One of the most important characteristics of a private limited company is that its shares are transferable. In Singapore, shares or debentures are movable property and are transferable under provisions of the company’s institution and the Companies Act.
As a company’s owner or shareholder, you can transfer your existing shares to new recipients rather than issuing new shares, either for business or personal reasons. To ensure correct share transferring and avoid costly mistakes, you’ll need to know the basic procedure.
What do you need to know about transfer of shares in Singapore?
Before getting to know the transferring process itself, it’s important that you understand its basic features and elements.
What’s the transfer of shares?
Transfer of shares refers to the voluntary handover of the rights and duties of company members (as represented by shares).
Why you need to transfer shares?
Particularly, you may consider transferring your shares due to the following reasons:
- You have a minority stake in the company and want to determine its value
- You receive the share as part of an employee share scheme. And you want to transfer the share before moving on to a new job or company
- You need to transfer shares to investors in return for capital or assets
- You’d like to bring new key business partners on board by transferring shares to them
- You want to transfer some (or all) of your shares to friends or family members, as a gift
It’s noteworthy that you can transfer your shares as gifts or sales. But the most typical purpose is to introduce a new shareholder.
Which persons may be involved?
Generally, the transfer of shares in a Singapore private limited company involves the following persons:
- Subscribers to the memorandum – the initial shareholders in your private limited company.
- Legal representative, in case of a deceased
- Transferor – the original shareholder who wants to transfer shares
- Transferee – share recipient or buyer
- Company (whether listed or unlisted)
What documents do you need to transfer shares?
It’s essential to have the following documents before the transfer of your shares:
- Instrument of transfer: an agreement between the transferor and transferee.
- Notice of transfer: a document submitted to ACRA to update the electronic register of your company members.
- Transfer request: the written request you send to the board to get approval for share transfers.
- Share Certificate: the legal document shows the ownership of the shares.
- Payment of stamp duty: the payment you send to IRAS to transfer your share.
Now that you’ve gained the fundamental facts and features, let’s discover the complete procedure to transfer your share in Singapore.
How to transfer shares in a private limited company?
The procedure will be divided into 3 stages: pre-application, application, and post-application.
Step 1: Pre-application
Before transferring shares, you need to take into consideration the following factors:
- Sign agreements and determine your sale price
The first step is to make an agreement for the share transfer. Specifically, both parties need to sign the Instrument of Share to formally start the transfer process.
In case you sign the agreement with a corporate body, they have to use the Common Seal for validation.
What is a common seal?
A common seal (frequently known as the company seal) refers to the official seal used by a corporate body.
If you do not have any experience with this, you should get a lawyer to establish the foundation of the transfer.
The sale price of your share is also an essential factor to consider.
Commonly, the price should be clearly fixed in advance and stated in the contract.
- Discuss your company’s restriction
You need to discuss ahead with the board to see if there’s any restriction that you need to follow on the transfer of shares between the shareholders.
- Notice shareholders about pre-emptive rights
Before transferring shares in a private limited company, you need to check Pre-emptive rights. Such rights give other shareholders in your company the first priority to obtain your transferred shares.
Such rights give other shareholders in your company the first priority to obtain your transferred shares.
You have to offer the shares, which you intend to transfer, to the existing shareholders first before submitting them to outsiders.
How does this work? You need to send a notice to inform other shareholders that you’re offering your shares and see if they want to exercise their pre-emptive rights.
If other shareholders are not interested in your offer, they will sign a Consent for Waiver of Pre-emption Rights.
After collecting these consent papers, you’re good to move on to the next stage.
Step 2: Application
At this stage, you’ll start to apply for transferring approval and pay for the stamp duty.
- Send request for transferring approval
Assuming you’re a transferor, you’ll need to write a transfer request to the directors’ board. The board has 30 days to either approve or deny your request.
Under reasonable circumstances, the board can turn down your request. For instance, conflicts or disagreements between company shareholders.
Instead of having the board of directors sign your request, you can pass a resolution at the annual meeting to approve a share transfer if you prefer. For more information on how annual general meetings work in Singapore, simply check out our related article.
- Pay stamp duty
Basically, stamp duty is a tax on property purchases such as stock or shares.
You must pay stamp duty to IRAS within 14 days from the execution of the Instrument of Transfer (IoT). Or 30 days if your IoT is signed outside Singapore.
Payment can be sent to IRAS directly or online. And late duty payment may lead to penalties.
In respect of the fee, stamp duty is at 0.2% of the share purchase price or the market value of the shares, whichever is higher. The market value of the transferred shares can be calculated as follows:
[Market value per share = Net asset value of the company / Total number of issued shares]
[Total market value = Market value per share x The number of transferred shares]
Step 3: Post Application
A few more steps need to be done before your transfer procedure ends.
- Cancel your share certificate
A share certificate is a written document. It mainly serves as legal proof of share ownership.
Your Singapore company secretary will prepare and issue a share certificate.
If you transfer all your shares, you need to send your certificate back to the secretary for cancellation.
On the other hand, if you only move part of your shares, you and your transferee will both receive a new certificate.
The deadline for you to do this can be between 7 and 28 days from the date that your transfer request is made.
- Update to the ACRA
Upon issuing the share certificate, the board must inform the ACRA in Singapore, through the submission of a Notice of Transfer. It’s a must for all companies to maintain the latest information of the company members with ACRA.
Your transfer will only take effect once ACRA has updated the electronic register of your company members.
Your company secretary is responsible for updating to ACRA.
- Receive a new Share Certificate
The transferring procedure ends with the issuance of the new Share Certificate.
This has to be done within 30 days from the date that ACRA updates the register of your company members and should be done by the company secretary.
To summarize, the procedure of transferring shares in a Singapore private company can be more complicated than in a public company.
Before asking for approval from the board, make sure you have everything double-checked including pre-emptive rights.
After the approval, remember to pay the stamp duty to IRAS and update your information to ACRA.
You can always rely on our corporate secretarial service to assist you with the transfer of shares in Singapore.
We ease out all the time-consuming, repetitive paperwork and processes for you. So you can focus on what really matters.
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Frequently Asked Questions
What are the restrictions on the transfer of shares in a Singapore private limited company?
For a private limited company, restrictions on the transfer of shares must be included in the Articles of Association.
There are two common forms of restriction you should follow:
- Pre-emption rights in favor of the other members
As mentioned above, the pre-emption clause provides that when you wish to sell your shares, you must first offer them to other company members.
Your offer should be set at a fair price, with the formula set out in the articles.
You can only transfer shares to the proposed transferee if other members do not exercise their pre-emption rights.
- Powers of the Board of Directors on registration of your share transfer
The board of directors has the power to accept or refuse your transfer of shares.
Who pays stamp duty on the share?
Normally, you have to mention the party who is responsible for the payment in the Instrument of Transfer – you or your transferee.
If there’s no mention, the transferee will automatically hold the responsibility for the duty payment.
The transferee has to calculate and pay duty within 30 days of the shares transaction.
Is stamp duty payable on gifted shares?
For transfer of shares by way of gift, 0.2% of the purchase price or market value of shares needs to be paid as stamp duty, according to IRAS.
Disclaimer: While BBCIncorp strives to make the information on this website as timely and accurate as possible, the information itself is for reference purposes only. You should not substitute the information provided in this article for competent legal advice. Feel free to contact BBCIncorp’s customer services for advice on your specific cases.
- What do you need to know about transfer of shares in Singapore?
- What documents do you need to transfer shares?
- How to transfer shares in a private limited company?
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