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How Many Shareholders Do You Need for Your Business?

Author Osome Content TeamOsome Content Team

4 min read
Running My Business

Selling shares for your business is a great way to gain more funding or give some ownership to the important people in your company. There are many options available to you; we have created a great guide to help you expand your options.

How Many Shareholders Do You Need for Your Business?

For Singaporean limited liability companies to run successfully, you would need a minimum of one shareholder. Private companies can keep up to 50 shareholders, including joint holders of shares as one person. But, not including any person the company employs or previously worked with.

In return for buying the shares, shareholders own a part of the company, earning possible dividends and growth in company value, which can raise the price of shares.

While forming the company, founders discuss how many shares they want to give, at what value, to whom and in what proportion. Usually, startup founders issue shares to themselves.

The ownership of all shares is recorded on share certificates given to shareholders. As the company continues to grow, it can issue more shares with more value to raise more capital in order to grow the company.

Types of Business That Can Issue Shares in Singapore

Commonly, there are three types of companies that can issue shares:

  1. Private company - can have a maximum of 20 shareholders. It also offers a share capital, and no shareholder is a corporation.
  2. Public company - it can have more than 50 shareholders. They usually raise capital by offering shares or debentures to the public.
  3. Unlimited company – it can have between 20 and 50 shareholders, depending on the company's nature.

Things to know:

  1. The minimum share capital required for shareholding is S$1.
  2. The Singapore government allows 100% local and foreign shareholding.
  3. Companies can issue shares in any currency.
  4. Companies can freely create a variety of classes of shares that provide different classes and rights to shareholders.
  5. Companies can issue shares anytime after they get approval from shareholders.
  6. Unless restricted by the company constitution, shareholders can freely transfer shares.

Share Capital Requirements

Share capital is the money invested in the company by shareholders in exchange for a specified number of shares. The Singaporean government allows companies to issue shares without receiving the full payment first. Because of that, the share capital can be divided into two categories:

  1. Paid-up capital: refers to the money that is paid in full.
  2. Unpaid share capital: refers to the money that is not paid upfront. This is commonly seen in small companies and lasts until the company lasts.

Types of Shares in Singaporean Companies

  1. Ordinary shares – are commonly issued shares. They offer voting rights of one vote per share at every general meeting, the right to dividends and the right to claim remaining assets when the company is closed down.
  2. Non-voting shares – are the same as ordinary shares. Just don't give the right to vote. These types of shares are issued to employees and family members.
  3. Preference shares – have some special rights over ordinary shares. For example, they receive dividend payments and remaining assets first. In many cases, preference shares act as non-voting shares.
  4. Alphabet shares – any company is free to make any class of share. For example, Class A, Class B or Class C with different rights and privileges to shareholders.
  5. Management shares – given to the founders and come with extra voting rights.
  6. Redeemable shares – given on the condition that the company can buy back the share anytime.
  7. Deferred shares – usually, deferred shares get dividends last, when the minimum dividends are paid to all other shareholders.

These Are the Shareholder Requirements

By Singaporean law, shareholders can be legal entities or individuals. They can either be local or foreign people. Also, Singapore gives 100% company ownership to foreign shareholders.

To become a shareholder, the person needs to buy the share first. This gives them a certain percentage of ownership in the company. As a business is a legal entity, shareholders don't need to pay any company debt, nor are they entitled to hold any assets. Although, buying shares does come up with certain rights and responsibilities.

How Companies Issue Shares

Organisations can issue shares anytime they want. They only need to pass an ordinary resolution of the shareholders and file a return of allotment. The business must fill out the documents with the Accounting and Corporate Regulatory Authority (ACRA) via Bizfile within 14 days of issuing the shares. The return of allotment should contain the following information:

  • Total number of shares in the allotment;
  • The total amount that needs to be paid on each allotment of share;
  • The total unpaid amount of each share;
  • Kind of class of share issued;
  • Details of shareholders (full name, address, etc., if shareholders are individuals);
  • UEN, corporation name and address (if shareholders are corporations);
  • The number and class of each share held by the shareholder.

The Rights of Shareholders

Rights of shareholders include:

  • Voting rights;
  • Right to attend and call meetings;
  • Right to dividends;
  • Right to be treated fairly;
  • Right to wind up the company;
  • Right to assets when the company is winded up.

What Shareholders Are Responsible For

  • Buy the shares at their specified price;
  • Attend and engage in general meetings;
  • Work towards increasing the growth of the company.

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