IQS LOCAL VARIATIONS
ICSA PROFESSIONAL PROGRAMME PART 1
CORPORATE LAW
Aim
The Chartered Secretary is, within the organisation, the first point of authority and reference
on the requirements of corporate law. A pivotal role is also played in corporate compliance,
and the body of law is the basis and framework for corporate secretarial practice.
The aim of the module is therefore to provide a thorough grounding in, and knowledge and
understanding of the sources and principle provisions of corporate law in the structure,
management and performance of the business entity.
Learning outcomes
At the conclusion of this module, candidates will be able to:

Understand and advise on the provisions and application of corporate law
appropriate to the constitution, formation and performance of the business entity.

Perform the role of principal compliance officer.

Understand and advise on the impact of law on the role of Directors, the Secretary,
and the audit function.
Pre-requisite Learning
This module is a component of the ICSA Professional Programme Part I. It is designed to
enable aspiring Chartered Secretaries to


demonstrate required standards of competence for professional practice in a key
discipline, and
acquire essential knowledge and skills to underpin the relevant components of the
Professional Programme.
Evidence of assessed knowledge and understanding must be demonstrated through the
examinations, or those of equivalent qualifications which have been approved as meeting
the Institute’s required curriculum and standards.
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The module specification is based on the assumption of some relevant prior certificated
knowledge, and candidates will find it helpful to have familiarised themselves particularly
with:


An introduction to the principles of law, and
Business law.
Syllabus
There are six main areas within the Corporate Law syllabus:

formation and constitution of companies; comparison with sole traders, partnerships,
limited liability partnerships, limited partnerships, governmental and not-for-profit
organisations;

the corporate veil; types of companies; the corporate capacity of companies and their
transactions;

capital rule, borrowing, charges and administrative receivership;

appointment, retirement and disqualification of directors; directors’ common law and
statutory duties; the appointment and duties of auditors and the company secretary;


