Allotment of Shares: A Guide for Businesses in Singapore

The allotment of shares is a crucial process for businesses in Singapore, enabling companies to raise capital, reward investors, or bring in new shareholders. Whether you're a start-up looking to secure funding or an established business planning to expand, understanding the allotment process is essential for maintaining compliance and optimizing your share structure. This guide provides a comprehensive overview of share allotment, its importance, and how Apexia Corporate Advisory can assist you.

What is Allotment of Shares?

The allotment of shares refers to the issuance of new shares by a company to individuals or entities, either as a way to raise capital or as part of fulfilling contractual obligations. Once allotted, these shares represent ownership and come with rights such as voting and dividends, depending on the share class.

Why Allot Shares?

1. Raise Capital

• Purpose: Fund business operations, expansion, or innovation.
• Example: Issuing shares to investors during funding rounds.

2. Reward Existing Stakeholders

• Purpose: Reward loyal shareholders or employees.
• Example: Allocating shares as part of Employee Share Ownership Plans (ESOPs).

3. Bring in New Investors or Partners

• Purpose: Introduce new shareholders to contribute financially or strategically.
• Example: Allocating shares to venture capitalists or strategic partners.

4. Reorganize Shareholding Structure

• Purpose: Adjust ownership proportions to reflect contributions or changes in business strategy.
• Example: Issuing additional shares to major contributors.

Types of Shares That Can Be Allotted

1. Ordinary Shares

• Most common type of shares issued.
• Provide voting rights and dividends.

2. Preference Shares

• Offer preferential rights over ordinary shares regarding dividends or repayment in case of liquidation.
• Typically non-voting.

3. Redeemable Shares

• Can be bought back by the company at a future date.
• Often used in specific investment agreements.

4. Restricted Shares

• Often issued as part of employee incentive schemes.
• Come with certain restrictions on transfer or sale.

Steps to Allot Shares in Singapore

Step 1: Check Authority in the Constitution

• Ensure the company's constitution allows for the issuance of new shares.
• Obtain shareholder approval if required.

Step 2: Prepare a Board Resolution

• Convene a board meeting to approve the allotment of shares.
• Document the resolution specifying the number, class, and recipients of shares.

Step 3: Update the ACRA Register

• File a Return of Allotment of Shares (e-Form 12) with the Accounting and Corporate Regulatory Authority (ACRA) within 14 days of the allotment.

Step 4: Issue Share Certificates

• Provide share certificates to the new shareholders within 30 days of allotment.

Step 5: Update Company Records

• Update the company's register of members to reflect the changes in shareholding.

Key Considerations for Share Allotment

1. Compliance with Regulations

• Ensure adherence to Singapore's Companies Act and the company's constitution.
• Timely filing of forms with ACRA is crucial.

2. Pre-Emptive Rights

• Existing shareholders may have pre-emptive rights, allowing them the first option to buy new shares.
• These rights must be respected unless waived.

3. Tax Implications

• Assess potential tax implications for the company and shareholders.
• Engage professional tax advisors to avoid complications.

4. Dilution of Ownership

• Issuing new shares can dilute the ownership percentage of existing shareholders.
• Communicate and manage this effectively to maintain shareholder trust.

Why Engage Apexia Corporate Advisory?

The allotment of shares requires careful planning, compliance, and communication. At Apexia Corporate Advisory, we provide:

1. Expert Guidance

• Advise on the appropriate share class and structure for your business goals.
• Ensure compliance with legal and regulatory requirements.

2. Documentation and Filing Support

• Prepare board resolutions and shareholder agreements.
• File necessary forms with ACRA accurately and on time.

3. Shareholder Communication

• Assist in managing shareholder expectations and pre-emptive rights.

4. Tax Advisory

• Offer insights into tax implications and strategies for optimizing shareholder value.

Conclusion

The allotment of shares is a powerful tool for raising capital, rewarding stakeholders, and growing your business. By understanding the process and adhering to compliance requirements, you can make informed decisions that align with your company's objectives. Need help with share allotment? Contact us today for professional guidance and tailored solutions!