Company Shares

In Singapore, shares are classified as movable property, which are usually denoted as “chose in action”. By definition, a chose in action are intangible property bound by a number of legal rights that must be enforced accordingly.  

As indicated in Section 16 of the Companies Act, when it comes to the legal definition for shares: “a share refers to a shareholder’s interest in the company quantified by a specific amount of money and reflected by the liabilities, interest and mutual covenants that the shareholders entered into.

Share Capital Structure

Shares and share capital are dealt with in Div 3 of Pt IV of the Companies Act.

In addition, to a certain extent, Part IV of the Companies Act governs the rights and obligations associated with the various types or classes of shares. However, a large part of the same is regulated and governed by the constitution of your company.  

If your company is listed on the Singapore Exchange (SGX) to the public, and you would like to issue securities, (which includes issuance of shares as well as debentures for financing), the main requirements are set out in the Securities and Futures Act of Singapore (Cap 289) and the SGX Listing Manual. For a private company, any issuance of shares would have to adhere to the constitution of your company as well as the Companies Act.

The share capital is simply 1 method of attracting finance into the company, representing the amount of money or assets contributed by shareholders to your company upon subscription for shares. The issued share capital of a company is the amount of money (or other assets-in-kind) which has been provided by the shareholders in consideration for the shares issued to them.

As of 30 January 2006, shares of Singapore-incorporated companies no longer have par values ascribed to them. Consequently, there is no requirement for companies to state an authorised share capital.


“Stock” is considered as a portion of your company’s share capital expressed in dollars as opposed to existing in discrete units like shares. If the shares are paid in full, you can convert them into stock subject to the terms of the company’s constitution.

It is important to distinguish between shares and stock. On one hand, stock exists as a fund that don’t have to be numbered, and on the other hand, shares must be numbered.

In accordance with the First Schedule of the Companies (Model Constitutions) Regulations 2015, you are allowed to convert shares into stock so long as they are fully paid and vice versa. You can do this using any currency or denomination.

This practice of conversion has been limited by the abolition of par value that affects both shares and stocks. However, one of the key differences between the 2 forms is the provision that you can hold or transfer stock as per their value in contrast to whole units of shares, which was a more significant issue when shares held par value.

Rights Conferred on Shareholders

In your company, shareholders have several rights that govern them. The below are some of the key rights that are legally provided to all shareholders:

  • The right to take part in all company affairs in accordance with its constitution: namely, the right to vote over particular decisions in relation to the company; and
  • Distribution rights: namely, the right to be given dividends during the lifetime of the company subject to its constitution and the Companies Act as well as the right to be given back all their subscribed capital including any additional assets after the company has been wound up (and all its debts have been paid).

The liabilities may include a liability to pay calls and contribute toward your company assets as long as the assets are insufficient to meet the liabilities of your company. However, it is important to note that with respect to a limited company, this would only be the case for holders of shares which are only partly paid up.

A liability to pay calls refers to the obligation of the shareholder of a partly paid share and shareholders are individually and legally responsible for the payment of all calls pertaining to a specific share. This liability in relation to a share ceases once the share is fully paid up.

Classes of Shares

Class rights refer to the rights and interests attached to the shares owned by individuals in your company. Where there is only 1 class of shares, the rights are simply called shareholder rights rather than class rights because there is no other class to compare with.

Class Rights

Your company’s share capital can be divided into several different classes, with each one of them giving shareholders different rights. You can use your company’s constitution to address the rights and obligations which accrue to specific class of shares.

Regulation 7 of the Companies (Model Constitutions) Regulations 2015 gives the directors the power to allocate different classes of shares, subject to an ordinary resolution empowering them to do so.

There is, however, no obligation on the company to provide the directors with this power. If the constitution is silent and a company wishes to allot a different class of shares, it must amend its constitution to allow for such power.

The constitution must also be amended to set out the rights and obligations of a newly created class of shares. The significance of the various classes of shares lies in the rights accruing to each class to vote, to receive capital and to be given dividends along with any surplus assets when your company is winding up.

Potentially, there may be many classes of shares. This is because the rights accorded to each are determined by agreement between the company and the subscribers.

However, it is possible to identify the common classes of shares as further described below.

Ordinary shares

Generally, the risk capital of most companies lies in the issuance of issue ordinary shares. Between ordinary shareholders and preference shareholders, the former usually receive their dividends first before the latter.

In addition, most company constitutions give ordinary shareholders a full right to vote because they commonly exert the largest amount of control over the company.

