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Legal issues that most startups in Singapore should pay attention to

Legal issues that most startups in Singapore should pay attention to – Starting up is tough, you are new to business and you are new to your business idea. You not only need to spend time trying to make your product work out, you will also need to spend time trying to make sure your bank doesn’t run down to zero and also managing staff which is a brand new thing to you.


There are many components of the business, not just accounting and finance. You might some time overlook one very important part of your business, which is legal. Contracts are signed, sometimes without much concern until something goes wrong. You suddenly realize that you made a mistake and you want to go back to before you signed it but you can’t.

Legal issues kill many startups because you end up signing more shares than you should or you end up spending so much time on settling it that you end up killing your business anyway. So we will like to share some of the legal issues that we can see coming into play and what you should play close attention to when you are starting up your business. You could maybe avoid them or at best try to at least minimize the impact of such issues:

1. ALWAYS check what you sign even if its from someone you trust

This is the best part of the whole article. We have met business owners who have signed things that they do not understand or do not read what they sign and trust that the other party will not take advantage of you and therefore will be informed to make the best decision for you.

The world is not the nicest place to be in. There are situations where certain individuals could make changes to your company and make you sign things without you even realizing it. Trust no one when it comes to legal documents, read the fine prints, read every line so that you know you are in the know of clauses that might not work in your favor.

Many might dismiss this, but the worst cases of legal arguments are those that states that they didn’t read what they sign and signed something unfavourable. In the eye of the law, such statements don’t stand. 

The law stands for those that are signed and confirmed on a document and in the eyes of the law, the condition where you signed the document doesn’t really matter. We have seen startups get into such issues and we do not wish to see such things happening to others. You could consult use about legal documents if you do need some pointers.

2. Always have a shareholder agreement, even with your best friend or your family member

The shareholder agreement not only states how much control of the company each person has but also the rules that govern what each person has to do. Inside such agreements can also allow for future investors and what role they can play and how each person should view the other in the company. This prevents all forms of argument and also to have something to fall back on when there are arguments.

If things are not clear and monetary issues are not discussed and pre-agreed, you can have major issues and arguments that not only can destroy your company but also your friendship or relationship with your loved ones.

Business should not lead to splitting of relationships and having such agreements may not be able to stop a break up but at least it could present some form of judgement when it comes to getting someone to work a little more or contributing a little more capital.

3. Consult a lawyer or a corporate secretary or a friend who is an old time entrepreneur

The biggest mistake most people make is during their company incorporation process. Why do i say so? Its easy to issue the wrong amounts of shares and misunderstanding what the director does and what the shareholder does.

Why you think this might affect things? When you get an investor and things turn sour, you might be up for a fight because you did not get things right in the first place. And one other common problem is getting yourself as the corporate secretary. Most think that corporate secretaries do not have much to do , that’s not true, ensuring resolutions are done correctly and consulting on proper procedures to get something done is what a corporate secretary is suppose to ensure. This can be a difference for you when something wrong happens and you need someone to ensure you did it right and therefore have no fear during a challenge.

When it comes to making such mistakes, when there is a need to bring in investments, it might be a weird signal to your investors about how your paid up capital is weird or the way you have structured your business and this is not a good move when it comes to getting a good start to your business.

If you are keen to find out more about the legal issues that you might face when setting up business, you could consult our business consultants at Koh Management.

We work closely with businesses to provide high quality management services to help businesses ease their business needs.

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