Issuing share certificates is an important step during company incorporation. As your company grows larger and becomes more successful, you may even consider selling a portion of your company shares to raise capital funds for your company.
To help you gain a better understanding of what shares are all about, this article will explain what a share certificate is, when and why it is issued, and why issuing share certificates is such an important thing for companies to do.
What is a Share Certificate?
A share certificate can be defined as a form of verification that can prove that you own shares of a particular company. This certificate can also prove that you are a certified shareholder of that company. If you are an investor, you will know that share certificates are now electronically deposited into your Central Depository accounts, meaning that you will no longer receive any physical documents. If the company that you have bought shares from is a publicly listed company, an electronic version of the share certificate will be issued to you.
If you are starting a new company, it is important for you to issue share certificates during or after the incorporation process. Once this process has been completed, share certificates will be issued when you sell, transfer, or give away shares of your company.
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What Information is Included in a Share Certificate?
A share certificate will include information on:
- Your company’s name
- Your company’s registration number
- The authority under which your company is constituted
- The certificate’s date of issuance
- The registered address of your company
- Your company shareholder’s name and address
- The number of shares that are being issued
- The class of the shares that are being issued
- Information stating whether the shares are fully or partly paid-up
- The amount (if any) that was unpaid
Before March 2017, every share certificate had to be stamped with the company’s common seal. Today, neither companies nor limited liability partnerships have to use a seal. To ensure that your share certificate is confirmed and valid, your share certificate needs to contain a signature of either:
- 1 Director and 1 Authorized Person, or
- 2 Directors, or
- 1 Director, and 1 Secretary.
What are the Types of Shares that can be Issued?
Today, Singapore companies can issue either preference or ordinary shares. The class name of the shares that you are issuing should be included in the share certificate.
Some other types of shares include management shares and redeemable shares, but these types of shares are rare.
Is it Mandatory for Shareholders to Fully Pay for the Shares Bought Upfront?
Shareholders can pay for the shares either fully or partially. If a shareholder decides to pay the full price of the shares, then those shares will belong fully to that shareholder.
Keep in mind the possibility that a shareholder can choose to only pay for a portion of the shares but still receives a share certificate stating the total amount of the shares bought. To avoid this event, your share certificate should clearly indicate whether or not the shares have been fully paid for. This will help to minimize any potential legal consequences or miscommunications.
Who should Prepare the Share Certificates?
Your company secretary should be the one who prepares your share certificates. That being said, it is important for you to ensure that your company secretary is professional and experienced in preparing and issuing the share certificates. The original copies of your share certificates can also be kept by your company secretary.
Since your company secretary is the one who is in charge of managing your share certificates, he or she should also take care of all the other regulatory matters that this responsibility brings. Your company secretary should have a clear record of all the shareholders, whose names are located in your company’s registry, as well as how many shares each one of them holds.
Share certificates can be signed by any 2 Directors of your company. However, if your company only has 1 Director, then 1 signature can be from your Director and the other one from your secretary.
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When Should You Issue a Share Certificate?
Once again, it is important for you to issue share certificates for your company during the incorporation process.
Other situations in which share certificates are issued include:
- If shareholders transfer shares to people who do not work for the company
- If shareholders transfer shares amongst themselves
- If one of the shareholders loses his or her share certificate
- If the company decides to issue new shares
- If one of the shareholders accidentally destroys the share certificate
What to Do in the Allotment of Shares to Raise Capital?
Every director that is a part of the company’s board of directors must give their approval before any shares can be allotted. More often than not, the main reason why companies decide to allot their shares lies in the fact that they want to raise their share capital. The company is the one that issues the shares and shareholders are the ones who are paying to own some of those same shares, creating a better cash flow for the company.
Once the proposal of issuing new shares has been approved by the board of directors, it is the company secretary’s duty to do the following tasks:
- Prepare a Director’s Resolution in Writing
- Work with the Accounting and Corporate Registry Authority (ACRA) to lodge the record with a return of allotment within 14 days from the date of issuance
- Prepare the new share certificates
This return of allotment form should include the following details:
- Nationality, proof of identification, address, and the full name of every member who owns some of the shares
- The number of shares that are going to be allotted to the shareholder
- The amount of money that needs to be paid for the shares, but only if the shares actually need to be paid for
- The amount of money that was either partially paid or completely unpaid for the shares
- The date of issuance
- The class of the shares that have been issued
How to Transfer Shares to Another Person or Company
This occurs when one of the shareholders transfers some of their shares to either another person or back into the company.
In this case, the company secretary is responsible for the following tasks:
- Preparing the Director’s Resolution in Writing recording the share transfer
- Preparing the Instrument of Transfer that states the consent of both parties involved in the share transfer process
- Obtaining a stamp duty acknowledgment from the Inland Revenue Authority of Singapore
- Recording all of this with the Accounting and Corporate Regulatory Authority
- Canceling the original share certificates
- Preparing the updated versions of the share certificates, complete with all the new share transfer details
Keep in mind that shares can be either fully or partially transferred. In any case, it is the company secretary’s responsibility to cancel the original share certificates and issue new, updated versions of them, complete with all the new share transfer details.
Are there any Deadlines to Take Note of?
According to the Companies Act, there are some deadlines that you should keep in mind of. You should always issue and deliver all share certificates to shareholders on time.
These are the deadlines that you should take note of:
- Within 60 days from the time when the shares were allotted
- Within 30 days from the time when the company secretary lodged the transfer of shares with the ACRA
Not complying with these deadlines is considered to be an offense and all affected companies and employees will wind up facing a fine of up to $1,000 or a default penalty.
Having a trustworthy company secretary is important for any business owner. Your company secretary must always keep track of where each one of your shares is allotted or transferred to. However, even an experienced secretary can make human errors.
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