The Communists, through James Puthucheary, were pressing very hard for a constitution which would allow branches complete control in the party and allow branch committees to nominate members to the central executive committee.
Lee Kuan Yew, Straits Times 21 September 1961
According to Mr. Lee, “such a constitution would in effect mean that the Communists would be able to capture the party because penetration of the branches of the party is a relatively easy matter because branches are open to everybody to join and participate in without serious check.”
So instead of democracy at a party level, Lee Kuan Yew and the PAP instituted a system with “two classes of members – ordinary members and cadre members.” Ordinary membership is open to all but cadre members are hand picked based their proven sincerity and honesty to the party.
This similar to a company that issue two classes of shares; one class has voting rights and the other does not. To obtain voting rights, one has to pass a serious of arbitrary tests and even that does not guarantee that a voting share will be bestowed upon you. Only those who have voting rights can democratically vote for the leadership.
The irony of this party structure is that the cadre system is closely associated with communism. It gives the Central Executive Committee full control in the selection of cadres and ensures fealty to the party leadership.
In the context of Lim Chin Siong and the other dissenters, Lee Kuan Yew and the leadership of the PAP could and did exclude those that they felt could be a threat in any context they themselves deemed appropriate (like disagreeing with party policies) because they controlled the cadre membership system.