How to Issue Shares in a Singapore Private Company

Last updated on December 20, 2018

Featured image for the "How to Issue Shares in a Singapore Private Company" article. It features a businessman taking a part of the capital share.

Issuing shares in your company is a great way to obtain investment capital and grow your business. If you want to encourage your employees to work harder and give them a stake in your company, you can also reward them with shares.

Considerations when Issuing Shares

There are many different considerations to take into account when deciding to issue new shares.

1. Different classes of shares

First, there are different classes of shares such as ordinary shares, alphabet shares, management shares and even preference shares.

(a) Ordinary shares

Holders of ordinary shares have equal voting and dividend rights in proportion to their shareholding. However, ordinary shares can be divided into alphabet shares which may have different rights (e.g. Class A or Class B ordinary shares).

(b) Shares with different rights

Examples of shares with different rights include shares that have preferential dividend rights, the lack of or higher voting rights, rights of redemption (e.g. to sell back their shares to the company) or management rights (e.g. the right to appoint a board member).

You would have to consider exactly which type of shares your company would like to issue.

2. Shareholder approval

Secondly, although the issuance of shares is normally proposed by the board of directors, the board requires shareholder approval in order to issue new shares per section 161 of the Companies Act.

Hence, the board must obtain either:

  • A specific mandate for that particular issuance of shares; or
  • A general mandate by the general meeting authorising the Board of Directors to issue shares.

You may need to hold an Extraordinary General Meeting to seek shareholder approval before issuing the shares.

If your company’s constitution stipulates any specific procedures that is required before the company may issue shares, then those procedures will have to be followed.

How Do You Issue New Shares?

An issuance of shares is known as an allotment of shares. In an allotment, the subscribers to a company’s constitution agree to take up shares of the company.

The following documents are usually prepared by the company secretary:

  1. A Director’s Resolution in Writing (DRIW) recording the allotment of shares;
  2. Lodgment with Accounting and Corporate Regulatory Authority (ACRA) a “return of allotment” within 14 days; and
  3. Preparation of new share certificate(s).

The “return of allotment” form should contain the following information:

  1. Number of shares in the allotment;
  2. Amount (if any) paid or deemed to be paid and the amount unpaid on the allotment of each share;
  3. Where there are different classes of shares, the specific class of shares to which each share in the allotment belongs; and
  4. Full name, identification, nationality and address of, and number and class of shares held by each of the company’s members. Or if the company has more than 50 members, then such particulars of each of the 50 members who hold the most number of shares in the company after the allotment (excluding treasury shares).

The company must have the share certificate ready to be issued to the new shareholders within 60 days after the allotment of shares.

After the share certificates have been issued to the new shareholders, the company secretary has to update the company’s register of shareholders.

Do You Need a Prospectus?

According to section 240 of the Securities and Futures Act (SFA), any offer of securities (e.g. shares, derivative products, bonds) must be accompanied by a prospectus (a comprehensive document issued to investors).

However, creating a prospectus is often expensive and takes a lot of time. In order to avoid the need to issue a prospectus , a private company may utilise the private placement exception under section 272B of the SFA if it abides by the conditions stipulated.

These conditions include making the offer of investment to no more than 50 persons within any period of 12 months and not making advertisements or promotional expenses.

When issuing shares with different rights, a company should try its best to ensure that all rights and obligations are clearly spelt out in the company constitution or a shareholder agreement. This will prevent legal disputes that may possibly arise in the future.

If you require assistance in issuing shares in your company, you may wish to engage a corporate secretarial firm.

Compliance
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  3. Price-Fixing, Bid-Rigging and Other Anti-Competitive Practices to Avoid
  4. Dividend Payments Guide for Singapore Business Owners
  5. Company Audits in Singapore: Requirements and Exemptions
  6. Guide to Transferring Shares in a Singapore Private Company
  7. How to Hold Extraordinary General Meetings (EGMs) in Singapore
  8. How to Issue Shares in a Singapore Private Company
  9. How to Reduce the Share Capital of Your Singapore Company
  10. Legally Conducting Lucky Draws for Singapore Businesses
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  13. Can Directors be Liable for Company Debts in Singapore?
  14. Paid-Up Capital in Singapore: A Complete Guide (Is $1 Enough?)
  15. Restaurant Inspection and Food Safety Rules in Singapore
  16. Preparing a Register of Shareholders for a Singapore Company
  17. Essential Regulatory Compliance Guide for Singapore Companies
  18. Finding a Suitable Corporate Secretarial Firm in Singapore
  19. Oppression of Minority Shareholders
  20. Process Agents in Singapore
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  4. How to Change the Name of Your Singapore Company
  5. How to Remove a Director from a Company in Singapore
  6. Appointing Company Directors in Singapore: Eligibility, Process etc.
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  10. Shareholder Rights in Singapore Private Companies
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  13. Creating and Registering Charges in Singapore: Guide for Companies
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  2. Company Memorandum and Articles of Association
  3. Minutes of Company Meeting in Singapore: How to Record
  4. Guide to Filing Financial Statements for Singapore Business Owners
  5. Filing Annual Returns For Your Business
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  8. Board Resolutions in Singapore
  9. Guide and Template for Notice of Extraordinary General Meeting
  10. How to Set Up a Register of Controllers
  11. How to Set Up a Register of Nominee Directors
Company Resolutions Templates
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  2. Your Guide to Resolutions to Appoint a Company Secretary
  3. Your Guide to Resolutions for Authority to Act on a Share Purchase and Subscription Agreement
  4. Your Guide to Shareholders’ Resolutions for Share Allotments
  5. Your Guide to Resolution for Authorisation of Investment in the Shares of Another Company
  6. Your Guide to Share Certificates in Singapore: Usage and How to Prepare
  7. Your Guide to Resolution for Transfer of Shares
  8. Your Guide to Resolution for Change of Registered Address
  9. Your Guide to Board Resolution for Approval/Allotment of Shares
  10. Your Guide to Resolutions to Increase a Company's Share Capital
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  3. Corporate Tax in Singapore: How to Pay, Tax Rate, Exemptions
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  5. Start-Up Tax Exemption Guide for New Singapore Companies
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Ending a Business
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  2. Striking Off a Company
  3. What Should a Creditor Do When a Company Becomes Insolvent?
  4. Dissolution of partnerships in Singapore
  5. Validation of Payments Made by Companies Being Wound Up
  6. Can a Company that Struck Itself Off the Register Later Apply to Restore Itself?
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