A Share Certificate is proof of a member’s ownership of a company’s share. It is a document issued by the company to its shareholders, and the document certifies registered ownership of shares starting from a particular date.
The selection between physical and electronic share certificates is contingent upon the company’s and its shareholders’ preferences and needs. Both options are legally binding in Singapore, adhering to the applicable regulations and guidelines governing corporate transactions within the country.
For shareholders, a crucial step is assigning shares, and once that’s completed, each participant should receive a share certificate. In Singapore, the legal process for issuing share certificates is regulated by Company Law.
Every new certificate shall be stamped with the common seal of the company and will include the following:
Companies usually issue 2 types of shares, ordinary and preference shares, which will be indicated in the share certificate.
Other less commonly issued shares are redeemable and management shares may also be reflected if the company issues such shares.
Shares do not need to be fully paid-up before they are issued. Shareholders can choose to pay for them fully or partially. If the shareholder obtains fully paid-up shares, the shares will completely belong to them.
On the other hand, shareholders of partially paid-up shares will still obtain a share certificate that typically indicates the total number of shares bought and whether they have been fully paid for.
Share certificates are generally issued at the time of incorporation and thereafter issued during the allotment and transfer of shares.
Allotment of shares happens when new shares are issued by a company, resulting in an increase in the total number of issued and paid-up shares. The issuance of shares is normally done to raise more share capital by selling new shares to existing or new shareholders.
The issuance of shares is proposed by the board of directors, but the board requires the existing shareholders’ approval to issue new shares as per section 161 of the Companies Act.
The board must secure a mandate for this purpose from the shareholders and may need to convene an Extraordinary General Meeting (EGM). The board should follow any procedure stipulated in the company’s constitution in this regard.
Following the issuance and subscription of shares by new or existing shareholders, the company secretary must prepare the following documents:
The “return of allotment” form contains the following information:
After issuance and lodgement with ACRA, there is a time limit within which the new share certificates need to be issued.
Transfer of shares happens when one shareholder transfers or sells his title/share of ownership in the company to another individual or a company.
Such transfers happen for several reasons, such as:
The company secretary shall prepare the following documents to effect the transfer:
The shareholder may partly or wholly transfer his share. Regardless of the type of transfer, the company secretary will call for and cancel the original share certificate.
In the case of a partial transfer, new share certificates will be issued to the transferor and transferee to reflect the new distribution of shares.
In case the shareholder has wholly transferred the shares, the transferee or the new shareholder will be issued with a share certificate as evidence of his title in the company.
After lodgement with ACRA, there is a time limit within which the new share certificates need to be issued. The company secretary shall also update the register of transfers and register of members.
Private limited companies should ensure that all necessary share certificates are issued and delivered promptly. They can issue only 1 certificate for all shares issued or transferred at any one time unless a shareholder requests separate certificates.
According to the Companies Act, every company is required to have the share certificates complete and ready for delivery:
Non-compliance with this requirement is an offence, and the company and every officer of the company who is in default shall be guilty of an offence and shall be liable on conviction to a fine not exceeding S$1,000 and also to a default penalty.
If a share certificate is damaged or destroyed, the company must pay up to S$2 to obtain a duplicate certificate from the owner, together with the following :
If the value represented by the share certificate exceeds S$500, then the company directors may require the applicant to place an advertisement in the newspaper.
This advertisement should state that the certificate has been lost or destroyed and that the owner will apply for a duplicate certificate after the expiration of 14 days after the advertisement’s publication.
In addition, the director may also require the applicant to provide a bond for an amount equal to the current market value of the shares, indemnifying the company against loss if the original certificate is produced.
A share certificate in lieu of the lost certificate is issued by the company secretary who must also prepare a DRIW noting the loss of the share certificate and declaring the previous one void before issuing a duplicate.
Every share certificate must be executed with the company’s common seal unless it is signed on its behalf by:
Companies should ensure that they issue share certificates properly and accurately, as it is a legal document. With the right guidance, companies can easily understand the process of issuing share certificates in Singapore and ensure that their shareholders are protected.
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