If your company in liquidating, and you have already repaid all the required liabilities, ordinary shares are usually the next in line to be repaid.

Preference Shares

Shareholders who own preference shares enjoy some special rights in a company. The fixed and (sometimes) cumulative dividends carried by these rights are usually paid from profits made by the company in preference to dividends on ordinary shares in the event of a winding up.

In the event of company dissolution or even asset dissolution, preference shares may take precedence. However, your company may not issue preference shares unless its constitution sets out the rights of shareholders in regard to:

  • Capital repayment;
  • Cumulative or non-cumulative dividends;
  • Sharing of excess profits and surplus assets;
  • Dividends on the subject of various classes of preference shares; and
  • Voting rights as well as precedence of capital payment.

You should also note that in a general company meeting, preference shares usually have no voting rights. Nevertheless, if any shareholder fails to pay his/her dividends on preference shares, voting rights may be prepared. This only applies if they were issued before 3 January 2016 but after 15 August 1984.

Shares issued after this period will have certain rights as provided in the constitution of your company.

In Singapore, according to the Companies Act, every preference shareholder is not allowed to hold the right to vote on a resolution meant to wind up the company or a resolution to alter the rights involved in various preference shares conferred on them.

Participating Preference Shares

Preference shares may be endowed with the right to receive dividends as per a quantified rate as well as to receive more dividends in the case of any excess profits so long as all ordinary shareholders have received their share of dividends.  

In addition, preference shares may be endowed with the same rights in the case of any excess assets of your company is winding up. One term for these shares is referred to as participating preference shares.

Cumulative or Non-cumulative Preference Shares

For the period your company is under operation or still existing, shareholders are entitled to dividends from cumulative preference shares at a fixed rate. In case your company makes losses in a certain year, and you are unable to pay shareholders in full as per the predetermined rate, you can carry forward the deficit in the coming years.

When it comes to non-cumulative preference shares, shareholders are only entitled to be paid the resulting dividends only when your company makes profits that can pay them in full as per the predetermined rate. You are not supposed to carry forward such obligations in the coming year(s).

Redeemable Preference Shares

These either give shareholders the right for your company to repay them their capital at a stated date or alternatively give your company the right to repay them after a stated period time (for instance, giving a notice of redemption) or within a specified period.

Redeeming these shares does not breach the general principle that your company may not reduce its capital. In accordance with the Companies Act, this is because such redemption does not reduce the share capital of a company.

Redeemable preference shares should be fully paid up and may be redeemed from proceeds of a newly issued shares. If they are not redeemed in this way, they may be deemed from the company’s capital so long all the directors agree to sign a solvency statement ratifying the same.

Once your company has redeemed the redeemable preference shares, you must lodge the details (and solvency statement if any) with Accounting and Corporate Regulatory Authority (ACRA).

Convertible Preference Shares

Usually, these shares carry the right to preferred fixed dividends for a specific period, and call for their eventual conversion into a different class of shares (typically ordinary shares).

The ordinary shares received after converting the preference shares (also known as the conversion ratio) will usually reveal your company’s ordinary share value at that time.

Non-voting Shares

Also referred to as restricted voting shares, these refer to shares that lack or have limited voting rights. To compensate for those shareholders who have non-voting rights, your company must give them preferential treatment when it comes to regarding dividends. In most cases, the company increase their dividends or give them fixed dividends.

Variation of Class Rights

If your company alters or varies the rights of holders of certain classes of shares, the law gives them a certain degree of safeguard, especially if they did not consent to it.

For example, if your company issues a number of classes of shares, each of them may have different rights when it comes to voting, dividend payments, priority of capital repayment and other rights.

Therefore, it is necessary to safeguard them against efforts by holders of other classes of shares who are eager to alter or vary their rights. Most of these safeguards are normally outlined in the constitution of your company.

For example, when it comes to the variation of rights, reg 8 of the Model Constitution requires at least 75 percent of holders of a particular class of issued shares to pass a special resolution in writing at a separate general meeting. This is also a statutory entitlement.

As stated in Section 74(6) of the Companies Act, it is considered that an allotment of existing preference shares and preference shares have equal ranks when it comes to variation of their class rights of holders of the latter unless otherwise stated in the company constitution.

The reason is that the holders of preference shares will eventually recognise that they have equal with future preference shareholders. Regulation 9 of the Model Constitution reinforces this by stating that the all rights can only be altered by creating or issuing more shares that rank equally with the shares of a particular class of shares.