What exactly does changing your business constitution or business ownership entail and how do you go about doing so? Essentially, what it means is that there is a transfer of business from one entity to another. The transferor will be the previous business constitution/owner, with the transferee being the new business constitution/owner. For example, if you were to change your business constitution from a sole-proprietorship to a public limited company, the transfer occurs from the sole-proprietor (you) to the public limited company (legal entity).
As business owners, we often strive to be well equipped and prepared because we recognise the importance of doing so. The economy is ever shifting and with nothing staying stagnant, it is vital to be prepared and to plan in advance. Part of growing and evolving is embracing the changes that come along and if you are looking to change your business constitution or transfer ownership, this comprises of a short writeup to assist you with the process.
Changing Business Constitution
A business constitution lays down the basic framework for which a business is governed by. It dictates how the company operates as well as the management of its assets.
If you are looking to convert your business from a sole proprietorship or Limited Liability Partnership (LLP), it is important to note that their legal form is entirely separate from that of a company. As such, the process for conversion is as follows:
- You will need to incorporate a new company and indicate that this company will be taking over the sole proprietorship/LLP (with its termination date, post-dated up to 3 months).
- Transference of assets, existing contracts and business matters
- Terminate sole proprietorship/LLP and notify ACRA
An important step in changing your business constitution is to notify ACRA via their online portal, Bizfile. You can access Bizfile via your CorpPass digital ID. However, if you are a foreigner, you will need to employ a director who meets the ACRA’s pre-scripted requirements, as well as engage a corporate service provider. It is important to ensure that this is done within 14 days of inducing a change otherwise, you could be charged a late fee of up to $350 and a fine of up to $5,000.
Additionally, every company is required to have an auditor appointed within 3 months of its incorporation unless exempted under the Companies Act.
Key obligations that companies need to abide by:
- Hold an Annual General Meeting (AGM) unless exempted.
- File annual return within 7 months of closing the financial year end.
- Register of registrable controllers
- Electronic Register of Members (under ACRA)
- Electronic registers of directors, secretaries, auditors, CEOs (under ACRA).
- Changes in company information are to be updated on ACRA within 14days.
Transferring Business Ownership
Transferring business ownership of a sole proprietorship means you are selling your business assets. As there is no legal difference between the owner and the sole proprietorship, it is not possible to sell a sole proprietorship. To transfer the business, you have to transfer ownership of its assets.
With regards to a company, to buy or sell shares one has to pay stamp duty on the related legal acquisition documents. This is required by the Inland Revenue Authority of Singapore (IRAS). From 1 Sep 2018, CorpPass will be the only login method for online corporate transactions with the Government. You must first be authorised to access IRAS’ digital e-Services via CorpPass before you can log in to the e-Stamping Portal.
If you are contemplating changing your business constitution or ownership, do not hesitate to contact us today!