Open a Public Company Limited by Guarantee in Singapore

Updated on Saturday 31st July 2021

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The public company limited by guarantee is used to set up a non-profit business in Singapore. The main goal of the company will be to engage in different activities that are of public interest but that yield no profit. When the business does earn a surplus from its activities, it is used to fund future projects. Unlike a regular, for-profit company, the earnings are not distributed among its members.
 
This type of business entity is understandably very different from the private limited company in Singapore. Nevertheless, it is a suitable business type for investors who wish to engage specifically in these types of activities that are not profit yielding. 
 
The non-profit business can, depending on its activities and its range, have a positive impact on the community and on a large number of individuals. Entrepreneurs can choose to register this type of company as a second step after setting up a private limited company in Singapore.
 

The main traits of the public company limited by guarantee

 
This type of company is used for different purposes, however, their one common trait is that they are non-profit purposes. The following characteristics apply to the types of activities in which this company is commonly involved:
 
  1. Independence: this business is not related in any manner to the Singaporean Government
  2. Self-governance: the company is generally self-governing and a body of members acts in a fiduciary capacity within the company.
  3. Beneficial: the company’s goal is to aid the community or a special category of individuals; most often the beneficiaries are not part of the organization (they are not members of the company).
  4. No profit: the company is not allowed to derive profit from its activities like a Singapore limited company would.
On a separate note, as a legal entity, the public company limited by guarantee can be characterized as follows:
 
No capital: unlike other business forms, like the Pte Ltd, the public company limited by guarantee has no share capital.
No shareholders: as there is no share capital, the company does not have shareholders, instead it has members.
Legal separateness: the public company limited by guarantee is separate from its members or founders; it acts in its own name, can be sued or it can sue.
Others: the company must include the word “Limited” in its name upon incorporation. 
 
The public company limited by guarantee must have at least 2 directors and 2 members and a qualified company secretary. It is required to submit annual account audits and it must file the annual returns. The members will agree to pay a fixed amount if the company is wound up. If you are considering setting up a company in Singapore as public company limited by guarantee, our team can help you.
 
 

The use of a public company limited by guarantee for non-profit purposes.

 
We have already mentioned the fact that the public company limited by guarantee is not used for business purposes. However, investors who are keen on starting a non-profit organization should know that they can do so in the form of a charitable trust or a society if they choose to do so.
 
However, the founders have a series of advantages when they choose to open a public company limited by guarantee and register it:
 
  • Entering into agreements: when it is registered, the public company limited by guarantee can enter into agreements with other legal entities that will provide services.
  • Tax exemptions: when it is registered, the company will be able to submit a tax exemption claim for the funds it gathers during its campaigns or actions.
  • Credibility: the registered company will be formally set up and this will project a credible image outside the organization and to stakeholders. 
  • Fundraising: when the company is registered, it will be easier to organize fundraisers from non-company members. 
 
According to a report from the Commissioner of Charities in Singapore:
 
- the total annual receipts in 2017 amounted to 20.5 billion SGD;
- there were 40 newly registered charities;
- in December 2018 there were 2,277 registered clarities in Singapore; this is an increase from the ones recorded at the end of December 2017 (2,263).

Public companies limited by guarantee that engage in charitable purposes benefit from tax deductions, however, this is not applicable in all cases. When approved cash and shares donations, as well as land and building donations, computer and artifact donations, can qualify for tax deductions.
 
In order to benefit from tax deductions, a company in Singapore needs to make an application to become an Institution of a Public Character (IPC) with the Commissioner of Charities. It is common for charities to register as these types of institutions and once they receive this status they will need to observe certain compliance regulations, such as maintaining donor records, submitting the annual return of donations, and the annual report detailing the use of the donation money, among others. A public company limited by guarantee that has obtained IPC status is administered by independent trustees.
 

Special considerations for public companies limited by guarantee

 
Companies limited by guarantee in Singapore need to engage in practices that allow them to avoid being abused by terrorist organizations, given the fact that their activities are concerned with raising and/or distributing funds for certain purposes. This task falls onto the directors or officers and they should be well aware of the fact that they need to implement practices that will allow them to avoid the risk or being abused for money laundering or coerced into financing other types of terrorist support through their charitable activities.
 
Singapore is a member of the Financial Action Task Force, an independent and inter-governmental body concerned with establishing international standards (the recommendations) aimed at preventing money laundering and terrorist financing.
 
Some of the methods that can be used to promote money laundering and terrorist activities through a public company limited by guarantee are the following:
 
  • the diversion of funds: the funds raised by the public company limited by guarantee for charitable purposes can be diverted during the business process; internal and external individuals involved in the company can act as fundraisers;
  • affiliation: the company should make sure that no staff operating for the purpose of its activities is affiliated with a terrorist organization or with terrorism supporters;
  • abuse of programming: the company’s charitable programme may be subject to abuse and/or manipulation at the point of delivery;
  • others: the support of recruitment for terrorist activities or false representation, carrying out other, illegal activities under the guise of a charitable entity organized as a public company limited by guarantee in Singapore.
 
Directors of public companies limited by guarantee in Singapore who wish to make sure that their organization is not subject to money laundering or terrorist financing can implement the following measures:
  • maintain financial transparency;
  • implement a culture of strong corporate governance;
  • perform due diligence checks (in a reasonable manner) on their most important donors and beneficiaries;
  • be well aware of the use of their funds and review the expenditure;
  • perform financial transactions through regulated channels in order to minimize the risk of abuse while the funds are in transit;
  • report any suspicious transactions to the Suspicious Transactions Reporting Office.
 
Charities in Singapore are subject to a set of mandatory statutory compliance rules that partly adhere to the rules for anti-money laundering listed above. These are all in connection with the transparency of their activities. For example, all charities are to submit annual returns, disclose fund-raising information, ensure that the accounting and donations records are properly kept and submit the annual financial statements and an annual report (which will also include plans for their future activities).
 
A public company limited by guarantee is usually involved in charity, religious, scientific, artistic or non-trade activities. This means that, before they can commence the fund-raising activities for these charitable purposes, they must obtain a permit from the Commissioner of Charities. The permit is issued to a company that is incorporated or unincorporated in Singapore, 30 days before the commencement of the fundraising. Some of the documents that are relevant for the application include proof that the company is a bona-fide organization acting in Singapore, a letter from the beneficiary which states that the fundraising is held in his name, and others.
 
There is no special charge to register a charity under the Charities Act and our team of Singapore company formation experts can give you more information on the registration requirements with the Commissioner, before the company begins its charitable or fundraising activities.

The process of setting up a company in Singapore under this business form can be simple and fast if you receive specialized assistance from our experts. Investors who wish to know more about this business form can contact our agents specialized in opening a private limited company in Singapore