Share Issuance

Share Issuance | Bestar

Singapore Share Issuance Explained

Share issuance in Singapore involves the process by which a company offers new shares to raise capital or for other strategic reasons. It is governed by the Companies Act 1967 and overseen by the Accounting and Corporate Regulatory Authority (ACRA).

Here's a breakdown of key aspects of share issuance in Singapore:

Reasons for Share Issuance:

• Raising Capital: This is a primary reason, allowing the company to fund expansion, research and development, acquisitions, or reduce debt.

• Attracting Investors: Offering shares can bring in new investors who provide capital and potentially expertise or networks.

• Employee Incentives: Companies may issue shares or share options to attract, retain, and motivate employees, aligning their interests with the company's performance.

• Debt Conversion: In some cases, companies might issue shares to lenders to convert debt into equity.

• Regulatory Requirements: Certain situations, like an Initial Public Offering (IPO), necessitate the issuance of shares.

Types of Shares a Company Can Issue:

Singaporean companies have the flexibility to issue different classes of shares, each with its own set of rights and privileges as defined in the company's constitution. Common types include:

• Ordinary Shares: These are the most common type, typically carrying voting rights, the right to dividends (though not guaranteed), and a claim on residual assets during liquidation. They can be further divided into classes (e.g., Class A, Class B) with varying rights.

• Preference Shares: These shares often have preferential rights over ordinary shares, such as priority in dividend payments and asset claims during liquidation. They may or may not carry voting rights. Types include:

  • Redeemable Preference Shares: The company can buy these shares back at a future date.

  • Convertible Preference Shares: These can be converted into other types of securities, usually ordinary shares, at a predetermined ratio.

  • Cumulative Preference Shares: If a dividend cannot be paid in a particular year, it accumulates and must be paid out before ordinary shareholders receive dividends.

• Non-Voting Shares: These shares do not grant the holder the right to vote at general meetings. They are sometimes issued to employees or family members.

• Management Shares: Often given to company founders, these shares typically carry extra voting rights, allowing founders to maintain control.

• Alphabet Shares: Companies can create different classes of shares (e.g., Class A, Class B) with distinct rights regarding voting, dividends, and other aspects.

• Treasury Shares: These are ordinary shares that the company has bought back from existing shareholders. They do not have voting rights or dividend entitlements while held by the company and can be resold or cancelled later.

The Share Issuance Process for Private Limited Companies:

1. Shareholder Approval: Generally, the company's board of directors proposes the issuance of new shares. However, approval from existing shareholders is usually required through an ordinary resolution passed at a general meeting or via written consent. The company's constitution might outline specific procedures.

2. Director's Resolution: Once approved, the directors will pass a Director's Resolution in Writing (DRIW) to formally record the allotment of shares.

3. Allotment of Shares: This is the process of assigning the new shares to the subscribers (the individuals or entities buying the shares).

4. Return of Allotment to ACRA: Within 14 days of the share allotment, the company must file a "return of allotment of shares" with ACRA via the BizFile+ portal. This filing includes details about the number and class of shares issued, the amount paid, and the particulars of the new shareholders.

5. Issuance of Share Certificates: The company must prepare and issue share certificates to the new shareholders within 60 days of the allotment. For private limited companies, these can be physical certificates. Publicly listed companies typically issue electronic confirmations via the Central Depository (CDP). The share certificate serves as proof of ownership. Since March 2017, a common seal is no longer mandatory; the certificate needs to be signed by two directors, or one director and a company secretary, or one director and an authorized person.

6. Updating the Register of Members: The company secretary is responsible for updating the company's register of members to reflect the new shareholdings.

Key Considerations:

• Minimum Share Capital: The minimum paid-up capital to register a company in Singapore is S$1. This can be increased through subsequent share issuances.

• Shareholder Limits: Private limited companies can have a maximum of 50 shareholders.

• Pre-emptive Rights: Existing shareholders often have the first right to purchase new shares in proportion to their current holdings, protecting their ownership percentage. These rights should be communicated to shareholders.

