While the company registration process in Singapore requires you to submit all sorts of information about your business, everything ultimately revolves around two basic elements — the company’s shares and the accompanying shareholders.
The registrar of companies in Singapore — Accounting and Corporate Regulatory Authority (ACRA) — primarily reviews the types of shares in your company, the distribution of shares among the company shareholders, your share capital, as well as the shareholders’ rights and responsibilities.
But, it doesn’t end there. Once you incorporate the business, ACRA will proceed to keep a close eye on how you manage everything about your shares and shareholders. If you so much as try to transfer shares or issue new shares, for instance, ACRA will require you to abide by not only Singapore law but also your own company constitution.
So, to make things much easier for you, we’ll explain all the essentials regarding company shares and shareholders in Singapore.
What is a Company Share?
A company share represents a unit of ownership in a company. When you own a share in a company, you effectively hold a portion of the company’s equity. This share gives you certain rights, such as voting rights in the company’s general meetings, receiving dividends, and claiming a portion of the company’s assets in the event of liquidation.
Shares are integral to the company’s capital structure, determining how much of the company each shareholder owns. The value of shares can fluctuate based on the company’s performance and market conditions, making them both a potential source of income and a risk-bearing investment.
Share Capital Requirement
Share capital refers to the funds a company raises by issuing shares to shareholders. In Singapore, the concept of share capital is split into two categories: paid-up capital and unpaid share capital.
The minimum paid-up capital required to register a company in Singapore is SGD 1. However, depending on the nature and size of the business, companies often start with a higher paid-up capital. Paid-up capital can be increased later by issuing new shares or having shareholders pay up their unpaid share capital.
Types of Shares in Singapore Company
- Ordinary Shares: This category offers shareholders dividend rights, voting rights (typically one vote for each share), as well as the license to acquire a fair share of the company’s assets after dissolution. ACRA requires each company to set aside at least one ordinary share during incorporation.
- Preference Shares: Preference Shares are considered to be superior to ordinary shares when it comes to dividend payouts. Such shareholders can, for instance, receive their dividend checks before regular shareholders.
- Non-Voting Shares: Although these shares can make you a rightful company member, they don’t come with voting rights. One particularly common example is Preference Shares.
- Deferred Shares: Companies hold off dividend payouts to Deferred Shares until the rest of the shares have received their rightful minimum allocations.
- Redeemable Shares: These are more like temporary shares that are allocated to new members, on condition that the company will reacquire them at a later date. This makes them ideal for short-term investors
- Management Shares: This is a special type that’s commonly allocated to senior company members such as founders. And the reason is, they happen to offer additional privileges like extra voting powers and decision-making rights.
- Alphabet Shares: This collectively refers to custom-defined categories of shares. Singapore’s Companies Act allows you to set up various share classes based on your company’s structure. You could, for instance, create Class A and Class B share classes with varying levels of privileges and rights.
What is a Shareholder?
A shareholder is an individual or entity that owns one or more shares in a company. They are essentially the owners of the company, with their ownership proportionate to the number of shares they hold. While shareholders can enjoy certain rights, they will also bear responsibility for the company.
- Financial Liability: Shareholders’ liability is generally limited to the amount unpaid on their shares. This means they are only financially liable up to the amount they agreed to pay for their shares.
- Participation in General Meetings: Shareholders should participate in general meetings to give their vote for certain situations. Major decisions, such as appointing nominee directors or approving significant transactions, require shareholder approval.
- Compliance with Company Constitution: Shareholders must adhere to the company’s constitution, which outlines the rules governing the company’s operations, including how shares can be transferred or sold.
- Shareholders Agreements: In some cases, shareholders may enter into agreements that define their rights and obligations beyond what is stated in the company’s constitution. These agreements can cover aspects like how disputes are resolved, how shares are sold, or how dividends are distributed.
Who Can Be a Shareholder in a Singapore Company?
Not everyone can be a shareholder in a company, they have to fulfill these requirements first before withholding that position.
