Guide For Share Allotment In Singapore

Share Allotment In Singapore

Definition (What is share allotment?)

The allotment of shares is the issuing of new shares to the existing shareholders or to third parties / non-existing members. The Directors of a Company may allot shares in the capital of the Company, if they have the authority to do so in accordance with the Constitution of the Company only with the approval of members of the Company as per section 161 of the Companies Act.

Issuing shares in your company is a great way to obtain investment capital and make growing of your business. It is one of the ways to encourage your employees to work harder and give them a stake in your company then you may wish to reward them with shares.

 

Considerations when Issuing Shares

There are some different considerations to take into account when deciding to issue new shares.

Different classes of shares

First, there are different classes of shares such as ordinary shares, alphabet shares, management shares and preference shares.

(a) Ordinary shares

Holders of ordinary shares have equal voting and dividend rights in proportion to their shareholding. However, ordinary shares can be divided into alphabet shares which may have different rights (Eg. Class A or Class B ordinary shares).

(b) Shares with different rights

Examples of shares with different rights include shares that have preferential dividend rights, the lack of or higher voting rights, rights of redemption (Eg. To sell back their shares to the company) or management rights (Eg. The right to appoint a board member).

You would have to consider exactly which type of shares your company would like to issue.

 

Approval by existing Shareholders

Although the issuance of shares is normally proposed by the board of directors, the board requires shareholder approval in order to issue new shares as per section 161 of the Companies Act.

Hence, the board must obtain either:

A specific mandate for that particular issuance of shares; or

  • A general mandate by the general meeting authorising the Board of Directors to issue shares.
  • You may need to hold an Extraordinary General Meeting to seek shareholder approval before issuing the shares.

When your company’s constitution stipulates any specific procedures that is required before the company may issue shares, then those procedures will have to be adhered.

 

Issuance of New Shares

An issuance of shares is known as an allotment of shares. In an allotment, the subscribers to a company’s constitution agree to take up shares of the company.

The following documents are usually prepared by the company secretary:

  • Proposed shareholder’s application to the Company
  • A Director’s Resolution in Writing (DRIW) recording the allotment of shares
  • A Members’ Resolution in Writing (DRIW) recording the allotment of shares
  • Written confirmation of no objection from the existing members
  • Authorisation letter to the Company Secretary for lodgement with ACRA
  • Lodgment with ACRA for a “Return of Allotment” within 14 days from the effective date
  • Preparation of new share certificate(s).

Usually the “Return of Allotment” Form should contain the following information:

  • Number of shares in the allotment;
  • Amount (if any) paid or deemed to be paid and the amount unpaid on the allotment of each share;
  • Where there are different classes of shares, the specific class of shares to which each share in the allotment belongs; and
  • Full name, identification, nationality and address of, and number and class of shares held by each of the company’s members; Or
  • If the company has more than 50 members, then such particulars of each of the 50 members who hold the most number of shares in the company after the allotment (excluding treasury shares).
  • The company is required to have the share certificate ready to be issued to the new shareholders within 60 days after the allotment of shares.
  • After the share certificates have been issued to the new shareholders, the company secretary has to update the company’s register of shareholders.
  • When the new allotments are made to the Directors then the Director’s shareholding details are also to be updated.

 

To increase share capital of a newly incorporated private company in Singapore

If your private company in Singapore has been incorporated only with low share capital or even just $1 then you can increase the share capital in just 4 steps:

  • (1) Open corporate bank account.
  • (2) Inject the desired capital funds into newly opened bank account.
  • (3) Prepare documents for increase of share capital.
  • (4) File documents for share capital increase / new allotment of shares with authorities.
  • Get the updated ACRA business profile with the increased capital.
  • Engage a professional Corporate Service Provider (CSP) like ACHI BIZ for seamless capital increase adhere to compliance in Singapore.

 

Finding of authorized capital versus paid up capital

Authorized capital

The amount of authorized share capital must be listed in the company’s founding documents. Any time the authorized share capital changes, these changes must be documented and made public.

Paid-up Capital

Paid-up capital can be found or calculated in the company’s financial statements. The regulatory authorities require publicly traded companies to disclose all sources of funding to the public.

 

Finding the Paid-up Capital

Paid-up capital (and if any additional paid-up capital) can be found on the company’s statement of financial position (also known as balance sheet) under shareholders’ equity. To calculate paid-up capital, a company must determine the par value of common stock and the number of shares issued to the founding shareholders.

 

Difference between allotment and transfer of shares

  • Allotment of shares is to increase the paid up capital of issued share capital whereas the transfer of shares is merely transferring from existing members to new or other existing members.
  • There is no stamp duty payable for allotment of shares whereas it’s to be paid for transfer of shares to have the legal effects.

 

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