The definition of shareholders of Singapore companies
According to the Singapore Companies Act, all companies incorporated in the city-state are required to have at least one shareholder. Shareholders are company members or, better said, are a company’s owners. Shareholders are individuals or legal entities that have invested a certain amount of money, a share capital, in order to receive a return of the investment that can take the form of distributions resulted from the company’s trading activities or in the form of growth in the value of the investment throughout time. Shareholders in Singapore companies limited by shares are individuals that have subscribed or purchased shares within the company. The most important role of shareholders of companies in Singapore is to raise capital.
The video below presents the main duties and powers of shareholders in Singapore companies:
What are the rights and powers of shareholders in Singapore?
Before opening a company in Singapore, investors should know that the shareholders ofSingapore companies have certain privileges, among which the right to vote when appointing the board of directors, the right to propose certain resolutions and the right to distribute the company’s income. Shareholders are also entitled to purchase new shares when issued by the Singapore company and the right to remaining assets in case of company liquidation.
- the adoption, alteration or repletion of the company’s Articles of Association,
- veto power when it comes to reduction of capital,
- in public companies in Singapore, shareholder have the power to remove directors and approve auditors.
Shareholders in Singapore not only have the right to attend meetings, but they are also allowed to call the meetings in certain situations, as per the Companies Act. The directors of a company are required to convene an extraordinary general meeting upon request, when such as request is made by members who hold no less than 10% of the total paid-up shares or they represent no less than 10% of the total voting rights of all members. In such a case, the directors will proceed to convene the meeting no later than two months after the receipt of the request.
All members have the ability to speak to any intended resolutions before the meetings. Being treated in a fair manner is another right for shareholders of private limited companies in Singapore.
Shareholders have the right to initiate legal action on behalf of the company as well as against the company. In both cases, legal assistance should be sought before commencing any action. Our specialists can give you advice on how to enforce your rights by taking legal action against the company directors, for example when the director fails to observe his duties under the company’s Articles of Association, when he does not have the company’s best interests in mind or in more severe cases, such as when the director was appropriating for himself company assets or cash. Directors are duties and responsibilities towards the company and its shareholders and they cannot engage in any actions of substance without the shareholders first approving the action (such as an important deal).
Legal action can also be taken against other shareholders, for example when the relations between these parties have completely broken down. Litigation is an option to solve shareholder and director disputes, however, alternative dispute resolution methods can also be used, for example mediation or arbitration.
Minority shareholders can be subject to certain rights that include calling for a poll vote on a resolution, calling a general meeting, preventing a meeting to be held on short notice, prevent the passing of a special resolution and others. In addition to these, they also have the right to initiate legal action if their rights are breached. Seeking remedies through legal action can result in a court decision for a buy-out of the minority shareholder’s stake, as well as other measures. When commercial or financial crimes are suspected, either by a minority shareholder or a regular one, the Commercial Affairs Department, a special division of the Singapore Police Force, will be involved in the case.
The company is a separate legal entity from its founders and this allows shareholders to have limited liability, as the name suggests. This means that the shareholders have the right to have their assets protected against creditors, in the event of company insolvency (unlike in the case of the sole trader, the shareholder’s income from company dividends remains their personal asset once distributed). No natural or legal person is able to seize the shareholder’s personal assets to help satisfy any creditor’s claims or debts. The shareholder is only liable for the amount he has invested in company shares.
Minority shareholders in Singapore companies
Minority shareholders in companies registered in Singapore are generally required to accept the decisions of directors and the majority shareholders. However, they also have certain rights that protect them. The rights of minority shareholders are mentioned in the Companies Act, but must also be stated in the Memorandum or Articles of Association of the company. Foreign investors with a minority stake in a Singapore company usually negotiate specific rights when joining the company.
The most important rights granted to minority shareholders in the Commercial Code in Singapore are the rights to attend and vote at the general meetings. General meetings are required to be held on an annual basis according to the law. Singapore minority shareholders also have the right to vote in matters such as resolutions to pay dividends and election or removal of the company’s directors. Minority shareholders have the right to be treated fairly, most of all.
Types of shares for companies in Singapore
A private limited company in Singapore can issue several types of shares. We list these below:
- Ordinary shares: these are the main types issued by a company and they offer the right to participate in meetings or receive assets upon winding up.
- Preference shares: these can offer preferential rights, in addition to those included for the ordinary type.
- Non-voting shares: as the name suggests, the shareholder does not have the right to vote in meetings.
- Redeemable shares: these are issued under the condition that the company will buy them back eventually.
- Management shares: these offer additional voting rights are issued only for the founders of the company.
These are just some examples of shares. Limited companies in Singapore will usually only work with ordinary shares, however, the founders can create classes of shares that suit their needs, for example for the purpose of maintaining extra management powers. The classes of shares are defined in the company’s Articles of Association.
For complete details about the regulations of the Companies Act or for nominee shareholder services please contact our specialists who can also help you open a company in Singaporeand can also offer you tax advice and planning.