How to Split Shares (or Stocks) in a Singapore Company
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.
- What is a Nominee Director & How to Appoint One in Singapore (With FAQs)
- Independent Directors: Who are They and What is Their Role?
- Board of Advisors: Who Are They and What Is Their Role?
- Appointing Company Directors in Singapore: Eligibility, Process etc.
- Managing Director vs CEO in Singapore: Roles and Obligations
- Guide to Directors' Remuneration in Singapore
- Directors' Duties in Singapore
- Shadow Directors: Who are They and What Duties Do They Owe to the Company?
- How to Remove a Director from a Company in Singapore
- Removal and Resignation of Company Auditor in Singapore
- Appointing a Company Secretary: Roles and Responsibilities
- Appointing an Authorised Representative for Foreign Companies in Singapore
- Process Agents in Singapore
- Share Buybacks in Singapore: Procedure, Cost and More
- How to Split Shares (or Stocks) in a Singapore Company
- 2 Ways to Remove a Singapore Company Shareholder ASAP
- What are Treasury Shares? Guide for Singapore Companies
- A Guide to Paid-Up Capital in Singapore
- Preparing a Register of Shareholders for a Singapore Company
- How to Issue Shares in a Singapore Private Company
- Guide to Transferring Shares in a Singapore Private Company
- Your Guide to Share Certificates in Singapore: Usage and How to Prepare
- Shareholder Rights in Singapore Private Companies
- Shareholder Roles and Obligations in Singapore Companies
- Dividend Payments Guide for Singapore Business Owners
- Share Transmission: What Happens If a Shareholder Dies in Singapore?
- How to Reduce the Share Capital of Your Singapore Company
- Buy-Sell Agreements: How to Write & Fund Them in Singapore
- Oppression of Minority Shareholders
- Is Your Business Collaboration Competition Law-Compliant?
- Explained: Registered Filing Agent for Singapore Businesses
- Transfer Pricing Obligations of Singapore Companies
- Adhering to Trading Sanctions and Restrictions in Singapore
- Cyber Hygiene Compliance Guide for Singapore Companies
- Corporate Social Responsibility For Businesses in Singapore
- Essential Regulatory Compliance Guide for Singapore Companies
- Dormant Companies and Their Filing Obligations in Singapore
- Anti-Money Laundering Regulations and Your Business: What You Need to Know
- Price-Fixing, Bid-Rigging and Other Anti-Competitive Practices to Avoid
- Legally Conducting Lucky Draws for Singapore Businesses
- Restaurant Inspection and Food Safety Rules in Singapore
- Does Your Company Need a Legal Team (In-House Counsel)?
- Acqui-Hiring of Singapore Companies: How Does It Work?
- Can a Company Director Take Legal Action Against Another Director?
- How to Change the Name of Your Singapore Company
- Can Directors be Liable for Company Debts in Singapore?
- Company Loans to Directors/Shareholders in Singapore
- 3 Types of Insurance Every Singapore Business Needs
- Creating and Registering Charges in Singapore: Guide for Companies
- Guide to Effective Business Continuity Planning in Singapore
- Business Asset Sale & Disposal in Singapore: How Do They Work?
- 5 Ways To Resolve Business Partnership Disputes in Singapore
- How to Commence a Derivative Action on Behalf of a Company in Singapore
- Business Will: How to Pass on Your Business to Your Successors in Singapore
- Record-Keeping Requirements for Singapore Companies
- Company Constitutions in Singapore and How to Draft One
- Company Memorandum and Articles of Association
- Company Resolutions: What are They?
- Board Resolutions in Singapore
- Minutes of Company Meeting in Singapore: How to Record
- How to Set Up a Register of Controllers
- How to Set Up a Register of Nominee Directors
- Guide to Filing Financial Statements for Singapore Business Owners
- Filing Annual Returns For Your Business
- Carbon Tax in Singapore: What is the Rate and Who Must Pay?
- Laws and Penalties for GST Evasion in Singapore
- 6 Common Taxes in Singapore For Individuals & Businesses
- Singapore Corporate Tax: How to Pay, Tax Rate, Exemptions
- Start-Up Tax Exemption Guide for New Singapore Companies
- GST Registration: Requirements and Procedure in Singapore
- What is Withholding Tax and When to Pay It in Singapore
- Singapore Influencers: Here's How to Calculate Your Income Tax
- Investigating Tax-Evading Business Owners in Singapore
- Small Business Accounting Services in Singapore
- Company Audits in Singapore: Requirements and Exemptions
- Suspect a PDPA Data Breach? Here's What to Do Next
- Must You Notify PDPC About a Data Breach in Your Business?
- Data Room: Should Your Singapore Company Set Up One?
- Victim of a Data Breach? Here’s What You Can Do
- Summary: Your Organisation's 10 Main PDPA Obligations
- Essential PDPA Compliance Guide for Singapore Businesses
- PDPA Consent Requirements: How Can Your Business Comply?
- Is It Legal for Businesses to Ask for Your NRIC in Singapore?
- How To Prevent Unauthorised Disclosure When Processing and Sending Personal Data
- Cloud Storage of Personal Data: Your Business’ Data Protection Obligations
- GDPR Compliance in Singapore: Is it Required and How to Comply
- Appointing a Data Protection Officer For Your Business: All You Need to Know
- How Can Companies Dispose of Documents Containing Personal Data?
- Check the Do-Not-Call Registry Before Marketing to Singapore Phone Numbers
- How to Legally Install CCTVs for Home/Business Use in Singapore
- Is Web Scraping or Crawling Legal in Singapore?
- Legal Options If Employees Breach Confidentiality in Singapore
- Social Media Marketing: Legal Guide for Singapore Businesses
- Your Guide to E-commerce Website Terms of Service in Singapore
- Dealing with Defamation of Your Business: Can You Sue?
- Sending Email Newsletters That Comply With Singapore Law
- A legal guide to drafting a social media policy for your company
- Your Guide to a Media Release Form in Singapore
- Your Guide to an Influencer Marketing Agreement in Singapore
- Outdoor Advertising: How to Legally Display Public Ads in Singapore
- A Guide to Digital Bank Regulation in Singapore
- Applying for a Major Payment Institution Licence in Singapore
- Applying to the MAS FinTech Regulatory Sandbox
- Payment Services Act Licensing Guide for Fintech Businesses
- How to Get a Payment Service Provider Licence in Singapore
- Financial Adviser's Licence Guide for Singapore Businesses
- Capital Markets (CMS) Licence Requirements in Singapore
- How to Offer E-Wallet Services in Singapore: Licensing Guide
- Digital Payment Token Services Licence Guide in Singapore
- How to Legally Offer Crypto Services in Singapore
- How to Restore a Struck-Off Company in Singapore
- Claw-Back of Assets From Unfair Preference and Undervalued Transactions
- Should You Save or Close Your Zombie Company in Singapore?
- Voluntary Suspension of Business in Singapore: How to Handle
- Winding Up a Singapore Company: Grounds and Procedure
- Closing Your Singapore Business: What You Need to Settle
- Striking Off a Company
- Restoring a Company That was Struck Off Without You Knowing
- Dissolution of partnerships in Singapore
- What Should a Creditor Do When a Company Becomes Insolvent?
- How to File a Proof of Debt Against a Company in Liquidation
- Validation of Payments Made by Companies Being Wound Up