Overview
- Introduction: The documents that decide your business’s fate
- The company constitution: More than just red tape
- The shareholder agreement: Where trust meets strategy?
- How they work together: The balance of law and strategy
- When governance fails: legal and regulatory consequences
- Common pitfalls even smart entrepreneurs miss
- Building a strong governance framework
- How MBiA simplifies corporate governance?
- Conclusion: Corporate governance is your competitive edge
Introduction: The documents that decide your business’s fate
In February 2025, City Developments Limited (CDL), one of Singapore’s leading property developers, faced internal turmoil when Executive Chairman Kwek Leng Beng accused his son, CEO Sherman Kwek, of attempting a boardroom coup by appointing new directors without proper approval. This conflict led to a suspension of trading and a sharp drop in share prices, highlighting the critical importance of corporate governance in ensuring business stability (Reuters).
Across Asia, similar governance failures have threatened businesses. Often, the difference between stability and crisis comes down to two key documents: the company constitution and the shareholder agreement. One provides the legal foundation, while the other sets relationship terms between shareholders. Understanding how they function and their role in real businesses is vital for long-term success.
The company constitution: More than just red tape
Every business in Asia begins with a constitution. Filed with regulators like Singapore’s ACRA or Vietnam’s Department of Planning and Investment, this document is the bedrock of your legal identity. It’s not just a formality—it’s the script that dictates how your company operates under local law.
For example, when Swire Properties, a major Hong Kong-based real estate developer, entered a joint venture with Shanghai Jing’an Real Estate Group in 2021 to restore the historic Zhangyuan Shikumen compound, its company constitution played a crucial role. The document outlined governance rules, shareholder rights, and dispute resolution mechanisms, ensuring compliance with local laws and smooth collaboration (Swire Properties).
A company’s constitution must also adapt to market changes. In 2022, GoTo Group, Indonesia’s largest tech firm, adopted a dual-class share structure when it went public on the Indonesian Stock Exchange (IDX). This structure gave certain shareholders greater voting power, but new regulations from Indonesia’s Financial Services Authority (OJK) required GoTo to revise its constitution to remain compliant (BlackRock).
The shareholder agreement: Where trust meets strategy?
While the constitution handles the “what,” the shareholder agreement defines the “how.” This confidential contract is where founders preempt disputes, protect equity, and plan for the unexpected.
In Singapore, shareholder agreements often include unanimous consent clauses for significant corporate actions, such as issuing additional shares or modifying share capital structures. This prevents dilution of ownership and ensures minority shareholders have a voice. The Venture Capital Investment Model Agreements (VIMA) framework provides a model shareholder agreement outlining these protections (Singapore Law Watch).
Flexibility is a key advantage of shareholder agreements. In Vietnam and most other countries, shareholder agreements increasingly include mediation clauses to resolve disputes between foreign investors and local partners. This aligns with Vietnam’s legal framework, which promotes alternative dispute resolution methods. The EU-Vietnam Free Trade Agreement (EVFTA) also encourages mediation in investor-state disputes, reinforcing Vietnam’s commitment to corporate dispute resolution (European Commission).
How they work together: The balance of law and strategy
The company constitution and shareholder agreement complement each other:
- Legal Status: The constitution is public and filed with regulators, while the shareholder agreement is private and tailored to shareholder needs.
- Flexibility: Amending a constitution often requires a 75% shareholder vote, whereas a shareholder agreement can be changed with unanimous consent, offering more adaptability.
- Enforcement: Violating a constitution can trigger regulatory penalties, while breaking a shareholder agreement results in internal disputes, usually resolved through arbitration.
For example, in Singapore, all companies must file their constitution with ACRA, making it public and ensuring statutory compliance. However, a shareholder agreement remains confidential, allowing shareholders to customize their rights and obligations without external scrutiny.
When governance fails: legal and regulatory consequences
Case 1: The importance of Rights of First Refusal (ROFR)
In the United Company Rusal Plc v. Crispian Investments Limited and Whiteleave Holdings Limited case, a dispute arose over the Right of First Refusal (ROFR) in a shareholder agreement. Crispian Investments attempted to sell its shares to a third party, triggering Rusal and Whiteleave’s ROFR rights. The court’s ruling emphasized the importance of clear and precise drafting in shareholder agreements to avoid loopholes (Maitland Chambers).
Case 2: The cost of missing an AGM
Failing to hold an Annual General Meeting (AGM) can lead to financial penalties and legal action. In Singapore, the Accounting and Corporate Regulatory Authority (ACRA) imposes fines and potential disqualification of directors for missing AGMs. Investors and stakeholders view non-compliance as a red flag, damaging corporate reputation (ACRA).
Common pitfalls even smart entrepreneurs miss
- Thinking one document covers everything
A company constitution alone may not cover dispute resolution, exit strategies, or minority shareholder protections.
- Copy-paste compliance
Using generic templates can result in non-compliance with local laws. For example, in Malaysia, the Sabah Land Ordinance governs land ownership differently from other states, requiring customized agreements.
- Ignoring cultural factors
In Japan, where consensus-driven decision-making is valued, requiring unanimous shareholder approval can facilitate smoother governance. However, in other markets, rigid agreements may slow down decision-making.
Building a strong governance framework
- Start with a solid constitution
Ensure compliance with local regulations (e.g., ACRA in Singapore, Enterprise Law in Vietnam).
- Customize your shareholder agreement
Cover aspects such as exit strategies, capital funding rules, and dispute resolution.
- Review and adapt
Companies expanding into Indonesia must consider foreign ownership laws, which impose investment restrictions in certain sectors.
How does MBiA simplify corporate governance?
- Local expertise: Our advisors ensure compliance with Singapore, Hong Kong, and ASEAN regulations. We prepare both constitutions and shareholders’ agreements tailored to the needs of diverse type of clients.
- Tech-driven solutions: e-sign shareholder agreements, track AGM deadlines, and store legal documents digitally.
- Cultural adaptability: We help businesses navigate local Asian norms with Western and International cultural preferences (and language compatibility).
Conclusion: Corporate governance is your competitive edge
In Asia’s highly competitive markets, the most successful businesses are those with structured governance. A strong constitution ensures legal stability, while a well-drafted shareholder agreement prevents internal conflicts. Together, they provide a roadmap for growth and sustainability.
MBiA combines local expertise with tech-driven solutions to simplify governance. Contact us today because even the boldest business visions need strong guardrails.
