Category: Company Director and shareholder

Disqualification of Director

WHAT IS DISQUALIFICATION

  • Refer to person who is prohibited from acting as director and being involvement in the company management regardless directly or indirectly

HOW WILL THE DISQUALIFIED DIRECTOR BEEN NOTIFIED

  • ACRA will send notification letter with displayed of disqualified period ( starting date and ending date )
  • Disqualification by bankruptcy will notified by Official Assignee separately.

REASON OF DISQUALIFICATION

The director may be disqualified due to the following reasons:

  • undischarged BANKRUPTCY
  • Has been convicted for an offence involving FRAUD or DISHONESTLY that carrier an imprisonment term of 3 months or more
  • Has been convicted 3 or more ACRA FILING OFFENCE
  • Has 3 or more companies that were STRUCK OFF BY ACRA within 5 year

PERIOD OF DISQUALIFICATION

WILL THE DISQUALIFICATION SEARCHABLE BY THE PUBLIC

YES, Disqualified Director will shown on Bizfile and personal Profile and is accessible by Public

WILL THE RELEVANT COMPANY NOTIFIED ABOUT ITS DISQUALIFIED DIRECTOR  

NO. Relevant disqualified director should update the Company.

Affected Company should take the necessary compliance action such as remove him as company director .

WILL I BEEN NOTIFIED WHEN THE DISQUALIFIED PERIOD IS END

NO. Disqualified period is stated on ACRA register and ACRA notification letter ( except disqualification by Bankruptcy)

CAN DISQUALIFIED DIRECTOR BECOME SHAREHOLDER

YES he still can hold any company share in normal circumstance. But ,  if affected Company’s  constitution required him to sell the share upon cessation of his directorship, then he must do so

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What is shareholder right ?

Shareholder refer to someone who owned the Company shares. And you are eligible to the following right :

Right may not conferred if you are appointed as Nominee shareholder and please note that the following right may also not apply to companies other than company limited by shares.

RIGHT TO ATTEND MEETING

shareholder have right to attend all general meeting ( especially Annual General meeting (AGM)) , and they are given right to speak on the resolution tabled in meeting

RIGHT TO ACCESS COMPANY RECORDS

Shareholder is given right to access to company information such as :

  • company statutory register book / electronic form to check register shareholder, director etc
  • Company financial reports
  • minutes of the general meeting

RIGHT TO VOTE

Each share normally equal to 1 vote . If you hold more shares means that you have more right of speak on the transaction .

However, please bear in mind that NOT all share carry voting right .

RIGHT TO DIVIDEND

Shareholder is eligible to the dividend according to their shareholding proportion in the Company.

RIGHT TO PROTECT PERSONAL ASSET FROM COMPANY CREDITOR

Company carry Separately legal entity concept .

One of the major criteria is company able to stand alone in the eyes of law.

Shareholder will not bear any consequence caused by the company.

His personal asset is totally protected.

RIGHT TO APPOINT PROXY

If you as shareholder not able to attend meeting, you may appoint someone to attend on your behalf.

Term and condition for the appointment of proxy is stated on company constitution .

Under normal circumstance, you are allowed to appoint 1 proxy and he can be anyone .

Type of Company shares

WHAT IS SHARE

Share refer to ownership in the Company .

TYPE OF SHARES

Ordinary Shares

Is the most common share in Singapore registered company .

In general, 1 ordinary share represent 1 vote .

Ordinary shareholder eligible for the right for dividend and right to claim the remaining assets when the company is wound up .

Some of the company may divide ordinary share into different class of share ( Class A , B , C)

Different class of ordinary share may represent different right .

Preference Shares

Preference shareholder ‘s right is over ordinary shareholder in term of dividend distribution and claim of company assets.

In most cases, preference shareholder have NO voting right .

BASIC RIGHT ATTACHED TO SHARES

  • Voting right
  • Right to call for meeting
  • right to attend meeting
  • right for the distribution of dividend

DOCUMENTS DETERMINE SHAREHOLDER RIGHT

Company constitution or shareholder agreement is the documents to list down shareholder right .

Related article : What is Shareholder Agreement

Related article : What is Company Constitution

CONSIDERATION TO DETERMINE TYPES OF SHARES

  • shareholder responsible level in the Company
  • who is shareholder ( founder / Employee / Investor)
  • Invested Amount into the company
  • shareholder relation level with the company business activities

Directors’ Fees vs Directors’ Salary

WHAT IS SALARY ?

