Issuing share certificates in Singapore

What is a share certificate?

A share certificate is an official document issued by a company to its shareholders, certifying that the holder owns a specified number of shares in the company. These certificates serve as a physical proof of ownership and contain important details, such as:

1. The name of the issuing company.

2. The shareholder's name.

3. The number of shares owned.

4. The class of shares (e.g., common or preferred).

5. The certificate number.

6. The date of issuance.

7. The company's official seal and signatures of authorized officers.

In modern practice, especially in jurisdictions like Singapore, many companies may use electronic records instead of physical certificates, but the purpose and content remain the same. The issuance of share certificates is governed by the Companies Act and regulations set by ACRA (Accounting and Corporate Regulatory Authority).

Different Types of Shares

A company can issue various types or "classes" of shares, including:

1. Ordinary Shares: These are the most common type of shares, typically granting voting rights but not entitling shareholders to receive or demand dividends. Ordinary shareholders often receive less in dividends compared to holders of preference shares. Companies may divide ordinary shares into different classes (e.g., "A" and "B") with distinct rights attached to each class.

2. Preference Shares: Preference shares offer certain preferential rights superior to ordinary shares, such as fixed dividends, priority over ordinary shares in receiving dividends, and priority in the return of capital upon the company’s liquidation.

3. Redeemable Preference Shares: These shares allow for the repayment of the principal share capital to shareholders, either on a specified date or at the discretion of the directors, provided the company remains a going concern. Redemptions can be paid from the company’s capital using proceeds from a fresh issue of shares. Directors must file a solvency statement with ACRA via the “Notice of Redemption of Redeemable Preference Shares” eService on BizFile+.

4. Convertible Preference Shares: These shares typically offer fixed dividends for a specified term. At the end of the term, the company may convert them into ordinary shares or leave them as they are, with conversion prices specified in the company’s constitution. The conversion allows shareholders to purchase ordinary shares at a lower price, irrespective of the market price of ordinary shares. The relevant transaction in BizFile+ is “Conversion of Shares”.

5. Treasury Shares: These are ordinary shares that the company has repurchased from shareholders. While the company holds these shares, it cannot exercise voting rights or receive dividends on them. The total number of treasury shares held is limited to 10% of the total number of ordinary shares issued, and any excess must be cancelled or disposed of within six months.

Key requirements and guidelines for issuing share certificates

Timing of Issuance: A company must issue share certificates within 30 days from the date of allotment of shares.

Form and Content: Share certificates must be in a form prescribed by the company's constitution or, if no form is prescribed, in a form approved by the directors. Each share certificate must include:

• The name of the company.

• The unique certificate number.

• The name and address of the shareholder.

• The class and number of shares the certificate represents.

• The amount paid on the shares (if applicable).

• The date of issue.

It should be signed by at least one director and the company secretary or by two directors. If the company has a common seal, it must be affixed in accordance with the company’s constitution.

Register of Members: The company must maintain a register of members, which records details of shareholdings and any changes. Entries in the register of members must be updated to reflect the issuance of share certificates.

Replacement of Lost or Destroyed Certificates: A company can issue a new share certificate if the original is lost or destroyed, provided the shareholder applies and provides satisfactory evidence of the loss or destruction. The company may require the shareholder to provide an indemnity against any potential claims and to pay any reasonable expenses incurred in connection with the issuance of the new certificate.

Transfer of Shares: Share certificates must be surrendered to the company for cancellation when shares are transferred. A new share certificate will be issued to the new shareholder upon registration of the transfer.

Inspection: Shareholders have the right to inspect their own share certificates and the register of members during business hours.

Compliance and Penalties: Failure to comply with the requirements for issuing share certificates can result in penalties for the company and its officers, including fines and potential legal action by shareholders.

Adhering to these requirements ensures compliance with the Companies Act and ACRA regulations, helping maintain proper corporate governance and shareholder rights.

Process of Issuing Share Certificates

Issuing share certificates involves specific processes and requirements depending on the scenario. Here's how to handle each of the occasions:

Shareholders Transfer Shares Between Themselves or to Outsiders:

Execute a Share Transfer Form: The current shareholder (transferor) and the new shareholder (transferee) must complete and sign a share transfer form.

Pay Stamp Duty: The share transfer form must be stamped, and the applicable stamp duty must be paid.

Board Approval: The board of directors must approve the transfer of shares. This is usually done in a board meeting.

Update the Register of Members: After the board approval, update the company's register of members to reflect the new shareholder details.

Cancel Old Share Certificate and Issue New One: Cancel the old share certificate held by the transferor and issue a new share certificate to the transferee. The new certificate should include details such as the shareholder's name, the number of shares, and the share class.

Notify ACRA: If required, notify ACRA about the share transfer via BizFile+.

The Company Decides to Issue New Shares:

Board Resolution: The board of directors must pass a resolution approving the issuance of new shares.

Offer and Subscription: Offer the new shares to potential investors or existing shareholders, and have them subscribe to these shares.

Payment for Shares: Collect payment for the shares from the subscribers.

Allotment of Shares: Officially allot the shares to the subscribers. Record the details of the allotment in the company's register of members.

Issue Share Certificates: Prepare and issue share certificates to the new shareholders, including details such as the shareholder's name, the number of shares, and the share class.

File Return of Allotment with ACRA: File the return of allotment with ACRA within 14 days of the allotment via BizFile+.

A Shareholder Loses Their Share Certificate, or the Certificate is Destroyed:

Notify the Company: The shareholder must notify the company about the lost or destroyed share certificate.

Publish a Notice: The company may require the shareholder to publish a notice in a newspaper to declare the loss or destruction of the share certificate, giving a period (usually 14 days) for any objections.

Indemnity: The shareholder may be required to provide an indemnity to the company against any potential claims related to the lost certificate.

Board Resolution: The board of directors must pass a resolution approving the issuance of a duplicate share certificate.

Issue Duplicate Share Certificate: Issue a duplicate share certificate to the shareholder, clearly marked as "Duplicate" or "Replacement" on the certificate.

Update Records: Update the company's register of members to reflect the issuance of the duplicate certificate.

For more details on the process, you can refer to the ACRA guidelines on share certificates.