What is a Public Company Limited by Guarantee (CLG) in Singapore?
Non-profit organisations in Singapore can operate as a Public Company Limited by Guarantee (CLG).
Considering registering your organisation as a CLG? Read on to understand what you may need to do and whether it’s the right move for you.
What is the Best Structure for your Company?
What is often neglected is the often misunderstood and forgotten aspect of what business entity is best for the business and the importance of incorporating a business to mitigate a large number of potential financial and legal risks.
If liability protection isn’t part of your business requirements, now is the time to put it up for some consideration. Liability protection is vital for entrepreneurs as it ensures your business’ or professional assets remain separate from your personal assets.
Public Company Limited by Guarantee vs Private Limited Company
Private Limited (Pte Ltd)
Private Limited (Pte Ltd) Companies are limited by shares and will therefore have a number of shareholders. The liability of those shareholders is limited to the share capital they own.
Shareholders will receive a share of the profits of that organisation through the payment of dividends.
Public Company Limited by Guarantee
CLGs, on the other hand, do not have shareholders as they are public companies, rather they have guarantors. Any profits that are made are reinvested in the company and members do not receive any payment outside of their salary.
Unlike shareholders, the liability of CLG members in the event of liquidation is limited to the amount of money they undertake to contribute.
This money can be thought of as a guarantee given by each member and is usually only a nominal amount as little as $1. This amount is agreed when the CLG is incorporated and therefore it will be included within the company’s incorporation documents.
Who is Considered a CLG?
The option of becoming a CLG is available to companies that carry out non-profit work. They are usually bodies carrying out charity activities. Those activities will generally need to have a national or public interest. CLGs are registered with the Accounting and Regulatory Authority of Singapore (ACRA). As a result, they are also expected to abide by the legislation set down in the Companies Act.
While there’s no strict list of the type of organisations that may benefit from registering as a CLG, examples include religious bodies, universities, and trade associations.
If you don’t want to become a CLG, or it’s not appropriate for your organisation structure, there are alternatives. For example, you can be either a charitable trust or a society.
Is a CLG a Charity?
No, not necessarily.
A CLG can apply for charity status if it meets the eligibility criteria to do so. This entitles it to a complete tax exemption on income.
To be eligible for charity status, an organisation has to fulfil the criteria that has been set out by the Commissioner of Charities.
The Benefits of Becoming a CLG
If you are currently looking into incorporating as a CLG, here are some of the benefits of doing so:
- Limited Liability. A CLG is a separate legal entity. This means that it is a body on its own and separate from its members. If a person or business tries to sue the organisation, it can be sued in its own name. This offers a level of protection to the members of the CLG. They otherwise risk being liable for costs incurred, or damages awarded, during any litigation. Operating as a society or trust does not give you this protection.
- Tax Benefits. A CLG is liable to pay corporate tax at a rate of 17% and there are some tax exemptions available. To understand more about corporate tax and the exemptions available to you, click here.
The Process Of Becoming A CLG
Some of the steps you need to take in applying to become a CLG are:
- Make an application to ACRA to set up the CLG. You can do that here by submitting the company constitution. The constitution (a.k.a. a Memorandum and Articles of Association) must include the name of the company, the objective, and the amount each member pledges to pay in the event of winding up.
- Apply for any licences you might need depending on the work the business carries out. You should do this at the time of registering.
- Now you wait! The process is generally quick with companies being listed as registered within just 15 minutes. Approval can take up to 2 months if it needs further investigation.
To summarise, a CLG is a public limited company and an entity generally used by non-profit organisations looking for corporate status. It offers a number of benefits to companies and members, the main one being that it limits individual liability.
Whether becoming a CLG is the right thing for you will depend on your company structure.
Hopefully, this article has helped you to understand more about what a CLG is, its benefits, and how you apply to become one.
If you need any more assistance in deciding whether becoming a CLG is what you need, ACRA has a useful table that shows the different types of companies available.
Sprout can help!
Looking to operate a CLG? Starting a new organisation may be overwhelming with a long checklist, but it can be much less so. With Sprout Asia, you can outsource your accounting, bookkeeping and incorporation needs.
Arrange for a complimentary consultation now if you’re interested in learning more about the incorporation process.