Salary refer to monthly amount of money given to Company employee based on his assigned job scope in the Company .

WHAT IS DIRECTOR FEES ?

Director fees is paid in recognized your capacity as Company Director .

HOW TO DECIDE BETWEEN DIRECTOR FEES OR REMUNERATION ?

Director salary and Director fees is category as Company Expenses

Director salary : will attract MONTHLY CPF contribution . This will become FIXED monthly expense .

P/s : Monthly CPF contribution ONLY apply to local director who is Singaporean / Singapore PR

Director fees : Is more flexible. Company can declare directors fees at any time with the proper resolution approval.

SIMILARITY OF DIRECTOR FEES AND SALARY

Please note that receivable director fees and remuneration is subject to personal tax.

Personal tax rate for Local director

Different tax rate will apply to Foreign Director

Let calculate and compare which is the better option.

All Question About Paid Up Answered Here

Paid up refer to the total amount investment in the Company in return for the Company shares .

Related Article : what is Paid Up Capital

Frequently Asked Questions (FAQ)

How to Decide Amount of Paid Up ?

If you apply for Visa Entrepreneur Pass , Company must have at least S$50,000 paid up.

If you engaged business industrial such as travel agency, recruitment agency etc , company is required to meet the paid up requirement .

In normal circumstance, is depend on the business natural example if company dealing with trading activities of course more cash flow is important and paid up is 1 way.

What is Legal Currency?

Is up to management to decide . Mostly is depend on the business natural, if involved with International Transaction, of course USD will be good choice .

When must i deposit the money into company bank account ?

Company Secretary will need to have copy of bank in slip or any other documents to proof that the fund been deposit before lodgement with ACRA .

Must the paid up keep into company bank account ? when it can been withdrawn out ?

The paid up can be withdrawn out for the purpose of operation of company transaction example : pay rented, salary, purchase equipment etc

What is the implication of the paid up shares ?

Paid up share means the share value had been fully paid . And company will based on it to declare dividend.

Declaration of dividend is based on porportion of shareholding .

What is Partly paid up ?

When issued of new share, director should determine it should be issued as fully paid or partly paid share .

Partly paid up share means company only received the partial payment for the share .

Example : Company issued 100 shares with value of S$100 but received only S$50 .

For the balance of S$50 , company will call up in agreed due course .

Guide to transfer share for singapore company

WHAT IS SHARE TRANSFER ?

Share transfer refer to the exercise of change in ownership in the Company.

HOW TO EFFECT THE SHARE TRANSFER ?

According to ACRA constitution :

Although there is silent about pre- emption right but the right to approve the shares transfer is on the hand of director now .

Directors’ resolution will needed to passed before effect the shares transfer with authority.

Transferor and Transferee will need to sign shares transfer form with the following detail information :

  • Company name where the shares transfer will take place
  • Transferor detail information
  • Transferee detail information
  • Number of shares to be transfer
  • Agreed consideration price / selling price
  • Witness signature for BOTH parties

HOW TO DECIDE SELLING PRICE ?

Decision on selling price is agreement between Transferor and Transferee There is no impact on company.

However , please note that selling price will have impact on stamp duties amount with IRAS .

HOW TO CALCULATE STAMP DUTIES WITH IRAS ?

IRAS will based on selling price and Net Asset Value ( which ever is higher ) to calculate stamp duties amount .

DUE DATE TO LODGE IN WITH IRAS AND ACRA ?

Company must effect the change with authorities within 14 days from the effective date

What is Shareholder Agreement

Following is the basic document you are required to sign before company registration :

  • F45 ( consent to act as director )
  • Company Constitution

Scenario :

Aside from the above 2 documents, MR A been asked to sign shareholder agreement .

Question :

WHAT IS SHAREHOLDER AGREEMENT ?

Shareholder Agreement is another internal documents with the additional list of regulation beside company constitution .

And it normally draft out for signature BEFORE company registration to have better clear picture of objective.

Any amendment of this agreement must with the consent of all shareholder .

The preparation of Shareholder Agreement is to protect the shareholder interest instead of company interest .

WHAT IS THE DIFFERENT BETWEEN COMPANY CONSTITUTION AND SHAREHOLDER AGREEMENT ?

