Non-profit company: Charities

1. Presentation

A non-profit company, also known as NPO, is an organization whose purpose is not to make profits to be shared among its members.

A non-profit company is directed by the board of directors, the management committee or the board of directors, generally composed of people with specific experience. They do not have the right to distribute monetary surpluses or profits to their own members. In addition, a non-profit company can benefit from tax exemptions if they obtain charitable status (VWO). VWOs that are established exclusively for charitable purposes and carry out activities to achieve these objectives can apply for registration as “charitable organizations”. Under the Charities Act, it is mandatory for the VWO to apply for registration within three months of its establishment.

A non-profit company can be registered as a public company limited by guarantee, a society or a charity.

In general, the process of incorporating a non-profit company in Singapore is the same as that of a private limited company in Singapore, the main difference being that there is no requirement to have an issued and paid-up share capital. This is because a non-profit company is usually incorporated as a public company limited by guarantee, i.e. the members of the company provide a guarantee that they will pay a sum of money when the company is wound up.

Depending on the type of entity created, different steps must be taken (public company limited by guarantee, corporation or charity).

2. Why is it necessary to register?

Although it is not mandatory to register your non-profit company in Singapore, it will be difficult to engage in meaningful and sustainable activities if you are not a registered entity. In addition, a company registration allows the entity to raise funds from non-members and claim tax exemptions on the funds raised.
A registered entity is a criterion that most donors use to evaluate fundraising requests. An organization is publicly accountable once it is registered, which builds trust.

3. Charitable goals can be classified into 4 generic categories:

1. Poverty

2. Advancement or encouragement of education

3. Advancement of a particular religion

4. Other goals beneficial to the community, such as

➤ Advancement of health
➤ Advancement of citizenship or community development
➤ Advancement of the arts, heritage, or science
➤ Advancement of environmental protection or improvement
➤ Assistance of persons in need - the young, the aged, the unhealthy, the disabled, the financially challenged or otherwise disadvantaged
➤ Advancement of animal welfare

4. Obligations

All registered non-profit company:

➤ Are required to submit financial statements and an annual report detailing their activities and proposed future plans
➤ Must ensure that accounting and donation records are properly maintained
➤ Must submit annual statements
➤ Are required to hold annual general meetings
Register a nonprofit company in Singapore

Public company limited by guarantee

1. Introduction:

A company limited by guarantee is a company that carries out non-profit activities with a national or public interest basis, such as the promotion of art, charity, etc. The company has no share capital.

A corporation limited by guarantee has members, rather than shareholders. The members of the company guarantee or pledge a predetermined amount of money to cover the debts of the company, which become due in the event of the company’s liquidation. The amount set aside as security can be as low as SGD 1.

Registration as a public company limited by guarantee:

Incorporating a company limited by guarantee for the purpose of establishing a non-profit company has the distinct advantages of incorporating a separate legal entity with limited liability for its members. Of the various choices available, this form of entity is the most advanced and desirable type of structure. Corporations limited by guarantee are generally engaged in non-commercial activities of a charitable, religious, scientific or artistic nature.

2. The steps and different stages:

1. Reservation of the name

First of all, an advance application must be made to ACRA, especially since the name can be reserved for a maximum of 90 days. The name reservation request can be made through ACRA’s online electronic portal.

To apply for a name, the desired name must be determined, along with the proposed core business. A complete list of the core activities as defined by the Singapore Standard Industrial Classification (“SSIC”) can be obtained from ACRA. Therefore, you will need to indicate the principal activity carried out by the business.

2. Directors or Officers

A minimum of one director is required for a public limited company by guarantee. As with a limited liability company, at least one of the directors must be an individual resident in Singapore.

3. Company Secretary

Similar to the requirement for a local resident director, the appointment of a company secretary is mandatory. Generally, the company secretary (whether in-house or external) ensures that the company complies with Singapore law and advises directors, members, auditors and tax agents on applicable legal deadlines.

4. Memorandum and Articles of Association

The company must have a Memorandum and Articles of Association (“M&AA”) to govern the manner in which it is to be managed. They should contain basic elements such as how a meeting of the corporation is to be held, i.e., when notice of the meeting is to be given to the members, and how a member may appoint a proxy in his or her stead to attend and vote validly at the meeting.

5. Auditors

Since NPOs are primarily for the public interest, they are accountable to the public and it is mandatory to prepare audited accounts. Auditors must be appointed within three months of incorporation.

6. Registered Office

A registered office is required; however, since NPOs do not necessarily have day-to-day operations similar to a limited liability company, the registered office address provided does not have to be the place of business.

7. Registration with Relevant Government Agencies

Particularly for NPOs, there are certain deadlines and registration requirements to be aware of. If your NPO is a charity and wishes to conduct fundraising activities, etc., it is required to register with the Commissioner of Charities within three months of the date of incorporation.

Also, if you want donors to be able to make tax-deductible donations, the nonprofit is required to apply for charitable status (“CPI”). Generally, a nonprofit that obtains CPI status is also required to disclose its fundraising information.

3. Tax Exemptions

Associations registered as companies limited by guarantee in Singapore are exempt from income tax if the excess funds are derived from members’ contributions or if more than 50% of the gross receipts are derived from members and are not tax deductible for members. For full tax exemption, the company must apply for charitable status after registration.

Registering Your Nonprofit Organization as a Corporation

1. Presentation

A corporation is an association of 10 or more persons, regardless of its nature or purpose, that is not already registered under another law. Corporations are suitable for groups of members or volunteers, especially small groups that do not rely heavily on donations and external funding.

2. Requirements for Establishing a Nonprofit Organization as a Corporation

➤ A minimum of 10 people is required to form a corporation
➤ 3 key position holders are required, namely the President, Secretary and Treasurer, who must be Singapore citizens or permanent residents of Singapore
➤ There is a requirement to have a constitution that governs the company
➤ There is a requirement to audit the accounts annually as well as a requirement to file annual reports with the Registry of Societies
➤ It does not have a separate legal identity, which means that members are exposed to liability
➤ Societies are registered with the Registrar of Societies (ROS) and are governed by the Singapore Societies Act

Get more information on charitable business registration

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