Converting from Public Company to Private Company
- a22162
- Dec 11, 2021
- 8 min read
Updated: 2 days ago
Singapore Public to Private Company Conversion
Converting from Public Company to Private Company
Converting a public company to a private company in Singapore is a strategic decision that involves complying with specific requirements under the Companies Act, governed by the Accounting and Corporate Regulatory Authority (ACRA).
The conversion process, often referred to as "going private," is a significant undertaking that requires careful planning, shareholder approval, and statutory filings.
Key Benefits of Going Private
Companies often choose to convert from a public to a private entity to reap several operational and compliance advantages:
Reduced Regulatory Burden: Public companies face stringent regulatory compliance requirements, including quarterly financial reporting, comprehensive disclosure rules, and meeting stock exchange listing requirements. Conversion to private status significantly reduces these administrative and compliance costs.
Greater Operational Flexibility: Private companies have more freedom in decision-making, as they are not subject to the continuous public scrutiny or the need to seek approval from a large, diverse body of public shareholders for key strategic decisions.
Protection from Hostile Takeovers: Being private makes a company less vulnerable to unsolicited takeover attempts, allowing management to focus on long-term strategy rather than short-term market performance.
No Obligation for Public Disclosure: Private companies are exempt from the extensive public disclosure requirements of public entities, allowing them to keep sensitive business information, such as financial and operational data, confidential from competitors.
Simplified Shareholder Management: A private company restricts the transfer of its shares, leading to a smaller, more concentrated shareholder base and simpler management of corporate governance.
The Conversion Procedure in Singapore
The process for a public company limited by shares to convert to a private company is mandated by the Singapore Companies Act and involves the following key steps:
1. Special Resolution and Constitutional Amendments
The company must first pass a Special Resolution at a general meeting of shareholders.
A Special Resolution requires a majority of at least 75% of the shareholders entitled to vote and voting in person or by proxy.
The resolution must confirm the intention to convert to a private company and approve the necessary amendments to the company's Constitution.
2. Amending the Constitution
A core requirement for a private company in Singapore is to restrict the transferability of its shares and to limit the number of members to fifty or fewer (excluding employees and former employees who became members while employed).
The company's Constitution must be amended to include these restrictive provisions.
3. Application to ACRA
Once the Special Resolution is passed and the Constitution is amended, the company must file the conversion application with the Registrar of Companies (ACRA) via the BizFile+ portal.
The company must lodge the Notice of Resolution, along with the amended Constitution, within 14 days after the resolution is passed.
The application must include a declaration confirming that the company now meets the statutory requirements of a private company.
4. ACRA Approval and Issuance of New Notice
Upon successful review of the application, ACRA will register the change and issue a Notice of Conversion to a Private Company.
The company is considered a private company from the date the change is registered by ACRA.
The company name must also be updated to reflect the new status, typically by adding the "Pte Ltd" designation (if it was previously listed as "Limited" or "Ltd").
⚠️ Important Considerations After Conversion
Converting to a private company does not end the compliance journey; it merely changes the nature of the requirements:
Aspect | Public Company (Before Conversion) | Private Company (After Conversion) |
Share Transfers | Shares are freely transferable (listed on exchange) | Transfer is restricted by the Constitution |
Maximum Members | Unlimited | 50 or fewer (excluding certain employees) |
Financial Reporting | Must file quarterly/bi-annual financial statements and an Annual Report publicly | Annual return filing and financial statements (unless exempted) |
Auditing | Mandatory annual audit, generally | May be exempt from audit if it qualifies as a small company or a small group for two consecutive financial years |
Prospectus | Required for public share offerings | Cannot offer shares to the public |
Accounting and Audit Exemptions
A significant post-conversion benefit is the potential for audit exemption. A company qualifies as a "small company" and is exempt from mandatory auditing if it meets at least two of the following three criteria for the current and immediate preceding financial year:
Total annual revenue is S$10 million or less.
Total assets are S$10 million or less.
Has 50 or fewer employees.
The conversion from a public to a private company in Singapore is a complex legal procedure. It is highly recommended to engage a professional corporate secretarial service or a legal advisor to manage the filings with ACRA and ensure all constitutional and statutory requirements are met.
Conversion Requirements: Public Company to Private Company
A public company with a share capital may be converted into a private company by fulfilling the following statutory requirements and lodging the necessary documents with the Registrar (ACRA):
1. Requirements for Conversion
The company must lodge with the Registrar:
A Copy of a Special Resolution that accomplishes two primary objectives:
Intention and Name Change: Resolving to convert to a private company and specifying a corresponding alteration to its name (e.g., adding "Pte Ltd").
Constitutional Amendments: Altering the provisions of the company's Constitution to impose the necessary restrictions for a private company (see Section 2 below).
A List of Shareholders: A current list of all persons holding shares in the company.
Other Required Information: Any other information relating to the company, its members, and its officers as required by the Registrar.
2. Definitional Requirements for a Private Company
For a company to legally qualify and register as a private company, its Constitution must include two essential provisions:
Restriction on Share Transfer: The right to transfer its shares must be explicitly restricted.
Membership Limit: The number of its members must be limited to not more than 50.
3. Flexibility in Restrictions
A private company retains the flexibility to manage its internal rules:
Amendment by Special Resolution: A private company may, by passing a Special Resolution, alter any existing restriction on the right to transfer its shares or any limitation on the number of its members included in its Constitution.
4. Definition of a Public Company
Public Company Defined: A company that does not meet the legal definition and requirements of a private company is considered a public company.
