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The Guide of Transfer Business Ownership in Singapore
Life is constantly changing and your business will face changes in the future. As a business owner, having the well-planned exit plan will help you to manage change [that will affect your company’s success] easily. As such, many agreed that every business owner should have a contingency plan with steps that are required to be taken when there is a transfer of business ownership.
Let us take this scenario as an example: You have made the decision to retire and sell your business. Selling your business or transferring the business ownership depends upon not only your business’ corporate structure but also the nature of the change of ownership. As such, it is important to have a contingency plan as well as to have a better understanding of how to transfer business ownership.
For Sole Proprietor or Partnership
If you plan to transfer business ownership, or if there are any changes to the particulars of the Sole-Proprietorship or Partnership, you (sole-proprietor/partner or authorised representative (if any) ) must lodge the changes with the Registrar online via BizFile+ using SingPass or CorpPass within 14 days from the date of the change. Late notification [of changes] will face a penalty.
Changes like changes of business address, business name and business activity do not require any endorsement or approval. However, there are certain changes that need the approval or endorsement, for example, the addition or withdrawal of the partners. The endorsement must be done within 14 days from the first submission date. The application will lapse and the transaction will be rejected if the required endorsement is not done within the 14 days. In this case, the sole-proprietor/partner or authorised representative have to re-submit a new transaction and pay the filing fee again
For a company that plans to transfer business ownership, stamp duty will be charged on the document signed during acquisitions. The stamp duties are required to be paid to the Inland Revenue Authority of Singapore (“IRAS”) when shareholders wish to transfer shares. In any transaction [that has a transfer of shares], there will be a “transferor” and a “transferee”. Please note that a transferor refers to the existing shareholder who is giving up the share, while the transferee is the new shareholder who will be receiving the share.
The duty is payable on the actual price or value of the shares, whichever is higher. The average price on the Stock Exchange of Singapore will be taken as the value of the shares [transferred]. The latest average price of the shares can be used if there is no available average price as at the date of the document.
For private companies, the net asset value (NAV) or the allotment price of the shares in the target company will be taken as the value of the shares transferred. In the case when there are different classes of shares (e.g.: preference shares in the target company), the NAV will depend on the rights attached to the respective class of share.
If you are planning to transfer business ownership or shares, we can provide you with a comprehensive guide to the procedures and process for a transfer of shares. Feel free to reach out to us today!