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At some point in your startup’s lifetime you’re likely to have to issue shares – especially if you’re raising funds. We know the process can be daunting, so we’ve put together this easy five-step guide to help you understand how to issue shares in Singapore and make sure you’re ready when you start raising funds.
A board resolution is a formal document that’s created for company records. It can be about any important issue in a company. It’s created to ensure that the board of directors are all aligned on the issue and that their decisions are in writing.
In most cases, the first step to issue company shares is to get your board of directors to pass a board resolution. This document should approve the terms of the new investment and the share issuance. The approval should be made subject to approval from the shareholders, whose authority is needed as a matter of law before the company can issue shares. Board resolutions often include a proposal to get shareholders’ approval, which, as we’ll see below, can be done through a shareholder resolution or shareholder meeting.
So how does a shareholder resolution or shareholder meeting work? We’ll explain in step two.
You’ve got the board’s approval. It’s now time to get your shareholders’ approval via a shareholder resolution.
A shareholder resolution can be passed in two ways:
Let’s look at the process for each in more detail.
Most companies opt to have a resolution passed in writing because it’s significantly easier than convening a shareholders’ meeting to take a vote. To pass a written resolution, the board simply drafts and circulates a written resolution that states the number of shares to be issued. If the shareholders agree with the share issuance, they can approve the resolution by signing the document and returning a copy to the company. As soon as the required number of shareholders sign the resolution, you can issue shares. When doing your fundraising through SeedLegals, the default method for attaining shareholder approval is through a written resolution.
Alternatively, you can hold a shareholders’ meeting to pass the resolution.
For this, you need to:
Some companies may choose to hold a shareholder meeting because it provides a forum for their shareholders to discuss the investment.
Holding a shareholders’ meeting requires your company to satisfy a number of formalities. If you don’t properly meet these formalities, the resolutions passed at the meeting could be deemed invalid.
To hold a shareholders’ meeting, you’ll need to: you’ll need to be mindful of the following:
Once you’ve obtained approval from your shareholders , you can issue the new shares.
To do this, you need to file a ‘return of allotment of shares’ with the Accounting and Corporate Regulatory Authority via the online portal Bizfile+. To do so, you (or an authorised corporate representative) will need the following information:
After you’ve successfully filed a return of allotment, your company’s electronic register of members (the “EROM”) will be automatically updated to reflect the new shareholders and updated shareholdings. The date that you filed the return of allotment is also the date that the issuance would be recorded on the EROM – so make sure that you make the filing on a date that has been agreed between you and your new shareholders.
You can now issue share certificates to the new shareholders, which, alongside the EROM, will serve as evidence of their shareholdings. The certificates should state the name of the company, the class of shares, how many shares each certificate represents and whether the shares are fully paid up. When doing your fundraising on SeedLegals, you can create share certificates automatically to distribute to your shareholders.
When you’ve completed everything above, you’re ready to issue your new shares. The requirements set out here represent the default position at law. But they are subject to the terms of your company’s constitution and shareholders agreement (if any). So be sure to check those documents to see if they contain any additional requirements relating to share issuances, shareholders meetings and approvals in general. If you’ve raised a funding round before, it’s likely that you’ll also need to satisfy any pre-emption and investor consent requirements before you can issue additional shares. When in doubt, seek professional legal advice.
We’ve covered the steps you need to take to issue shares in Singapore. We know that documentation can be tedious and take months to draft, finalise and execute. Here at SeedLegals, we help our startups save weeks – or even months – of admin-heavy, expensive work.
Our automated data-driven platform builds local law-compliant docs in just a few clicks, so you can focus on achieving your company’s milestones. If you get stuck at any point along the way, the step-by-step wizard is there to help or you can reach out to our team of experts anytime to get unlimited support.
If you have any questions, or still not sure on the best way to go, we’re here to help. Get in touch with our team who will guide you and help you get started.
*Disclaimer: The information contained in this article does not constitute and should not be treated as legal, tax, accounting, or financial advice.