In Singapore and beyond, it is common occurrence for companies to issue and transfer shares, which require an instrument known as a share certificate.
This article delves into the nitty-gritty details of what a share certificate means and why company shareholders need this document
What is a Share Certificate?
A share certificate refers to a legally recognised document that is vital in proving that an individual is a member of a company and you own shares in it. In Singapore, the Companies Act necessitates that a share capital must bear the content and wordings ratified by ACRA.
What are the Timelines for Issuing a Share Certificate?
As soon as a company carries out an allotment of shares (or debentures), it will have 60 days to issue a share certificate to the shareholders or 30 days after a transfer has been lodged and registered with a company.
You must be asking yourself, what if the company does not issue the share certificate in time.
It is a common occurrence for a company to surpass the 60-day deadline. If you are a victim of this delay, you are allowed to serve the company with a notice asking it to issue you with the certificate.
The company must comply with the notice within 10 days. If it does not, you are obliged to apply for a court order to direct the company to comply with the issuance of the certificate, and that the cost of the application is paid by the company or its officers.
What Happens If the Share Certificate is Lost?
In the event of losing or destroying your share certificate, you may apply for a duplicate certificate so long as you still hold shares in the company. Such application should be accompanied by:
- A fee, where required by the company, of up to $2;
- A duly written undertaking that in case you find the lost share certificate, the company is obliged to confiscate it.
- A legal statement declaring that you have lost/damaged the certificate, and you have not sold it, pledged it, or knowingly disposed of it.
If the value of your shares is higher than S$500, the directors of the company may also require you as the applicant shareholder to:
- Publish a newspaper advert to declare publicly that you have lost/destroyed your share certificate, and that you intend to apply for a new one as soon as 14 days elapses counting from the date of the advert publication; and/or
- Secure a bond equivalent to your shares’ or debentures’ current market value to guarantee the company against any loss in case a third party produces the original share certificate before you apply for a replacement.
Many public listed companies operate on a scripless basis, and the Central Depository system (CDP) have custody of shares in such companies.
Under this method, the shares’ legal title are held in the CDP. A shareholder may decide to hold the shares in his/her own name, but shares in a public company which trades on a scripless basis may only be traded through a CDP account.
In the course of a trade, the scripless share transactions are usually electronically recorded by the CDP and the statements sent in order to indicate the quantity of shares held by the shareholders. The depository register of the CDP is considered the main record of the members of a listed company that trades on a scripless basis.
In accordance with the Company’s Act in Singapore’s, all companies are prohibited from issuing share warrants. This is because the holder of the warrant is eligible to shares specified in that document and which enable the transfer of those shares as soon as the warrant is delivered (also known as “bearer shares”).
Numbering of Shares
It is important to number each share in your company. However, shares need not have a distinguishing number if:
- All the issued shares (or a class of shares) are fully paid up and rank equally at any time and for all purposes, so long as they remain fully paid up and of equal rank; or
- All the issued shares have certificates to support them according to the Companies Act and every certificate is distinguished by the right number recorded in the members’ register.
What are the Contents of Share Certificates?
A share certificate must contain the following information under the official seal or common seal of the company specifying the:
- Company name
- Company registration number
- Company registered address
- Shareholder’s name
- Class of shares
- Number of issued shares
- Authority under which the company is established
- Unpaid amount on the shares (if any) and indication if fully paid up and
Note: As of 31 Mar 2017, companies and limited liability partnerships (LLPs) were exempted from using the official seal or common seal on various documents including share certificates. A Signature of authorised individuals is enough.
What are Estoppel Share Certificates?
If a share certificate states that they are paid in full, but they are actually not, the company is estopped from denying that the holder of the certificate has not paid up the shares in full. In addition, your company is estopped from calling a subsequent purchaser of those shares.
The subsequent purchaser will not be able to take advantage of the estoppel if he/she:
- Is not misled by the contents of the share certificate;
- Has knowledge that he/she has no title to the shares; and
- Did not rely upon the statements in the share certificates when he/she purchased the shares.
When a share certificate is forged, the person relying on the share certificate cannot take advantage of the estoppel since there is no actual representation made by the company.
Conclusion - Share Certificates
This comprehensive guide has provided you with key information to help you understand the importance of share certificates in a Singapore company.
Need professional guidance? No worries! Feel free to contact our experts at Tianlong Services to learn more about share certificates.