
the corporate veil
Generally if the company is clearly under resourced such that it cannot run
independently from its controllers, English courts will treat the company as
agent of controller
Indicative factors:
Indication of consent to agency relationship?
Are there any differences between the 2 businesses
Is there any separateness?
Whether one is I the controlling mind of another?
Genuine commercial reason?
Subsidiary does not mean it is an agent (must have indications that
parent company wants to use subsidiary to sign contracts)
In adherence to general principles of piercing the veil
1. There is a need to scrutinize the motives behind a particular act or where justice of case
requires it
2. To prevent a company’s controllers from using the company to bring a suit which is
disguising what in fact should be an action by its controllers
3. General trend would be the presence of abuse
Under Companies Act to lift the veil
1. S340(1) enables the court to make anyone who was knowingly a party to the carrying on
of a business by a company, with intent to defraud its creditors, personally responsible
for any debts or liabilities of the company invoked when company is wound up or
sued
2. S339(3) makes it an offence for an officer of company to knowingly be a party to the
contracting of a debt by the company where at that time, there was no reasonable
expectation of the company being able to pay the debt
3. S145(10) states that all companies must have at least 1 director who is ordinarily
resident in Singapore
Any member who knows that company is carrying on business without a director
shall be liable for payment of all the debts of the company
4. S144(2) states that where an officer of a company authorizes to be signed on behalf of
company a bill of exchange, cheque, order for goods in which company’s name does not
appear, officer is liable for fine
5. S403(2) states that directors who wilfully pay or permit to be paid dividends when there
are no profits available for distribution as such may be held personally liable to creditors
of the company for amounts of debt due by company to them
