Shareholders of Private Limited Companies in Singapore

Updated on Tuesday 25th May 2021

Rate this article
based on 2 reviews


Shareholders of Private Limited Companies in Singapore Image
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:
 
  1. The right to attend meetings: the shareholders have the right to attend general meetings, granted by ordinary shares and other types of shares.
  2. The right to vote: during the meetings, the shareholders can vote during the elections for the Board of Directors or for resolutions.
  3. The right to profits: they have the right to receive part of the company’s profits in the form of dividends.
  4. 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.
Shareholders in Singapore not only have the right to attend meetings, but they are also allowed to call the meetings in certain situations, as per the Companies Act. The directors of a company are required to convene an extraordinary general meeting upon request, when such as request is made by members who hold no less than 10% of the total paid-up shares or they represent no less than 10% of the total voting rights of all members. In such a case, the directors will proceed to convene the meeting no later than two months after the receipt of the request.
 
All members have the ability to speak to any intended resolutions before the meetings. Being treated in a fair manner is another right for shareholders of private limited companies in Singapore.
 
Shareholders have the right to initiate legal action on behalf of the company as well as against the company. In both cases, legal assistance should be sought before commencing any action. Our specialists can give you advice on how to enforce your rights by taking legal action against the company directors, for example when the director fails to observe his duties under the company’s Articles of Association, when he does not have the company’s best interests in mind or in more severe cases, such as when the director was appropriating for himself company assets or cash. Directors are duties and responsibilities towards the company and its shareholders and they cannot engage in any actions of substance without the shareholders first approving the action (such as an important deal).
 
Legal action can also be taken against other shareholders, for example when the relations between these parties have completely broken down. Litigation is an option to solve shareholder and director disputes, however, alternative dispute resolution methods can also be used, for example mediation or arbitration.

Minority shareholders can be subject to certain rights that include 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. In addition to these, they also have the right to initiate legal action if their rights are breached. Seeking remedies through legal action can result in a court decision for a buy-out of the minority shareholder’s stake, as well as other measures. When commercial or financial crimes are suspected, either by a minority shareholder or a regular one, the Commercial Affairs Department, a special division of the Singapore Police Force, will be involved in the case.
 
The company is a separate legal entity from its founders and this allows shareholders to have limited liability, as the name suggests. This means that the shareholders have the right to have their assets protected against creditors, in the event of company insolvency (unlike in the case of the sole trader, the shareholder’s income from company dividends remains their personal asset once distributed). No natural or legal person is able to seize the shareholder’s personal assets to help satisfy any creditor’s claims or debts. The shareholder is only liable for the amount he has invested in company shares.

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. 
 

Setting up a private limited company in Singapore

 
A private limited company offers clear advantages in terms of shareholder protection, as seen in this article. Furthermore, its incorporation is not complicated and the registration of a private limited company in Singapore can be easily achieved with the help of our experts, even if the founders cannot be present in Singapore during the entire procedure. The shareholding structure will be outlined in the company’s Articles of Incorporation when we assist the founders with the initial document draw up.
 
Apart from the fact that is it a separate legal entity from its shareholders and directors, and the fact that the members are only liable up to the extent of their contributions, the Pte Ltd Singapore also has the following advantages:
 
  1. Succession: the company can continue its activities indefinitely (of course, provided that it is not wound up) irrespective of whether or not the original members are still present; shares can be easily transferred, thus ensuring continuity; likewise, ownership can be transferred without disrupting the company’s activities;
  2. Credibility: the private limited company is a corporate structure that offers a credible image to clients and creditors, compared to a partnership or as sole trader; when investors choose to incorporate this business form they show that they have plans to grow and develop and this can create a more credible image in the eyes of clients and creditors but also for the purpose of accessing corporate loans;
  3. Tax advantages: unlike simpler business forms, corporations can benefit from incentives and other types of government support; read below more about the taxation regime in Singapore and how it applies to limited liability companies;
  4. Capital: the company can raise capital fairly easily when it decides to expand; it can bring in more shareholders or issue more shares to existing ones.
     
The following facts apply in the 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.
 
Contact our team of agents who specialize in setting up a private limited company in Singapore to receive more information about the rights and duties of shareholders. We provide complete company formation services and can help investors open this type of company as well as other business forms.