Transfer of Shares in Singapore
The shares of a company can be transferred or sold just like any other form of property. The could be many different reasons behind the transfer of share, be it the retirement or death of a shareholder, or recouping an investment, or gifting shares to family members, or raising additional capital, or bringing in a new business partner. A share transfer in Singapore involves some procedures and it could be is an easy process if you know how to do it.
Let us have a look at what are the procedures involved and what kinds of documents needed in share transfer.
A. Individual and Corporate Shareholders
In the case where the transferor and transferees are either an individual or a corporation, or a combination of both, the documentation needed will be different.
- Directors’ Resolutions in Writing (“DRIW”) – to authorise a corporate representative to sign on the company’s behalf on all documents relating to the transfer.
- Certificate of Appointment of Corporate Representative
In general, the corporate shareholder will approve,
- the appointment of an authorised individual to sign on the company’s behalf (as the company cannot sign); and
- the use of the Common Seal
However, the use of Common Seal is not common overseas though it is the norm for companies incorporated in Singapore to have a Common Seal. As such, the wording on the relevant documentation will be amended accordingly to suit the circumstances if the transferor or transferee is a foreign company.
For individual shareholders [who may be based overseas], or is unable to sign on the required documentation due to certain reasons, the company has the option of preparing a Proxy Form, for the individual to appoint a proxy to sign on his or her behalf.
B. Pre-emptive Rights
As the name implies, the pre-emptive rights mean that the company’s existing shareholders will have the first rights to any share that is being transferred. You can review your company’s Memorandum and Articles of Association (“M&AA”) to check if your company’s shareholders have pre-emptive rights (it is because it will typically have a clause to state if pre-emptive rights are applicable).
C. DRIW to note the purchase / sale / acceptance of shares and authorise the affixation of the company’s Common Seal on any documents relating to the transfer
It is a common practice to annex a copy of the said agreement to the DRIW if there is an agreement signed between the transferor and transferee (such as a Sale and Purchase Agreement, Loan Agreement or Joint Venture Agreement).
In addition to this, the DRIW can authorise specific individuals [who may act on the company’s behalf] to negotiate the said agreement or any other pertinent terms in relation to the transfer. Please note that this may not necessarily be the directors of the company and may be an employee of the company.
In instances that the company needs to engage a legal counsel or financial consultant to advise the company on the terms of the agreement, the appointment of the said professional should also be stated in the DRIW. On top of that, the company secretary should also be authorised to make the relevant lodgement with ACRA and make the payment of the stamp duty with IRAS on the company’s behalf.
D. Instrument of Transfer to be executed by transferor and transferee
To be specific, The Instrument of Transfer is an official document that signifies the transferor’s agreement to transfer and the transferee’s agreement to accept the shares. That means if individuals are signing the Instrument of Transfer, a witness will usually be required to sign as well. In the case if the corporate entities are signing the Instrument of Transfer, corporate entities’ Common Seal will be required to be affixed.
Please note that slight amendments to the Instrument of Transfer may be required if the transferor or transferee is a foreign entity.
E. Working Sheet relating to the transfer of Shares
As the name implies, the Working Sheet is relating to the transfer of shares is a requirement by IRAS; and it will then be used in determining the stamp duty that has to be paid (the stamp duty is calculated based on the purchase price or market value of the shares transferred, whichever is higher). The company will need either its latest audited accounts, or the latest management accounts to complete the Working Sheet, and the information needed is as follows:
- Total assets
- Total liabilities
- Total number of issued shares
- Number of shares transferred
F. Share Certificate
The Share Certificate is a legal document that signifies the ownership of the shares specified; the issuance of the Share Certificate will be authorised by the affixation of the company’s Common Seal.
For a transfer of shares, the following steps will take place:
- The transferor returns his or her Share Certificate to the company secretary;
- The company secretary will cancel the transferor’s share certificate and may issue a new Share Certificate if the transferor will continue to hold shares in the company subsequent to the transfer
- The company secretary will prepare and issue a new Share Certificate to the transferee
- The company secretary will update the company’s registers
- The company secretary will make the relevant lodgement with ACRA
Please note the transferor’s Share Certificate has to be cancelled prior to the issuance of the new Share Certificate to avoid dispute in the ownership in future. If you are planning a share transfer and you need any professional assistance, feel free to reach out to us at 3E Accounting Singapore!