Commencing Business
Are you inspiring to become an entrepreneur or company owner?
Or do you already have a business and you want to start another company?
This article includes the nitty gritty details that you need to look into when you want to set up a public company in Singapore.
Do You Want to Start a Public or Private Company?
First things first.
Starting a business begins with deciding whether you want to start a public or private company.
On one hand, with a private company, you can start trading or operating it as soon as you register it with the registrar of companies.
Immediately you receive the certificate of incorporation from Accounting and Corporate Regulatory Authority (ACRA), and you have armed yourself with all the prerequisite licences and approvals, just get down to business without hesitation.
Topics 2.1 to 2.3 guides you the steps needed to incorporate a company.
Click here to go back to Chapter 2 Overview and revisit the steps as necessary.
Starting a public company
On the other hand, if you want to start a public company, there are a number of documents that must be submitted to the registrar of companies. These include:
- a statement in lieu of prospectus; and
- a statement declaring that all shares have been paid by the directors/shareholders.
Going the public company route and failing to issue a prospectus during incorporation, especially if your business has a share capital would lead to being locked out from giving any shares or debentures.
You can only avoid such mishaps by lodging a statement in lieu of prospectus to the registrar of companies at least 3 days prior to giving the first shares or debentures.
Now you might be asking yourself; what if I don’t do all the above?
Easy. Failing to comply with the above prerequisites can land you and your directors in jail and if there’s some leniency, ACRA will slap you with a heavy fine!
This normally happens to newly registered public companies that ignore the requirements and go ahead to borrow money.
Statement in Lieu of Prospectus
Before you present your statement in lieu of prospectus to ACRA, you must ensure that it meets certain terms and key provisions.
As stipulated in the Companies Act as well as the Sixth Schedule of the Companies Act (also known as the “Schedule”), double-check the document for the following:
- Usually, the statement must be on paper and specify all matters indicated in the Schedule, which take account of:
- Names of all your company directors;
- Share capital of your company; and
- Transaction details associated with property and particulars of all the auditors involved.
- Signatures of the directors or proposed directors must appear on the statement and if not, their authorized agents must do so on their behalf;
- Details of key reports that an authorized company auditor is allowed to make if your company intends to purchase a business or shares in another company; and
- Countersignatures or written declaration attached to the document stating the full picture of any adjustments made on figures of your company’s profits, losses, assets or liabilities. The approved auditor(s) who made the adjustments must countersign the documents and indicate specific reasons for making such adjustments.
Feel free to peruse through the Sixth Schedule of the Companies Act if you want to see an example of a statement in lieu of prospectus.
After Issuing a Prospectus, What Next?
As a public company, as soon as you have presented your statement in lieu of prospectus to ACRA, you are not legible to start your business operations or borrow money by inviting the public to subscribe to your shares.
This only happens if you are bound by the following avoidable mishaps:
- If there’s a high likelihood of reimbursing funds to the public due to your company a failure to receive a listing on the securities exchange. This usually happens after the prospective shareholders had already lodged an application for shares or debentures.
- If your company allots shares to the public who paid for them using cash without fulfilling the minimum subscription requirements;
- If your company directors or authorised secretary fails to present a statement of declaration with ACRA; and
- If your company directors fail to pay for shares that they should using cash to a similar amount that matches the amount due on application as well as allotting shares meant for the public.
Conclusion - Commencing Business
Starting a company requires you to be open to change once various opportunities present themselves. It is a learning process. Being flexible and trusting your gut in all circumstances is the key to believing that you can do it.