ion of companies, takeovers, schemes of arrangements; compulsory
and voluntary winding-up; directors’ liability on insolvent liquidation; administration
and other voluntary arrangements.
Company law is a distinctive subject because it has several unusual characteristics:
Companies are entirely artificial creations
Companies have no tangible existence: they only exist because governments permit them to
do so. This means that much company law, like tax law, is statutory, and therefore subject to
the benefits of statute, such as certainty, clarity and availability, but also subject to its failings,
such as slowness to react to changing circumstances, poor drafting and inflexibility.
Company law is both self-referential and connected to other areas of law It is quite difficult to
separate any one part of company law from any other, since all the parts are interconnected.
But at the same time, for a good understanding of company law, it also helps to have some
knowledge of contract law, conveyance law, banking law, bankruptcy law and accounting
practice.
Company law states that, provided certain procedural requirements are fulfilled, a company
will exist irrespective of the motives of the persons behind the company. Once a company
has its certificate of incorporation, it has its own separate legal personality, irrespective of
the personal behaviour of the directors who manage the company, the reasons, honest or
otherwise, for which they it set up, or the manner in which they run it.
Company law is pragmatic Company law attempts simultaneously to promote commerce
and to deter fraud. It promotes commerce by allowing entrepreneurs to set up in business
with a predetermined estimate of the amount of capital they will lose if the business fails.
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Without the security of that knowledge, entrepreneurs would either not bother to set up
businesses, thus reducing employment prospects and tax revenues, or would go else-where
to a more entrepreneur-friendly country. At the same time, the knowledge that an
entrepreneur has a ceiling on his liabilities may serve as an incentive to dubious and illegal
activity, which the law must try to deter.
Company law also tries to find a balance between allowing entrepreneurs the opportunity to
manage the company as they see fit, while making them accountable to the company’s
members and, under limited circumstances, both to the company’s creditors and to the wider
world.
Learning content
The Nature and Formation of a Company
The nature of a company – definition of a company, the essential characteristics of a
company, separate legal personality and the veil of incorporation, the criminal and civil
liability of a company. Sources of company law and the impact on local jurisdictions.
Types of company – public and private, limited by shares and guarantees, unlimited
companies, holding and subsidiary companies and undertakings, comparison with sole
traders, general partnerships, limited liability partnerships, limited partnerships, voluntary
and charitable organizations. The corporate veil; types of companies; the corporate capacity
of companies and their transactions
Different rules apply to different forms of companies, according to their status – and that
status may need to change (for example, when a company wishes to change from being a
public company to a private one).
The distinctions between the different types of
company, their respective advantages and disadvantages, and the methods of conversion,
should all be understood.
Candidates should also be aware of the commercial advantages of being a registered
company, while taking account of the unsuitability of the company limited by shares for
bodies that are accountable to wider interests than shareholders, and which do not operate
for profit alone.
Company formation – the registration procedure, the role of the Accounting & Corporate
Regulatory Authority (ACRA), the commencement of business and the regulatory
environment.
The promotion of a company – the company promoter, the duties owed by a promoter and
the remedies for breach, the enforcement and liability on pre-incorporation contracts.
The Constitution of a Company
The external constitution – the memorandum of association, purpose, content and alteration.
The internal constitution – the articles of association, purpose, outline content, the
contractual effect of the memorandum and articles, alteration and limits to alteration of the
articles.
Since the passing of the Companies Act (Cap 50), the corporate capacity of a company, as
reflected in the objects clause of the Memorandum of Association, has not been the issue
that it was once was – but it is not to be ignored. Candidates should be aware of the effect
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of the rules introduced by that Act and the diminished significance of the ultra vires rule.
Articles of Association remain important.
Corporate Transactions
Corporate capacity and the doctrine of ultra vires and constructive notice. The powers of
directors and other officers and employees to bind the company. Agency concepts and the
rule in Turquand’s case. Transactions prior to incorporation. The company’s seal.
The Capital of a Company
(a)
Share Capital
A company’s capital: shares, share capital, the maintenance of capital rule,
borrowing, charges and administrative receivership
Candidates must be aware of the practicalities, procedures, commercial concepts
and legislation based on the maintenance of capital principle.
Capital terminology: Types of shares, including treasury shares, class rights and their
variation. Issuing and the payment for shares. The alteration of share capital. The
capital maintenance rule, purpose and exceptions to it. Redemption and purchase of
own shares, financial assistance, serious loss of capital and distribution of profits.
The concept of membership – transfer and transmission, disclosure and the register
of members.
Public offers of shares – types of public offer, the regulation of public offers and
remedies for misleading prospectuses.
(b)
Loan Capital
Debentures – the power to borrow, secured and unsecured borrowings, types of
debenture and remedies of a debenture holder.
Fixed and floating charges – characteristics of fixed and floating charges, priority,
invalidating charges and registration requirements.
This is another topic where the overall principle should be tackled first. If candidates
understand that shareholders’ capital should be available to creditors and not
