How to Split Shares (or Stocks) in a Singapore Company

Last updated on June 13, 2022

businessman cutting shares

If your Singapore company is looking to increase its number of shares for various commercial purposes, whether in the company’s early stages or later in its incorporation, you may wish to consider a share split (also known as a stock split or share division). This article will explain:

What is a Share Split?

A share split refers to a form of altering a company’s share capital by dividing all or some of its shares into smaller denominations. The effect of this is an increase in the total number of shares of your company without affecting the company’s overall value.

For example, in August 2020, Apple split each of its existing shares, which were then valued at around $540 per share, into 4 shares. This means that the price per share in Apple was divided to become around $540 ÷ 4 = $135.

While the total value of the shareholding by existing Apple shareholders was not affected, the share split meant that the total number of shares represented by the share value increased by 4 times. Thus, if X had held 100 shares valued at approximately $135 x 100 = $13,500 before August 2020, X would hold 400 shares valued at approximately $13,500 after the share split.

What is the difference between a share split and a reverse share split?

Besides a conventional share split, which increases a company’s share capital, another form of altering a company’s share capital is a reverse share split. Reverse share splits involve the consolidation of the number of existing shares into fewer shares. This means that the price per share will increase following a reverse share split depending on the ratio used. Like in conventional share splits, the company’s value remains unchanged.

Companies may wish to consider a reverse share split to maintain a higher share price to satisfy the minimum bid price of shares and avoid the risk of being delisted. In Singapore, the Singapore Exchange Securities Trading Limited (SGX-ST) requires the issue price of shares to be at least $5 each. Thus, a company whose price per share is below $5 may want to consider a reverse share split to increase its price per share.

When Should Companies Consider a Share Split?

Share splits may occur in both private and public companies. While share splits are more common in public companies, whose shares are publicly traded in the open market, they can also be undertaken by private companies. This section highlights some of the benefits you may wish to consider in deciding to split your company’s shares.

Opportunity to align employee interests with the company’s interests

When companies choose to undergo a share split, this can offer a great opportunity for existing employees to have the option to own a part of the company at a more affordable price.

This is particularly so where the price per share prior to the share split was too high for employees to afford. In turn, employees gain ownership interest in the company and greater incentive to invest in the company’s growth.

Share splits can also offer an incentive to new employees if the company’s offer of employment offers them a higher number of shares as part of their compensation package. This method of giving a company’s shares to its employees is referred to as an Employee Stock Ownership Plan (ESOP) and seeks to instil a sense of ownership interest in the company by giving them a stake in the company’s profits.

Under an ESOP, employees are given a specified number of shares in the company at various intervals. The employee may also be able to sell their shares in exchange for  cash. This arrangement can align the employees’ interests with that of the company’s interests as it ultimately incentivises better work performance to contribute to the company’s success.

Attract investors through reduced share prices

Share splits in companies can also have the effect of improving a company’s liquidity. This is because the lower price per share makes it easier for more investors and traders to buy and sell the company’s shares. Moreover, such trading will be possible without directly affecting the company’s underlying value.

As share splits are often conducted when a company’s price per share has increased to a point where it becomes too high for new investors to afford, share splits can also provide a signal to the market that the company has been growing. They can then generate greater confidence in the company’s potential and continued growth. As a result, the company may be able to attract more investors and further boost demand for its shares and in turn, its share price.

How to Split Shares in a Singapore Company

To split shares in a Singapore company, you would need to determine the desired share split ratio based on your company’s needs, as well as fulfil certain legal requirements.

Determining the share split ratio     

A share split ratio refers to how many new shares into which a single share is to be divided in a share split. In the case of Apple’s share split in August 2020, as discussed above, the share split ratio was 4 for 1. This resulted in X receiving an additional 300 shares, on top of X’s initial 100 shares, to make up 400 shares in total with no change to Apple’s total share value.

The most common share split ratios are 2-for-1 or 3-for-1 splits, which may be denoted as 2:1 and 3:1 respectively. However, different ratios may be adopted by the company’s board of directors who decide on the share split.

Different commercial reasons may inform a company’s choice of share split ratio. For instance, if the desired outcome of your company’s share split is to reduce the price per share in order to attract small investors, you might consider a share split ratio that will reduce the price per share to one that is more accessible to your target group of investors. Doing so could help attract small investors who may prefer to buy cheaper whole shares rather than to purchase fractional shares through brokerage firms.

The process of executing a share split in a Singapore company

Once you have determined an appropriate split share ratio, the ratio must be approved by your company’s board of directors. This approval to alter the company’s share capital may occur by an ordinary resolution in a general meeting, which requires more than 50% of the votes cast to support the share split in the ratio proposed.

Once your company receives the necessary internal approval, your company needs to file a “Notice by Local Company of Alteration in Share Capital under S71” transaction with the Accounting and Corporate Regulatory Authority (ACRA) through ACRA’s business filing portal, BizFile+.

This online transaction can be completed at no fee and a step-by-step guide detailing the process can be found here. You will be required to provide the following information:

  • Your company’s Unique Entity Number (UEN)
  • The nature of the share alteration as determined in your company’s ordinary resolution
  • The updated share information
  • The currency in which the value of your company’s shares are to be denominated
  • The updated shareholder information detailing the number of shares held by existing shareholders
  • Other changes in the company’s share capital or shareholders list as may be relevant

Where your company is a publicly listed company, you would additionally be required to comply with the SGX-ST’s listing requirements. Some of these requirements include:

  • Obtaining SGX-ST’s in-principle approval for the listing and quotation of the additional shares on the SGX-ST
  • Ensuring the terms of the share split do not contravene any laws and regulations governing the company and the company constitution

After Splitting Shares

Paying dividends for split shares

Dividends, which may be periodically paid by a company to its shareholders, can be affected by the share split. The manner in which dividend payouts are affected depends on the date of record. This is the date by which one must be a shareholder to receive a certain dividend payout.

Where the share split occurs after the date of record, there will be no change to the total dividend payouts in respect of the existing shares. This is because the dividends will be paid out according to the prevailing number of shares on the date of record.

This also means that shareholders who come to hold a company’s shares following the share split after the date of record for a given dividend declaration are not entitled to the dividends that have been previously declared. These shareholders will receive only the dividends that are declared after their purchase of the new (and split) shares.

On the other hand, where the share split occurs before the date of record, the dividend payouts in respect of the newly divided shares will be reduced proportionately to the split share ratio to account for the increase in the number of outstanding shares.

Can the company split its shares multiple times?

Under Singapore law, there is no restriction on the total number of times a company is permitted to split its shares.

Thus, insofar as each share split is conducted in accordance with the prescribed procedures, your company will be able to conduct multiple share splits throughout the course of its business where it is commercially beneficial to do so.

This article has sought to summarise the key benefits your company may enjoy for a share split as well as a general overview of the processes and fees involved.

If you need assistance with the share-splitting process in Singapore, it is recommended that you engage a corporate services firm. They will be able to assist in drafting the required ordinary resolutions, as well as filing with ACRA the necessary transactions, to help your company complete your share split in accordance with the legal requirements.

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