Template for Board Resolution for Approval/Allotment of Shares

Overview

Board Approval to Issue/Allot New Shares

The company’s constitution would typically provide that the Board of Directors (the “Board”) has the authority to issue (i.e allot) shares in the company. For example, clause 7(1) of the Model Constitution states:

“Without prejudice to any special rights previously conferred on the holders of any existing shares or class of shares but subject to the Act, shares in the company may be issued by the directors.”

However, section 161 of the Companies Act (CA) requires shareholders to give their approval for the issuance of company shares, “notwithstanding anything in the company’s constitution”. As a result, the Board must obtain, from the shareholders, either:

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

Shareholder approval is conferred by means of a shareholders’ resolution passed by the shareholders at a general meeting. This shareholders’ resolution will take the form of an ordinary resolution which would be passed if a majority of more than 50% of the votes are cast in favour of it.

Once the Board has obtained either a specific mandate for that particular issuance of shares, or a general mandate authorising the Board to issue shares, the Board would pass a board resolution authorising the new shares to be issued.

The mandate would usually last for a specified period of time (e.g. until the next Annual General Meeting of the company). Upon expiry, a new mandate must be obtained in order to issue shares.

Board Resolution to Approve an Issue/Allotment of Shares

In addition to authorising the issuance of shares for a specified period of time, the board resolution would also typically authorise the issuance of a share certificate as evidence of the shareholder’s right and title to the shares.

The company must issue a share certificate to that shareholder within 60 days of the date of allotment.

The resolution would also authorise a director to sign all notices, communications and regulatory filings that the company is required to make in relation to the issuance of shares.

For example, the company will have to lodge with the Accounting and Corporate Regulatory Authority (ACRA) a “Return of Allotment”, which serves as notification to ACRA that new shares have been allotted.

In relation to any documents that would have to be in writing under seal, such as deeds, this resolution would grant the authority to either affix the company’s common seal, or rely on section 41B of the Companies Act which provides that a company may execute a deed without a common seal by signature:

On behalf of the company by a director of the company and a company secretary;
On behalf of the company by at least 2 directors of the company; or
On behalf of the company by a director of the company in the presence of a witness who attests the signature.