To incorporate in Singapore, all companies must issue at least one share. The shares of a company not only designate the ownership of the company but also provide rights, privileges, and responsibilities to the shareholders. This guide provides an overview of the regulations pertaining to company shares and shareholders in Singapore; it includes:
- Singapore Company Shares – At a Glance
- Share Capital Requirement
- Type of Shares in Singapore
- Who Can be a Shareholder?
- Issuance of New Shares
- Transfer of Shares
- Shareholder Rights
- Shareholders Responsibilities
- Key Takeaways
At a Glance
- Minimum share capital S$1
- Private limited companies must have a minimum of 1 shareholder and can have a maximum of 50 shareholders
- Singapore allows 100% local or foreign shareholding
- Shares can be issued in any major currency
- Companies have the freedom to create different share classes that offer different rights and privileges to shareholders
- Companies are free to issue shares at any time with the approval of the shareholders
- Shares can be freely transferred between shareholders unless such a transfer is restricted by the company constitution
Share Capital Requirement
Share capital refers to the money that has been invested in the company by shareholders in exchange for shares a company has issued to shareholders. Under Singapore company law, companies can issue shares without receiving full payment from the shareholders. As such, the total share capital of a company can be divided into two categories: paid-up capital and unpaid capital.
Paid-up capital refers to the money that shareholders have paid in full for the issued shares. Unpaid share capital refers to the situation when none of the monies due for an allotment of shares that have been issued have been paid. In small companies for the share capital is often unpaid and remain due to the company indefinitely.
Singapore company law requires all companies to maintain share capital throughout the life of the company. To incorporate, companies must have a minimum of S$1 in paid-up capital. Company shares can be issued in any major currency; although, for convenience, Singapore dollars are preferred.
Types of Shares
Singapore company law allows companies to create share types that offer different privileges and rights to shareholders. A list of the most common types of shares issued by Singapore companies is below.
- Ordinary shares: All companies are required to issue one ordinary share in order to incorporate. Typically, ordinary shares offer voting rights of one vote per share at general meetings, the right to dividends and the right to claim the remaining assets when the company is wound up.
- Non-voting shares: Unlike ordinary shares, non-voting shares do not give the shareholder the right to general meetings or to vote. Non-voting shares are generally issued to employees or the main shareholder’s family members.
- Preference shares: In general, preference shares give special rights over ordinary shareholders with respect to dividend payments. For example, a company may choose to issue dividends to preference shareholders first before ordinary shareholders. Furthermore, preference shares may have rights to claim the assets of the company over ordinary shareholders. In most cases, preference shares are non-voting shares.
- Alphabet shares: A company can choose to create different classes of shares (e.g. Class A, Class B, Class C) with each offering different rights and privileges to shareholders.
- Management shares: Often given to the founders of the business, management shares usually offer extra voting rights.
- Redeemable shares: Normally, a redeemable share is issued with the condition that the company will buy back the share at a future date.
- Deferred shares: No dividend is paid to deferred shares until a minimum dividend has been paid to all other shareholders.
Who Can Be A Shareholder?
According to Singapore company law, a private limited company must have a minimum of 1 shareholder and cannot exceed a maximum of 50 shareholders. Shareholders can be natural persons or corporations and can be local or foreign. Furthermore, Singapore allows for 100% company ownership by foreign shareholders.
To become a shareholder, an individual must first purchase shares of the company. By buying shares, a shareholder is an owner of the company. Since the company is a separate legal entity, the shareholder does not hold any assets of the company nor is she liable for the debts of the company. As owners of the company, shareholders are entitled to certain rights. Lastly, along with those rights, shareholders are also bestowed with certain responsibilities.
