Issuing Share Certificates for your Private Limited Company
Share Certificates are issued when the incorporation of your company is complete. Share certificates prove the legality of the ownership of the company shares and are very important.
To understand more about share certificates, we will go through what a share certificate is, when and why they are issued and why they are important to the incorporated company.
What is a Share Certificate?
A Share Certificate is a document issued by the company to its shareholders, and it states that the person named in the certificate owns a certain number of shares issued by the company as at a particular date.
Share Certificates are now issued only by Private Limited Companies in Singapore. Companies that are publicly listed issue electronic Share Certificates and such electronic shares are issued and transferred into the shareholder’s Central Depositary (CDP) accounts.
If you are starting a new company, you will first need to issue a share certificate when your company is being incorporated. After that, new share certificates can and will be issued when you give out, transfer or sell shares of your company.
What Information Do You Need To Include in a Share Certificate?
There are several information about the company and the shareholder that needs to be included in a standard share certificate to ensure the legality and validity of the Share Certificate.
The company’s name
The company’s registration number
The authority under which the company is constituted
The date the certificate was issued
The company’s registered address
The shareholder’s name and address
Number of shares being issued
The class of shares
Whether the shares are fully or partly paid up
The amount (if any) unpaid on the shares
Something to note: Before March 2017, every share certificate must be stamped with the company’s official or common seal. Since 2017, companies and limited liability partnerships (LLPs) will not have to use a seal. Instead, the signature of 2 Directors, 1 Director and 1 Secretary OR 1 Director and 1 Authorised Person is enough to ensure that the share certificate is confirmed and valid.
Do Shareholders Need To Fully Pay for the Shares Bought Upfront?
A shareholder can pay for shares either fully or partially. If the shareholder has fully paid for the shares, it will belong fully to the shareholder. Note that shareholders can choose to pay for only a portion of the total shares but still receive a share certificate that states the total amount of shares bought.
In these cases, the share certificate should indicate whether the shares have been fully paid for, to minimize any miscommunications and legal consequences.
Who Prepares and Keeps the Share Certificates in a Company?
A company secretary prepares the share certificates in a company. Therefore, it is very important to ensure you have a professional company secretary that is capable of preparing and issuing the certificates.
The original copy of a share certificate can be kept with the company by the company secretary together with the company minute book as well.
The company secretary will be in charge of managing the shares certificates, which also means this person will be responsible for the regulatory matters that come with this responsibility. The person should also have a clear record of all the shareholders in the company’s registry and how much shares each of them hold.
We understand that it can be difficult to find a trusted company secretary to handle all your company’s important documents, more so if you are a new entrepreneur. At Lionsworld, we have more than 39 years of experience in managing the corporate secretarial duties of companies in Singapore and will be able to give the best advice for the filings of your company to keep your company on the right track with proper legal documentations.
When Do You Need To Issue Share Certificates?
Apart from when you first complete the incorporation of your company, new share certificates will also need to be issued when:
There is a transfer of shares between shareholders or to other new shareholders
The company decides to issue new shares or increase their share capital
A shareholder loses or need to replace their share certificate
1. Transfer of Shares
This happens if a shareholder sells or transfers their shares to another individual, shareholder or company.
The old share certificate will need to be cancelled and a new share certificate reflecting the new ownership of shares will need to be issued. This will be prepared by the company secretary.
Before the transfer of shares can proceed, it is the duty of the company secretary to ensure that the company does not have any special processes in its company constitution.
The Company Secretary will then need to:
Prepare the Director’s Resolution in Writing (DRIW) recording the share transfer.
Prepare the Instrument of Transfer which states both the transferor and transferee’s consent in transferring and accepting the shares
Record this with ACRA.
File the transfer of shares to the Inland Revenue Authority of Singapore (IRAS) and obtain a stamp duty acknowledgement from.
Cancel the original share certificates.
Prepare the newly updated share certificates with the details of the new share information.
If the share transfer does not involve full transferring share ownership (i.e. the shareholder transferring the shares will still have shares remaining in the company), a new share certificate for this shareholder will still need to be issued, stating the new remaining number of shares belonging to the shareholder.
2. Allotment of Shares to Increase Share Capital
According to the Singapore Companies Act, all directors listed in the company’s board of directors must approve before shares can be allotted. Generally, new shares are allotted when companies want to raise their share capital.
This means that the company issues shares and shareholders pay to own shares in the company, thus creating cash flow for the company.
When the board of directors decides and approves the decision to issue new shares, the company secretary will have to do the following:
Prepare a Director’s Resolution in Writing (DRIW) to provide proof that a share has been allotted to the shareholder in question.
Lodge the record with the Accounting and Corporate Regulatory Authority (ACRA) with a return of allotment within 14 days of issuance.
Prepare the new share certificates.
Unlike in the transfer of shares, there is no stamp duty required for the issuing of new shares.
3. Replacement of Share Certificates
If a share certificate is lost or destroyed, the owner can apply to the company for a duplicate certificate. When doing so, they will need to provide to the company a:
Statutory Declaration that the certificate has been lost or destroyed, and that the share certificate has not been pledged, sold or disposed of, and proper searches have been made (if the certificate was lost); and
Written Undertaking that if the owner finds the lost certificate, it will be returned to the company.
The company secretary will then assist in cancelling the original share certificate, preparing the duplicate share certificate and updating the register of members and register of allotment of shares.
If the value of the shares is greater than $500, the company may require the shareholder to:
Insert a newspaper advertisement stating that the share certificate has been lost or destroyed and the owner intends to apply for a duplicate in 14 days’ time; and/or
Furnish a bond for an amount equal to the shares’ current market value (or more) to indemnify the company against any loss suffered if the original share certificate is found by others.
Is There a Deadline To Issue Your Share Certificates?
Yes, according to the Companies Act.
Make sure that you issue and deliver all share certificates to shareholders on time.
These are the deadlines:
Within 60 days after shares are allotted
Within 30 days after the secretary has lodged the transfer of shares with ACRA
Note these deadlines as it is an offence to not comply with the deadlines under the Companies Act. Affected companies and employees in question are considered to be guilty, facing a fine not exceeding $1,000 or a default penalty.
Always remember that the company secretary is the person solely in charge of issuing and keeping a track record of where each share is allotted or transferred to. Therefore, a company secretary is of utmost importance to any company, regardless of big or small.