Legal Steps a Company Must Take to Pass a Special Resolution
The legal steps a Singapore company must take to pass a Special Resolution are governed by the Companies Act and the company's own Constitution.
A Special Resolution is required for major decisions that fundamentally alter the company's structure or constitutive documents, such as changing the company name, altering the Constitution (as in the case of conversion from public to private), or reducing share capital.
The process involves three main stages: preparation, voting, and post-resolution filing.
1. Preparation and Notice
The most critical step is ensuring proper notice is given to all shareholders entitled to attend and vote.
A. Notice Period and Content
The company must issue a written notice for the general meeting (which could be an Annual General Meeting or an Extraordinary General Meeting) to all members entitled to vote.
Company Type | Minimum Statutory Notice Period | Requirement |
Public Company | 21 days | The notice must clearly state the intention to propose the resolution as a Special Resolution. |
Private Company | 14 days | The notice must clearly state the intention to propose the resolution as a Special Resolution. |
Shorter Notice: A meeting can be called with shorter notice if members representing at least 95% of the total voting rights agree to it.
Wording: The notice must explicitly state the full text of the resolution to be passed and that it is being proposed as a Special Resolution.
B. Determining Quorum
The Constitution specifies the minimum number of members (Quorum) that must be present, either in person or by proxy, for the meeting to be validly held. If the Constitution is silent, the Companies Act requires a minimum quorum of two members present in person.
2. Voting and Approval
The resolution must be passed by the required majority of shareholders.
A. The Majority Threshold
A Special Resolution requires a higher level of approval than an Ordinary Resolution (which is a simple majority of >50%).
Requirement: The resolution must be passed by a majority of not less than 75% of the members entitled to vote and voting in person or by proxy at the meeting.
B. Methods of Voting
The resolution can be passed by:
Show of Hands: Typically a simple initial vote, unless a poll is demanded.
Poll: A detailed vote where each share carries one vote (or as specified by the Constitution). A poll must be taken if demanded by a shareholder(s) representing a certain minimum percentage of voting rights (e.g., 5% under certain circumstances).
Written Resolution (Private Companies Only): Most resolutions for private companies can be passed as a written resolution without a physical meeting. The resolution is passed when it is formally agreed to by members representing at least 75% of the total voting rights on any given date.
3. Post-Resolution Filing
Once the Special Resolution is passed, the company must comply with statutory filing requirements to make the change official.
Filing with ACRA: A copy of every Special Resolution must be lodged with the Registrar of Companies (ACRA) via the BizFile+ portal.
Deadline: This filing must be completed within 14 days after the resolution is passed.
Constitution Updates: If the Special Resolution alters the company's Constitution, the company must also lodge the new, altered Constitution with ACRA within the same timeframe.
🇸🇬 Bestar: Expert Corporate Secretarial Services for Company Conversion in Singapore
Navigating the complexities of company conversion in Singapore, such as transitioning a public entity to a private one (or converting an LLP/Sole Proprietorship to a Private Limited Company), requires specialized knowledge of the Companies Act and precise regulatory filing with ACRA. Bestar is an experienced corporate secretarial service provider in Singapore, offering comprehensive support for structural changes and compliance management.
Bestar offers a full spectrum of accounting, taxation, and corporate support, which are critical components of any structural business change.
Key Expertise in Company Conversion and Restructuring
The transition from one corporate structure to another—particularly the complex process of a public company becoming private or a simpler LLP/Sole Proprietorship to Pte Ltd conversion—involves several high-stakes legal and financial steps. Bestar’s expertise focuses on the following:
Statutory Compliance for Conversion: Bestar's team assists in preparing and lodging the necessary documents with the Accounting and Corporate Regulatory Authority (ACRA), ensuring compliance with all requirements under the Singapore Companies Act. This is crucial for avoiding penalties and ensuring the conversion is legally sound.
Drafting Special Resolutions: Conversion of a public company to a private company requires a Special Resolution (a $75\%$ shareholder majority). Bestar assists in preparing the accurate wording for this resolution and ensuring proper meeting procedures and notice periods are adhered to.
Constitutional Amendments: A key requirement for a private company is amending the Constitution to restrict share transfers and limit membership to 50. Bestar ensures the company's new Constitution is drafted and filed correctly to reflect its new private status.
Corporate Restructuring Advisory: Their professionals are often involved in corporate restructuring exercises, advising clients on the statutory compliance requirements for major changes in share capital, officer appointments, and other governance matters that arise during conversion.
End-to-End Support for Transfers: For conversions like LLP to Pte Ltd, Bestar provides guidance on the essential steps of:
Obtaining a No Objection Letter for retaining the business name.
The formal transfer of assets and liabilities from the old entity to the new Pte Ltd company.
Submitting all required documents for Pte Ltd incorporation and the subsequent cessation of the former entity.
Comprehensive Corporate Support
Beyond the specific conversion process, Bestar provides ongoing corporate secretarial services essential for the compliance of the newly converted entity:
Annual Compliance: Managing the preparation and timely filing of Annual Returns (AR) and Annual General Meeting (AGM) documents.
Statutory Record Maintenance: Maintaining and updating all required statutory registers (e.g., Register of Members, Directors, Charges) to reflect the new corporate structure.
Ongoing Advisory: Offering consultation on corporate governance, directors' duties, and changes in local legislation.
By leveraging an experienced provider like Bestar, companies undergoing conversion can streamline the process, mitigate compliance risks, and ensure a smooth transition to their desired corporate structure, allowing management to focus on business operations.
If you would like to know more, please contact Bestar.
Comments