• Prospectus Requirement: Under the Securities and Futures Act (SFA), any offer of securities (including shares) to the public generally requires a prospectus, which is a detailed document for investors. However, private companies may be exempt under certain conditions, such as offering shares to no more than 50 people within a 12-month period without public advertising.

• Company Constitution: The company's constitution (Memorandum and Articles of Association) outlines the rules governing the issuance and transfer of shares, as well as the rights attached to different share classes.

• Share Transfer: Existing shareholders can transfer their shares to others unless restricted by the company's constitution. A notice of transfer must be filed with ACRA.

Role of the Company Secretary:

The company secretary plays a crucial role in the share issuance process, including:

• Preparing the necessary resolutions and other documentation.

• Filing the return of allotment with ACRA.

• Preparing and issuing share certificates.

• Maintaining the company's register of members.

• Ensuring compliance with the Companies Act and ACRA regulations.

Keeping the company's share information accurate and up-to-date with ACRA is essential for transparency and compliance. Failure to adhere to the regulations, such as the 14-day filing deadline for the return of allotment, can result in penalties.

How Bestar can Help

In the context of share issuance in Singapore,  Company Secretaries are absolutely indispensable. Think of us as the meticulous orchestrator ensuring everything runs smoothly and legally. Here's how Bestar can significantly help with share issuance:

Before the Issuance:

• Advising on Procedures and Compliance: Bestar possesses a deep understanding of the Companies Act 1967 and ACRA regulations related to share issuance. We can advise the board of directors on the correct procedures to follow, ensuring compliance at every step. This includes outlining the need for shareholder resolutions, director resolutions, and the timing of filings.

• Drafting Resolutions and Documentation: We are skilled in preparing the necessary legal documentation, such as:

  • Board Resolutions: Documenting the directors' decision to issue new shares, the number of shares, the issue price, and the allocation.

  • Shareholder Resolutions: Drafting the ordinary or special resolutions required for shareholder approval, ensuring they accurately reflect the proposed issuance.

  • Written Consents: Preparing the necessary documentation if shareholder approval is obtained through written means instead of a general meeting.

• Reviewing the Company's Constitution: We will review the company's constitution (Memorandum and Articles of Association) to ensure the proposed share issuance aligns with its provisions, particularly regarding pre-emptive rights and any restrictions on share transfers.

• Managing Communication with Shareholders: Bestar can help prepare and disseminate information to existing shareholders regarding the proposed share issuance, including details about pre-emptive rights and the process for participating.

  
  

During the Issuance:

• Organizing and Documenting Meetings: If a general meeting is required for shareholder approval, Bestar will organize the meeting, prepare the agenda and minutes, and ensure proper procedures are followed during the meeting.

• Managing the Allotment Process: We oversee the process of allocating the new shares to the subscribers, ensuring accurate records are maintained.

• Ensuring Timely Filing with ACRA: A critical responsibility is preparing and filing the "Return of Allotment of Shares" with ACRA via the BizFile+ portal within 14 days of the allotment. Bestar ensures all required information is accurately completed and submitted on time, avoiding penalties for late filing.

After the Issuance:

• Preparing and Issuing Share Certificates: Bestar is responsible for preparing and issuing share certificates to the new shareholders, ensuring they contain the necessary information and are executed correctly (signed by the required individuals).

• Updating the Register of Members: We maintain the company's statutory register of members, accurately recording the details of the new shareholders and their shareholdings. This register is a crucial record of ownership in the company.

• Maintaining Corporate Records: Bestar ensures all documentation related to the share issuance, including resolutions, allotment records, and share certificates, are properly maintained as part of the company's statutory records.

• Advising on Subsequent Share Transfers: If the new shareholders subsequently wish to transfer their shares, Bestar will guide them through the process and ensure the necessary filings are made with ACRA.

In essence, Bestar acts as the guardian of compliance and good governance throughout the share issuance process. We bring their expertise in corporate law and administrative procedures to ensure the company adheres to all legal requirements, protects the interests of shareholders, and maintains accurate records. Our meticulous attention to detail and understanding of the regulatory landscape are invaluable in navigating the complexities of share issuance in Singapore.

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