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Issuance of New Shares
A company can issue new shares at any time by passing an ordinary resolution of the shareholders and filing a return of allotment. The company must file a return of allotment with the Accounting and Corporate Regulatory Authority (ACRA) through BizFile within 14 days of issuing the shares. The return of allotment must include the following information:
- The number of the shares in the allotment
- The amount (if any) paid or deemed to be paid on the allotment of each share
- The amount (if any) unpaid on each share
- The class of shares issued (if applicable)
- The full name, identification, nationality, and address (for shareholders who are individuals)
- The corporation name or UEN, and address (for shareholders that are corporations)
- The number and class of shares held by each of its members
Transfer of Shares
Shares can be bought and sold between shareholders and such transactions are known as a transfer of shares. Shareholders are free to transfer shares with other shareholders subject to any restrictions by the company constitution. Furthermore, company directors normally do not have the right to refuse the transfer of shares from one shareholder to another.
When a transfer of shares has occurred, the company must file a notice of transfer of shares with ACRA using BizFile or report the transfer in the annual returns.
- Voting rights: The typical ordinary share gives a shareholder one vote. Shareholders exercise their voting rights when an ordinary resolution is required. Examples of ordinary resolutions include:
- Appointing and removing auditors
- Electing a new director to replace a retiring director
- Altering the company’s constitution
- Changing the share capital of the company
- Changing the name of the company
- Right to attend and call meetings: Shareholders have the right to attend annual general meetings (AGMs), where they are also entitled to speak directly to other shareholders and the board of directors. In certain cases, minority shareholders can call meetings in between AGMs. Under Singapore company law, two or more shareholders, who own at least 10% of the share capital of the company can call an Extraordinary General Meeting (EGM).
- Right to be treated fairly: Under section 216 of the Companies Act, shareholders can seek remedy from the government of Singapore for the following:
- The company or the directors’ actions are oppressive or in disregard of the interests of one or more shareholders.
- The act of the company, its shareholder, debenture holders or directors unfairly discriminates or is prejudicial to one or more shareholders.
- Rights to dividends: The directors of a company have the right to recommend the payment of a dividend of a fixed amount. However, to officially distribute a dividend, the company must pass an ordinary resolution through a shareholder vote. Typically, companies pay dividends in a hierarchy in which preference shareholders receive dividend payments first before ordinary shareholders are paid.
- Right to wind up the company: In certain circumstances, shareholders can seek to wind up a company; these include:
- The director(s) of the company acted in their own self-interest to the deficit of the company
- The company is being used for unlawful means
- The company is running a multi-level marketing or pyramid scheme
- Right to assets when winding up: Shareholders have the rights to company assets if the company winds up. Typically, ordinary shareholders have the last claim on any of the company’s remaining assets after debt holders and preference shareholders.
- Pay the full price for shares: Shareholders are required to pay the full amount for the shares their shares.
- Attend and participate in general meetings: Although not mandated by Singapore company law, shareholders should attend and participate in both AGMs and EGMs. General meetings are where the company decides on ordinary and special resolutions that require a shareholder vote. In addition, general meetings are the forum in which shareholders can directly voice their opinions regarding the management of the company to the directors.
- Voice interests and opinions to the company secretary in between general meetings: Apart from general meetings, the shareholders have a direct line of communication with the board of directors through the company secretary. Since shareholders do not participate in the day-to-day management of the company, it is to their benefit to voice their opinions and interests regarding company matters to the company secretary.
- Singapore company law allows companies to create different types of shares with different rights and restrictions to match the needs of existing shareholders and new investors.
- Companies can issue new shares at any time by passing an ordinary resolution of the shareholders and filing a return of allotment with ACRA with 14 days of issuing new shares.
- Shareholders are entitled to the following rights:
- The right to dividends when issued by the company
- The right to the remaining assets when a company is wound up
- The right to attend general meetings and vote on company issues that require an ordinary resolution
- The right to be treated fairly by the officers and other shareholders of the company
- Shareholders also have the responsibility to:
- Pay the full amount for their shares
- Participate and voice their interests at general meetings and vote on issues that require an ordinary resolution
- Voice their opinion and interests to the company secretary between general meetings
- Shareholders can freely transfer shares unless restricted by the company constitution. Similarly, the board of directors normally can not restrict the transfer of shares unless stated otherwise in the company constitution. Lastly, the company must file a transfer of shares with ACRA.