A company shareholder is a member of the company that owns shares of the company after having purchased shares and invested in the capital of the company. Shareholders of a private limited company in Singapore have important roles and rights with the company.
Requirements for Shareholders of a Singapore Company
Private limited companies in Singapore must have at least one shareholder until a maximum of 50 shareholders.
In Singapore, a private limited company is a popular company structure that limits the liability of its shareholders to the amount invested and has a separate legal entity from its shareholders and directors.
Roles of a Shareholder
Shareholders have a substantial role in the company and predominant place in its governance.
Ownership and Investment
The primary role of a shareholder is to support the business of the company by investing in its capital and owning a part of the company’s ownership through shares. These shares which represent their ownership interest in the company, offer some rights to the shareholders.
The shareholders can purchase, sell or transfer their shares as they see fit pursuant to the rules set off in the company constitution.
Electing the Board of Directors
Shareholders have the power to appoint the board of directors, who are responsible for managing the day-to-day company’s affairs. The board of directors is accountable to the shareholders, and they are expected to act in the best interest of the company and its shareholders.
Approving Major Decisions
Shareholders are involved in the decision making of the company, such as participate in Annual General Meetings (AGM) and Extraordinary General Meetings (EGM) of the company.
They have the right to approve or reject significant decisions, such as: alteration of the capital of the company, mergers and acquisitions, changes to the company’s Constitution, and the issuance of new shares. The approval of these decisions usually requires a special resolution, which means that at least 75% of the shareholders must agree.
Register of registerable controller for UBO
Shareholders holding directly or indirectly 25% or more of the company’s shares, shall provide their information and documents in order to be identified as Ultimate Beneficiary Owner (UBO).
Rights of the Singapore Company Shareholders
Rights attached to shares held by the shareholders are defined into the company’s Constitution and the Shareholders’ Agreement if any. The number of shares held by the shareholders will often define the scope of their rights.
Voting rights
Shareholders have the right to vote on key decisions, such as electing the board of directors, approving major decisions, and amending the articles of association. By default, the law provide that each shareholder is entitled to one vote per share they own.
Right to Receive Dividends
Shareholders have the right to receive dividends from the company if the company declares a dividend. The amount of the dividend is determined by the board of directors and approved by the shareholders.
Right to call a meeting
Any shareholder holding at least 5% of the votes can call a meeting. The notice of the meeting must specify the business to be transacted and be sent to all shareholders entitled to receive it. In other company, the governing constitution may specify who has the right to call a meeting and under what conditions.
Right to bring legal action
Shareholders have the right to bring legal action on behalf of the company (known as a “derivative action”) if they believe the company’s interests are not being properly protected or if there has been a breach of directors’ duties.
Right to Inspect Company Records
Shareholders have the right to inspect the company’s records and books of accounts, including financial statements and minutes of general meetings. This right allows shareholders to keep track of the company’s performance and ensure that the company is being run in accordance with the law. Shareholders can exercise their right to inspect these records by making a written request to the company.
It is important to note that there may be certain limitations on the right to inspect company records in certain circumstances, such as when the information is confidential or sensitive. Shareholders should consult with a legal professional for advice specific to their situation.
For the Director, without specifications or exceptions, they need not furnish reasons before exercising the right and in the absence of proof to the contrary, he is assumed to be acting for the benefit of the company.
Right to financial statements
Shareholders have the right to receive a copy of financial statements, balance sheets, and auditors’ report at least 14 days before the documents are to be presented at a general meeting.
In the case of a private company which has dispensed with the holding of an AGM, shareholders have the right to receive a copy of financial statements and related documents within 5 months after the end of the financial year.
Right to Sue the Company
Shareholders have the right to sue the company if the company engages in activities that harm the shareholders or if the company breaches its duties to the shareholders. This right allows shareholders to hold the company accountable for its actions and seek legal remedies if necessary.
The pre-emption rights
They are rights giving existing shareholders priority in acquiring new shares issued by the company. The existence of such rights are not guaranteed and depends on the individual company’s constitution.
Right to Sell Shares
Shareholders have the right to sell their shares to other parties if they choose to do so. The sale of shares is subject to certain restrictions, such as pre-emptive rights, which give existing shareholders the right to purchase the shares before they are offered to external parties.
Limited liability
As a shareholder of a private limited company, your liability is limited to the amount of your investment in the company. This means that your personal assets are not at risk if the company incurs debts or is sued.
Conclusion
In summary, shareholders of a private limited company in Singapore play a critical role in the company’s governance and decision-making process. Shareholders have important rights, including the right to vote, receive dividends, inspect company records, sue the company, and sell their shares.
These rights help to ensure that the company is being run in the best interests of the shareholders and in accordance with the law. It is important for shareholders to be aware of their roles and rights and to participate actively in the company’s affairs. This can help to create a positive and transparent relationship between the company and its shareholders, which is essential for the long-term success of the company.
When writing the constitution of the company, certain rights and roles can be adjusted based on the needs of the company or its shareholders. Being well-advised from an early company stage helps in mitigating any further risk.
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