dissipated on the shareholders themselves, and that public companies should
adhere to minimum capital requirements, candidates can then learn about the
refinements and detail that put that principle into operation.
Since most companies borrow and will need to grant various forms of security,
candidates will also need to know the law relating to the granting of security and the
remedies open to security-holders.
Directors, Company Secretaries, Auditors and other Company Officers
A perennial issue in company law is when members or directors may be identified with their
companies, so that they may be liable for their companies’ debts.
Some decided cases indicate that members or directors are not responsible for their
companies’ debts, assuming that the company is properly formed and there is no evidence
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of impropriety – a view that sometimes can seem harsh for creditors. In other cases, the
courts have looked at the substance of a company and chosen to lift or pierce the corporate
veil when the company form has been, in the eyes of the court, abused. The cases form no
coherent body of law from which unambiguous conclusions may safely be drawn.
The potential liability of directors is a very significant issue and directors often seek guidance
on this matter from their company secretaries: candidates should therefore be well aware of
this issue.
Directors – types of director, appointment, tenure, remuneration, retirement and
disqualification of directors. Common law, fiduciary and statutory duties. Absolving directors
from breach of duty. Insider dealing, Market abuse, Disclosure of interests.
Company Secretary – appointment, qualification, authority and duties of the company
secretary. Advising directors is also a core function of the company secretary. Although the
Corporate Law paper looks mainly at the law relating to directors and the Corporate
Governance and Corporate Secretaryship papers address issues of procedure and best
practice, candidates should be aware that non statutory corporate governance is
increasingly being seen as pertinent to the law relating to company directors.
Auditors, - appointment, removal, rights, liabilities and duties of an auditor. Audit exemption.
Shareholder Remedies
(a)
Minority protection
The general position of a minority shareholder within a company – the division of
power between the board of directors and the shareholders, the rule in Foss v
Harbottle, the common law exceptions.
Candidates often see minority protection as one of the more human sides of
company law. Historically it was very difficult for minority shareholders to assert their
minority rights, but gradually the pendulum began to swing more in their favour.
(b)
Statutory shareholder remedies – the use of just and equitable winding up and locus
standi. The alternative statutory remedy of unfairly prejudicial conduct, locus standi,
the meaning of unfairly prejudicial conduct, limits and remedies available.
(c)
Government investigations
.A company secretary would be expected to cooperate with any properly authorised
governmental investigation and candidates might be required to advise shareholders
and directors on the ramifications of such an investigation.
Companies in difficulty
(a)
Reconstruction of companies, takeovers and schemes of arrangements; compulsory
acquisition of shares on a takeover.
(b)
Insolvency and winding up – grounds, locus standi, compulsory and voluntary
winding up; the role and powers of the liquidator, swelling the assets available by
setting aside transactions and seeking contributions towards the assets of a
company, order of application of assets of insolvent companies. Consequences of
winding up, striking off and restoration of companies to the register. Directors’ liability
on insolvent liquidation.
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Companies sometimes find themselves in a financial muddle, perhaps through
misfortune, perhaps through their directors’ incompetence. Where humans become
bankrupt, companies are wound up by a liquidator.
The liquidator has to salvage as much from the company’s assets to repay creditors,
or, if the company is actually solvent, repay the members their capital after payment
of the creditors. This may involve the liquidator in examining the directors’ actions in
the period leading up to the winding up. The liquidator may be able to have certain
transactions set aside and/or apply to the court to make the directors personally
liable for some of their actions. Liquidation is a very drastic step.
(c)
Alternatives to winding up – there is an alternative procedure – administration- which
may be available under certain circumstances and which may be more appropriate
than liquidation - administrative receivership, administration and company
voluntary arrangements. Candidates should be aware of the differences between
and the usefulness of liquidation, administrative receivership and administration.
Candidates should also be aware of the less-well-known voluntary arrangements,
even though they are not greatly used.
Study Materials and Resources
Study Text
Commercial Applications of Company Law Singapore
Pamela Hanrahan / Ian Ramsay / Geof Stapledon/ Victor Yeo / Joyce Lee
CCH Asia Pte Ltd
Statutes and Regulations
Companies Act (Cap 50)
Limited Partnership Act
Limited Liability Partnership Act
Securities and Futures Act
The Singapore Exchange Listing Manual
The Code on Takeovers and Mergers of Singapore
Recommended Reading List
Pearlie Koh, Victor Yeo, Low Kee Yang (1999) Company Law, Butterworths Asia
Davies, P.L. and Prentice, D. (1997) Gower’s Principles of Modern Company Law, Sweet &
Maxwell: London
Farrar, J.F. (1998) Farrar’s Company Law, Butterworths Law: London
Mayson, S., French, D. and Ryan, C. (2002) Mason, French & Ryan on Company Law,
Oxford University Press: Oxford
Morse, G., Marshall, E., Morris, R. and Crabb, L. (eds.) (1999), Charlesworth and Morse:
Company Law, Sweet & Maxwell: London
Pennington R.R.. (2001) Pennington’s Company Law, Butterworths Law: London
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Source books
Sourcebooks are an essential tool for the company lawyer. A collected edition of the
company and insolvency legislation is essential.
Walmsley, (2001) Butterworth’s Company Law Handbook, Butterworths Law: London
Web Resources
Singapore Legislations Update www.egazette.com.sg
Ministry of Finance, Singapore www.mof.gov.sg
Accounting & Corporate Regulatory Authority www.acra.gov.sg
Singapore Exchange www.sgx.com
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