Non-Profit Organization Entities in Singapore: PCLG, Society, and Charitable Trust
There are three forms of non-profit organizations (NPOs) in Singapore, also known as charities or voluntary welfare organizations.
Foreign nationals who are seeking to set up an NPO in Singapore must first decide the type of non-profit entity they wish to register. The size and structure of the intended organization and its source of funding may become key determinants when choosing the type of organization to register in Singapore.
Broadly, foreign nationals may choose from any of the following three types of NPOs:
- Public Company Limited by Guarantee (PCLG);
- Society; and
- Charitable Trust.
Public Company Limited by Guarantee (PCLG)
A PCLG may be set up without any share capital for the purpose of carrying out non-profit activities. Hence, a PCLG consists of only members and no shareholders. The members, however, must guarantee to pay a predetermined amount of money to cover the entity’s liabilities in the event that it is dissolved at a later date.
At the time of incorporation in Singapore, a PCLG’s name must be suffixed with the word “Limited”. However, post-incorporation, this suffix may be removed on the condition that the entity will not distribute profits among its members, and after prior approval of the relevant regulatory authority.
At least 10 persons are required for the setting up of a Society, which is regarded as a club, partnership or association of its members. While a Society may be the easiest to set up, it may be difficult for it to rely on external donations and funds. This is because external donors often prefer a more formal business structure such as the one provided by a PCLG.
A Society is best suited for small community-based groups which are deeply embedded in the community in which it operates. However, a Society does not have a legal entity status of its own and is constituted by its members, who own all liabilities.
A Charitable Trust is named so after the “trust deed” or the written document that outlines the entity’s arrangement whereby an owner of property or funds hands over the rights to administer the same to a group of persons called the trustees. The trustees manage the assets for the benefit of some other persons, who are the beneficiaries, or for a stated goal or objective.
In this article, we will mainly focus on the process of registering or incorporating a Public Company Limited by Guarantee or PCLG.
How does a PCLG differ from a Society or a Charitable Trust?
A PCLG has no share capital and carries out non-profit-making activities tied to national or public interests, such as promoting art, charitable causes, etc. It is generally engaged in non-trading, charitable, religious, scientific or artistic activities that benefit the public.
On the other hand, a Society is basically a club, company, partnership or association. It is a membership or volunteer-based business structure which does not depend heavily on donations or external funding due to its strong community links.
A Charitable Trust is the most time consuming and expensive to establish. Although setting up a Society is said to be quick, easy and inexpensive, donors prefer more formal business structure arrangements such as a PCLG. Furthermore, the latter enjoys restricted members’ liability which makes the members less exposed to liability issues compared to a Society.
But both PCLG and Society must apply for a Charity status to acquire full tax exemption.
Nevertheless, NPO registration as a PCLG is still the most preferred form of entity practically due to its limited liability. This means that it may sue or be sued in its own name, and the members will be protected from any liabilities incurred.
A version of this article appeared in the ASEAN Briefing magazine How to Set Up a Non-Profit Organization in Singapore.