In Singapore, the process of share transmission, or the legal transfer of shares due to significant events like a shareholder’s death, is governed by a combination of factors, including the company’s constitution, the Companies Act (Chap. 50), and the deceased shareholder’s will or intestacy laws if there’s no will in place.
Understanding share transmission
Recipient of the shares
The recipient of the shares is typically designated in the company’s constitution. However, in cases where the Constitution is adopted without specific provisions for share transmission, the recipient varies depending on whether the deceased was the sole shareholder or a joint shareholder.
Death of a joint shareholder
In instances where the deceased shareholder was part of joint ownership, the principle of “right of survivorship” applies. This principle dictates that surviving joint shareholders automatically inherit the deceased shareholder’s shares, irrespective of provisions in the deceased’s will or intestacy rules.
Death of the sole shareholder
How to effect a share transmission
If there is no will from the deceased shareholder, the administrator must approach the court to seek Letters of Administration. Conversely, a Grant of Probate from the court must be obtained from the court if the deceased shareholder did leave a will.
These documents grant legal authority to the administrator/executor to manage the deceased shareholder’s assets. Without either of these documents, the administrator/executor cannot claim ownership of the transmitted shares.
Aside from determining eligible recipients, a company’s constitution might impose additional constraints on share transmissions. For example, it could allow directors to reject the registration of a legal holder of shares as a company member. These restrictions specifically vary based on the company’s unique constitution, necessitating reference to it for clarity.
Conclusion
It’s crucial to plan for the transfer of shares in a Singapore company upon a shareholder’s demise to facilitate a seamless transition to the next generation of management. Beyond the general guidelines outlined, thorough examination of the company’s constitution is essential, as it may contain specific restrictions pertaining to share transmission. We stand ready to assist our clients in understanding and effectively managing this process by conducting analysis of existing related documentation, ensuring a smooth transition of shares in accordance with their wishes and legal obligations.
FAQ
1. Is share transmission similar to share transfer?
While both involves the transfer of share ownership, there are some differences. A share transfer is the deliberate share ownership transfer from the transferor (the party transferring) to the transferee (the party receiving). Meanwhile, a share transmission is a share transfer occurs due to the original holder’s death, mental incapacity, or insolvency.
2. How can the recipient of the transmitted share from a lone shareholder dissolve the company?
If the recipient of the sent shares from the sole shareholder intends to dissolve the company, the process remains consistent with standard cessation procedures. However, in this case, the company strike-off is only applicable after the completion of the share transmission.
3. How will the share be distributed if the deceased shareholder is also the sole director of the business?
Since all companies in Singapore are obliged to have at least one director residing in Singapore, upon the death of the sole director, a new director must be appointed. They will then perform.
If you are interested in topics related to shares in Singapore, explore our library of articles below for further insights:
- Share Certificates in Singapore: Overview and Legal Considerations
- Roles and Rights of the Shareholders of a Private Limited Company in Singapore
- How to set up a Private Company Limited by Shares in Singapore?
