What is Share Capital?
Share capital refers to the amount of money that a company receives from its shareholders in exchange for issuing ownership shares. It serves as a fundamental indicator of a shareholder’s stake in the company and can be structured to reflect various levels of ownership rights, dividend entitlements, and decision-making authority. At the time of incorporation, a company must declare its initial share capital and can later increase or restructure it to suit its evolving business needs.
Share capital can either be:
- Issued Capital: The value of shares that have been distributed to shareholders.
- Paid-up Capital: The actual amount paid by shareholders for their shares. This may be equal to or less than the issued capital.
While there is no statutory minimum requirement in Singapore, companies typically start with a nominal capital of S$1 to keep incorporation simple. More capital can be injected later through share allotments.
Why Structure Share Classes?
Companies may choose to issue different classes of shares to provide flexibility and strategic control. Reasons to create multiple share classes include:
- Control and Voting Rights: Allow founders or key stakeholders to retain voting control even when issuing shares to new investors.
- Dividend Preference: Allocate fixed or higher dividend payouts to specific shareholders, such as early investors or family members.
- Succession Planning: Distribute ownership across family members while assigning limited control to preserve governance efficiency.
- Investment Structuring: Offer convertible or redeemable shares to investors to attract capital with defined exit strategies.
Common Share Types in Singapore
- Ordinary Shares: The default share type. Holders typically have one vote per share and receive dividends if declared.
- Preference Shares: Often carry no voting rights but offer priority in dividend payments and asset distribution upon winding up.
- Redeemable Shares: Can be repurchased by the company under agreed terms, useful in funding rounds.
- Convertible Shares: May be converted into ordinary shares based on conditions (e.g., IPO or fundraising events).
Compliance and Reporting Requirements
- Share capital and structure must be disclosed during incorporation and updated via BizFile+ if changes occur post-incorporation.
- Companies must issue share certificates and update the electronic register of members.
- Share allotment resolutions and shareholder agreements should be properly documented and, where applicable, filed with ACRA.
Recap Table: Share Capital Essentials
Feature | Description |
Definition | Funds raised through issuance of shares to shareholders |
Legal Requirement | Must declare during incorporation |
Ordinary Shares | Default share type with voting rights and dividends |
Preference Shares | Non-voting typically, with dividend and liquidation priority |
Multiple Classes Allowed | Yes, if provided in the constitution |
Paid-Up Capital | Can be increased later via allotment and BizFile+ submission |
Need Help Structuring Your Share Capital?
Whether you’re just starting your business or planning an equity round, we can help you structure your share capital in a way that aligns with your financial and strategic goals. Our services include share class advisory, preparation of share allotment resolutions, filing with ACRA, and drafting shareholder agreements.
Contact us today to optimise your capital structure and ensure compliance with Singapore’s corporate regulations.