The long and short of it is, distributed company shares owned by their respective holders can be sold or transfered at any time, as long as rules and procedures laid out in the constitution of the company and local business regulations are abided. Ownership transfers of private limited companies in Singapore take place in the form of share transfers, as private limited companies are owned through the ownership of their shares. Some reasons behind executing a share transfer or sale include are: to realise the value of a minor investment in a company; in the case of employees holding shares as part of an employee share scheme, to sell them back the company before moving on to another employer; to raise capital or exit the company completely.
Singapore Company Secretarial Services
Transfer of share ownership involves both a transferor and a transferee, the former being the existing shareholder relinquishing shares, while the latter is the intended recipient (person or entity) of the shares. In all likelihood, executing the task without error will require experienced Singapore company secretarial services, but understanding the basic rules and concepts will be helpful in preparing and managing such a transfer, and more important, ensuring that shareholders follow the correct procedures so that the transfer cannot be challenged as invalid.
An Instrument of Transfer: This is a document which indicates the transferor’s agreement in transferring his shares to the transferee, and the transferee’s agreement in accepting the shares from the transferor.
- A board’s resolution in writing and
- a certificate of appointment of corporate representative
should be produced if either the transferee or the transferor is an incorporated company to show that the person who executed the Instrument of Transfer has the authority to do so on behalf of the company.
Stamp Duty & Written Transfer Request: Upon execution of the share transfer, the instrument of transfer, which usually states if it’s the transferor or transferee who will be paying the stamp duty, must be stamped by IRAS within 14 days. Stamp duty is usually taken to be 0.2% of the higher of the purchase price or the market value of the shares. More information is provided at the IRAS Stamp Duty Calculator. Stamp duties for Instrument of Transfer made within Singapore should be paid within 14 days after it has been first executed in Singapore or, if first executed outside Singapore, within 30 days after it has been first received in Singapore.
New Share Certificate: The company must lodge a notice of transfer with Accounting and Corporate Regulatory Authority (ACRA), subject to the restrictions on transfer of shares, such as:
Pre-emption Rights: Pre-emption rights in the company’s constitution may exist that may stipulate to whom shares may be transferred, or may give the existing members a right to have any shares offered to them first before they can be transferred. Any transfer of shares which is in violation of the restriction on transfer of shares may be set aside, or declared void. Shareholders should sign a consent of waiver of pre-emption rights if they decide not to exercise them.
Directors’ discretion to decline to lodge a notice of transfer of shares: There may exist a stipulation in the company’s constitution that gives the directors discretion to decline to lodge a notice of transfer of shares. Even so, the directors are still required to act in the capacity of a fiduciary, in the best interests of the company. For a refusal to be effective, it must be exercised by a positive board resolution. If the company refuses to register the transferee, the company is required by s 129(1) of the Companies’ Act to send to the transferor and the transferee notice of the refusal within 30 days.
The share certificate of the transferor is a document which indicates that the transferor has an existing legal title to the share. If the Instrument of Transfer is in order, with the company possessing the old share certificate, the company must lodge a notice of transfer with ACRA. The notice of transfer should be lodged within 30 days. The company is required to issue the new share certificate within 30 days of which the transfer is lodged. If the company does not do so, the transferee can serve a notice to the company to make good the default. If the company still does not issue the certificate within 10 days after service of the notice, the transferee can obtain a court order to compel the company to do so under s 130AE(4) of the Companies Act. In the event that the company does not possess the Share Certificate, s 128(3) of the Companies’ Act provides that company shall, by notice in writing, require the person in possession, custody or control of the Share Certificate to produce it within 7 to 28 days.
Relevant Documents for the transfer of shares:
- Instrument of Transfer
- Notice of Transfer
- Share Certificate
- IRAS acknowledgement of stamp duty
and where the transferee or the transferor is a corporate shareholder:
- Certificate of Appointment of Corporate Representative
- Board Resolution in Writing authorising the transferor/transferee as the Company’s Corporate Representative
and where restrictions of the company exist:
- Board of Directors’ resolution
- Consent for Waiver of Pre-emption rights
Contact your Company Secretary at your Company Secretary Services Provider for more information regarding the finer details of share and ownership transfer.