Shareholder Agreement is a PRIVATE DOCUMENT and is different from Company Constitution which must registered with ACRA and public can purchase it at any point of time

WHAT IS CONTENT OF SHAREHOLDER AGREEMENT ?

shareholder agreement will consist the following basic provision :

  • Dividend Policy
  • regulation in allotment and transfer of shares
  • shareholder’s list of right

How To Remove Company Director

Background :

Mr A try to contact Mr B ( another appointed director ) who is “missing ” .

And due to his ” absent ” , Company facing the following problem

  • Not able to present signed report to shareholder
  • Not able to meet the quorum for director meeting

HOW TO REMOVE HIM FROM THE BOARD OF DIRECTOR ?

According to the Companies Act :

152 (9)  Subject to any provision to the contrary in the constitution, a private company may by ordinary resolution remove a director before the expiration of his period of office notwithstanding anything in any agreement between the private company and the director.

BEFORE we proceed to remove Mr B, company must check the following on the company constitution :

  • Does the Company Constitution allowed to have 1 director ?

IF NOT appointment of NEW director is compulsory BEFORE removal of director taking place .

Local Resident Director vs Foreign Director

Appointment of local resident director is compulsory for all Singapore registered Pte ltd company .

DEFINITION OF LOCAL RESIDENT DIRECTOR :

Local residential director refer to someone who ordinary stay in Singapore which include Singaporean, Singapore PR and EntrePass Holder ( Employment Pass holder must apply letter consent from MOM)

BASIC REQUIREMENT FOR BEING LOCAL RESIDENT DIRECTOR :

  • with Local resident address
  • above 18 years old
  • No maximum age
  • No criminal records
  • No undischarged bankrupt

DIFFERENT BETWEEN LOCAL RESIDENT DIRECTOR AND FOREIGN DIRECTOR

The major different is the tax rate on the received income .

Local director will tax based on the local resident tax rate

tax calculator for Local resident Individual

Residency Status for Foreign director will be based on his number of days stay in Singapore :

DIFFERENT TYPE OF TAX RATE FOR NON RESIDENT INDIVIDUAL

tax calculator for non resident individual

What is Shareholder Agreement ?

WHAT IS SHAREHOLDER AGREEMENT

Shareholder agreement is treated as supplement legal document for company constitution.

Is a agreement between shareholder with the  Company , it does not means must include  ALL shareholder , it can be prepared based on  their control interest level, type of shareholding etc.

 

IS THE SHAREHOLDER AGREEMENT COMPULSORY ?

It is not mandatory for company to prepare shareholder agreement with Company Constitution is in place.

 

WHAT SHOULD INCLUDE INSIDE THE SHAREHOLDER AGREEMENT ?

There is no standard clause for shareholder agreement. Normally is depend  on shareholder’s objection.

The following is the basic clause :

  • shareholder’s basic right
  • shareholder ‘s right during company on risk status : liqudation, be sued , restructuring
  • how the procedure for decision to be made
  • regulation in allotment of shares and shares transfer
  • tag along and drag along provision

 

WHICH COMPANY SHOULD PREPARE SHAREHOLDER AGREEMENT ?

It is highly recommend that company with large number of shareholder , complex shareholding structure especially involved with another entity.

 

WHEN SHOULD SHAREHOLDER AGREEMENT PUT IN PLACE ?

There is no stipulate time frame when should company prepare and sign the agreement. But is highly recommend that before date of incorporation .

This is good timing to achieve common understanding between shareholder and company.

 

IS SHAREHOLDER AGREEMENT IS THE KEY SOLUTION IF DISPUTE OCCUR AMONG SHAREHOLDER ?

Number of shareholding you hold determine your control power in the Company, what if the following scenario happen ?

Scenario : Company A with 2 shareholder and each other hold 50% of the company share , how shareholder agreement help if there is dispute occur among them ?

Answer : Please ensure that ” Dispute resolution procedure  “was included in the shareholder agreement

WHAT IS DISPUTE RESOLUTION ?

Dispute resolution is a term that refers to a number of processes that can be used to resolve a conflict, dispute or claim.

 

IS THE SHAREHOLDER AGREEMENT AVALIABLE FOR THE PUBLIC VIEWING  ?

NO. Shareholder Agreement is means for private viewing .Only company constitution is avaliable for purchase as it was lodge in with ACRA during incorporation stage .

 

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