Public Company Limited by Shares

a22162
Aug 15, 2024
5 min read

Public Company Limited by Shares in Singapore

A public company limited by shares is a legal entity in Singapore where:

Shareholders have limited liability: Their financial responsibility is restricted to the amount invested in the company.
Can have more than 50 shareholders: Unlike private companies, there's no limit to the number of shareholders.
Can raise capital publicly: The company can offer shares and debentures to the public to raise funds.
Requires a prospectus: Before offering shares to the public, the company must register a prospectus with the Monetary Authority of Singapore (MAS).
Potential for listing: While not mandatory, public companies can list their shares on the Singapore Exchange (SGX) for trading.

Key Differences from Private Companies

Feature	Public Company Limited by Shares	Private Company Limited by Shares
Number of shareholders	More than 50	Maximum 50
Public offering of shares	Allowed	Not allowed
Prospectus requirement	Required	Not required
Listing on stock exchange	Possible	Not applicable

When to Choose a Public Company

This company structure is typically suitable for large-scale businesses seeking significant capital investment. It's common for established companies looking to expand operations or for startups with high growth potential.

Considerations

Regulatory Compliance: Public companies face stricter regulations and reporting requirements compared to private companies.
Public Scrutiny: The company's financial performance and decisions are subject to public scrutiny.
Ownership Dilution: Offering shares to the public can dilute the ownership stake of existing shareholders.

Forming a Public Company in Singapore: A Complex Process

Forming a public company in Singapore is a significantly more complex process than setting up a private company. It involves a higher level of regulatory scrutiny and compliance. Here's a general overview of the steps involved:

1. Pre-Incorporation Planning

Feasibility Study: Thoroughly assess the market, competition, financial projections, and business plan.
Investor Relations: Develop a strategy to attract investors and communicate the company's vision.
Legal and Regulatory Compliance: Understand the extensive legal and regulatory framework for public companies, including the Companies Act, Securities and Futures Act, and Listing Rules of the Singapore Exchange (SGX).

2. Incorporation

Company Name Approval: Reserve a suitable company name with the Accounting and Corporate Regulatory Authority (ACRA).
Preparation of Documents: Draft the company's constitution (Memorandum and Articles of Association), which outlines the company's objectives, share capital structure, and internal governance.
Appointment of Directors and Company Secretary: Appoint at least one director (who must be a resident) and a company secretary.
Registered Address: Establish a registered office address in Singapore.
Share Capital Structure: Determine the share capital structure, including the number and types of shares.

3. Prospectus Preparation

Compiling Financial Information: Prepare audited financial statements for at least three years (if applicable).
Risk Assessment: Conduct a thorough risk assessment and disclosure of material risks.
Prospectus Drafting: Prepare a comprehensive prospectus outlining the company's business, financial performance, risks, and proposed use of funds.

4. Regulatory Approvals

MAS Approval: Submit the prospectus to the Monetary Authority of Singapore (MAS) for approval.
SGX Listing: If seeking a listing, prepare the listing application and submit it to SGX.
Other Approvals: Depending on the nature of the business, additional approvals may be required from other regulatory authorities.

5. Public Offering and Listing

Share Issue: Offer shares to the public through an Initial Public Offering (IPO).
Listing on SGX: If applicable, list the company's shares on the SGX.
Post-Listing Compliance: Adhere to continuous disclosure obligations and other listing requirements.

Key Considerations

Time and Cost: The process is time-consuming and expensive due to legal, accounting, and regulatory fees.
Regulatory Burden: Public companies face stringent reporting, disclosure, and compliance requirements.
Public Scrutiny: The company's performance and decisions are subject to public scrutiny.
Shareholder Management: Managing the interests of a large number of shareholders can be complex.

Prospectus: A Crucial Document for Investors

A prospectus is a formal legal document that provides detailed information about an investment offering to the public. It's essentially a comprehensive overview of a company, its financial health, business operations, and the securities it's offering for sale.

Purpose of a Prospectus

Investor Protection: The primary goal of a prospectus is to protect investors by providing them with sufficient information to make informed investment decisions.
Regulatory Compliance: It's a mandatory requirement for companies offering securities to the public, ensuring transparency and accountability.
Marketing Tool: While primarily informative, a well-crafted prospectus can also generate interest in the investment.

Key Components of a Prospectus

A typical prospectus includes the following sections:

Company Description: An overview of the company's history, business operations, products or services, and market position.
Risk Factors: Detailed information about the potential risks associated with investing in the company.
Financial Information: Historical financial statements, including balance sheets, income statements, and cash flow statements.
Use of Proceeds: How the company plans to use the funds raised from the offering.
Management Team: Information about the company's management team, including their experience and compensation.
Underwriting: Details about the investment bank or underwriters involved in the offering.
Legal Information: Disclaimers, legal notices, and other relevant legal information.

The Crucial Role of Legal, Financial, and Corporate Advisory Professionals

Forming a public company is a complex endeavor that requires expert guidance. Legal, financial, and corporate advisory professionals play an indispensable role in navigating the intricate process and ensuring a successful outcome.

Legal Professionals

Corporate Structuring: Assist in choosing the most suitable corporate structure and drafting the necessary legal documents (Memorandum and Articles of Association).
Regulatory Compliance: Ensure adherence to all relevant laws and regulations, including the Companies Act, Securities and Futures Act, and Listing Rules of the Singapore Exchange (SGX).
Prospectus Drafting: Help prepare the prospectus, ensuring it complies with legal requirements and accurately discloses all material information.
Contract Negotiation: Assist in negotiating contracts with underwriters, investors, and other parties involved in the IPO process.
Due Diligence: Conduct thorough legal due diligence to identify potential risks and liabilities.

Financial Professionals

Financial Modeling: Develop financial projections and forecasts to support the business plan and valuation.
Valuation: Determine the company's fair market value for the IPO.
IPO Structuring: Advise on the optimal IPO structure, including share pricing, offering size, and allocation.
Financial Reporting: Prepare financial statements and other financial reports required for the prospectus.
Investor Relations: Assist in developing investor relations strategies and materials.

Corporate Advisory Professionals

Strategic Planning: Provide strategic guidance on the company's growth and development plans.
Business Plan Development: Help create a comprehensive business plan that outlines the company's vision, mission, and objectives.
IPO Process Management: Oversee the entire IPO process, coordinating with legal, financial, and other professionals.
Post-IPO Compliance: Advise on ongoing compliance requirements and corporate governance best practices.
Market Analysis: Conduct market research and analysis to identify opportunities and challenges.

By working together, these professionals form a synergistic team that can guide a company through the complexities of going public. Their expertise is invaluable in mitigating risks, maximizing value, and achieving a successful IPO.

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