- You can only become a shareholder by purchasing company shares.
- A private limited company in Singapore can have as few as one shareholder, and as many as 50 shareholders.
- Both individuals and corporations can be registered as shareholders.
- Singaporean companies are open to both local and foreign shareholders. In fact, foreign shareholders can even go ahead and take up all the shares in a company.
- Once incorporated, a company exists and runs as a completely separate entity from its shareholders. That means shareholders are not personally responsible for any liabilities and debts that might arise from the company.
- The shares allocated to shareholders come with specific rights and privileges, which subsequently determine the roles and responsibilities of each shareholder.
- Shareholders are free to transfer and issue shares to other company shareholders.
- Each shareholder’s ownership equity is determined by the combined volume and value of the shares they own. With 50% of the company shares, for instance, you’d pretty much be entitled to half of the company.
What is Shareholder Rights?
Through their share allocations, shareholders ordinarily get the following privileges:
- The right to vote.
- The right to a proportional share of the dividend payout.
- The right to fair treatment within the company.
- The right to attend and organize company meetings.
- The right to participate in the company dissolution process.
- The right to a share of the company assets after dissolution.
Share Transaction In Singapore Company
In Singapore, managing and executing share transactions is a critical aspect of company operations, involving legal compliance and adherence to the company's constitution. Share transactions mainly revolve around two key activities: share issuance and share transfer. Understanding these processes is essential for maintaining the integrity of the company's ownership structure and ensuring that all shareholders' rights are protected.
Share Issuance
Share Issuance refers to the process of creating and distributing new shares to existing or new shareholders. This process is typically undertaken for various reasons, such as raising additional capital for business expansion, rewarding employees through stock options, or bringing in new investors.
ACRA is flexible enough to accommodate a wide range of changes in your company shares. For example, you can proceed to issue new shares whenever you want. All it takes is passing an ordinary resolution along with other shareholders, after which you should file ACRA’s return of allotment within 14 days –through a formal application via the official BizFile portal. You’ll be expected to submit the following details:
- The classes of shares you’re issuing.
- The paid and unpaid amounts for each share allotment.
- The number of shares the company is issuing.
- The business name, UEN, and registered address of the shareholders who happen to corporations.
- The full name, nationality, identification info, and physical address of each shareholder who happens to be an individual.
- The number of shares owned by each shareholder, plus their corresponding share classes.
Share Transfer
Apart from issuing new shares, shareholders can go ahead and transfer shares between themselves.
In simple terms, this refers to the process of transferring ownership of existing shares from one shareholder to another. Unlike share issuance, which involves the creation of new shares, share transfer deals with the redistribution of already issued shares.
But, while ACRA allows shareholders to proceed freely, this whole process is usually controlled and governed by the company constitution. As such, you can only transfer shares at the discretion of your company’s rules.
Both share issuance and share transfer are critical processes that require careful planning and execution in Singapore. These transactions must comply with the company’s constitution, relevant shareholder agreements, and the legal requirements set out by ACRA. Whether you are issuing new shares to raise capital or transferring shares to change ownership, understanding these processes will help maintain compliance and protect the rights of all stakeholders involved.
Key Takeaway
Understanding the intricacies of shares and shareholders is vital for anyone involved in a Singaporean company. By grasping these concepts, you can better manage your company’s capital structure and ensure compliance with the legal framework, setting a strong foundation for your business’s success!
At WealthBridge, we provide comprehensive corporate services, including incorporation support for businesses looking to establish themselves in Singapore. Our team ensures that the entire process, from company registration to share issuance and transfer, complies with the legal requirements set by the Accounting and Corporate Regulatory Authority (ACRA). With our understanding of Singapore’s corporate landscape, we assist businesses in managing their share capital and shareholder agreements, ensuring long-term growth and compliance. WealthBridge is a leading corporate services provider, trusted for helping companies navigate complex regulatory frameworks while focusing on their core business goals.