Shareholders of Private Limited Companies in Singapore
Updated on Tuesday 24th March 2020
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The shareholders of private limited companies in Singapore have a series of rights as per the types of shares they own and as per the Companies Act. In case of a private limited company in Singapore, the shareholder’s liability is limited to the amount unpaid on the owned shares.
A distinction between the Singapore limited company and the public company is that the shares are subject to a restriction or a limitation on the right to transfer the shares. The company cannot list its shares publicly and, moreover, in most cases, there will be a pre-emptive right for other members to buy the shares first in the event in which they are transferred.
A company limited by shares, also known as the Pte Ltd Singapore, is the most commonly used business form. In this article, we list the main issues its shareholders need to take into consideration.
The rights of a company shareholder in Singapore
A shareholder has a number of rights as defined in the company’s own constitutive documents and according to the general company formation principles.
Below, we highlight the main types of rights and powers of a shareholder:
- The right to attend meetings: the shareholders have the right to attend general meetings, granted by ordinary shares and other types of shares.
- The right to vote: during the meetings, the shareholders can vote during the elections for the Board of Directors or for resolutions.
- The right to profits: they have the right to receive part of the company’s profits in the form of dividends.
- Asset distribution: in the event in which the company is wound up, the shareholders have the right to receive part of the remaining assets if any.
The company is a separate legal entity from its founders and this allows shareholders to have limited liability, as the name suggests. One of our agents who specialize in the registration of a private limited company in Singapore can give investors more information regarding the rights of company members.
Types of shares for companies in Singapore
A private limited company in Singapore can issue several types of shares. We list these below:
- Ordinary shares: these are the main types issued by a company and they offer the right to participate in meetings or receive assets upon winding up.
- Preference shares: these can offer preferential rights, in addition to those included for the ordinary type.
- Non-voting shares: as the name suggests, the shareholder does not have the right to vote in meetings.
- Redeemable shares: these are issued under the condition that the company will buy them back eventually.
- Management shares: these offer additional voting rights are issued only for the founders of the company.
These are just some examples of shares. Limited companies in Singapore will usually only work with ordinary shares, however, the founders can create classes of shares that suit their needs, for example for the purpose of maintaining extra management powers. The classes of shares are defined in the company’s Articles of Association.
Minority shareholders can be subject to certain rights that include to calling for a poll vote on a resolution, calling a general meeting, preventing a meeting to be held on short notice, prevent the passing of a special resolution and others.
The following facts apply in case of a private limited company in Singapore:
- it has between 1 and 50 shareholders.
- 1 SGD is the minimum share capital.
- the standard corporate income tax rate for these companies is 17% and for the income year 2019 75% of the first 10,000 SGD of normal income and 50% of the next 190,000 normal chargeable income are exempt from tax.
- in 2018, approximately 65% of all companies in Singapore were private limited liability companies.
As highlighted above, the taxation of companies in Singapore is an attractive one. Moreover, qualifying newly incorporated private limited companies can be subject to a tax exemption for the first three consecutive years of assessment (under certain conditions).
The private limited company is a type of business that is advantageous in terms of formation and also for the rights of the shareholders. The fact that they are only limited only up to a certain amount is convenient and so is the fact that the company has a legal identity and it can enter into agreements or be sued in its own name.