Guide to Allotment & Issuance of New Shares in Singapore

Understanding Allotment and Issuance

Before we delve into the details, let's first break down the terminology:

Allotment is the act of assigning a certain number of shares to an individual without specifying the precise shares. Essentially, it's the stage when a person earns an unconditional right to be included in the register of members for those shares. This means that the individual becomes a shareholder with all the associated rights and benefits. • Issuance occurs when the person's name makes its way onto the register of members, indicating that the application, allotment, and registration process is complete. At this point, the individual officially becomes a shareholder with legal ownership of the shares.

Why Issue New Shares?

There are several compelling reasons for issuing new shares:

1. Raising Capital: Let's say your business needs a financial boost. Issuing shares can be a direct and effective way to gather funds for various activities such as expanding operations, investing in research and development, or acquiring new assets.
2. Retaining Employees: To attract and retain top talent, many companies allocate shares as part of incentive schemes. By offering employees the opportunity to become shareholders, their interests become aligned with the company's performance, fostering a sense of ownership and commitment.
3. Converting Debt: In times of financial strain, shares can be allotted to lenders as a means to convert debt into equity, providing a potential solution to liquidity challenges.
4. Regulatory Fulfillment: Sometimes, issuing shares is required to meet regulatory obligations, such as during an IPO (Initial Public Offering) when a company goes public and offers shares to the general public.

The Formalities of an Allotment

As you prepare to allot shares, there are a few formalities to consider:

Decide on the type of shares you're issuing: Different classes of shares may have different rights and privileges attached to them. It's important to carefully consider the implications of each type before making a decision.

Seek approval from shareholders, if necessary: Depending on the company's constitution and the number of shares being allotted, obtaining approval from existing shareholders might be required. This ensures transparency and fairness in the allotment process.

Inform shareholders about any preemptive rights: Preemptive rights give existing shareholders the opportunity to purchase additional shares before they are offered to outsiders. It's crucial to communicate these rights to shareholders to ensure compliance and avoid potential disputes.

Procedure for Allotting and Issuing Shares

Now that you have a solid understanding of the concept and importance of allotment and issuance, let's dive into the step-by-step guide:

1. Pass the Resolution: Start by passing a resolution, which can take the form of a written shareholders' resolution, an ordinary resolution, or a board resolution. This formalizes the decision to allot new shares and provides a clear record of the process.
2. File a Return of Allotment with ACRA (Accounting and Corporate Regulatory Authority): Once the shares have been issued, you have 14 days to file a return of allotment with ACRA, the regulatory authority in Singapore. This document provides details about the shares issued and identifies the shareholders who have received them.
3. Issue Share Certificates: After filing the return of allotment, share certificates must be issued to shareholders. These certificates serve as tangible evidence of ownership and are important for shareholders to exercise their rights and prove their ownership in legal and financial transactions.

Conclusion

The allotment and issuance of new shares play a crucial role in the corporate landscape of Singapore. By understanding the process and following the necessary steps and procedures, you can raise capital, engage shareholders, and fulfill legal requirements with confidence. The strategic allocation and distribution of shares can empower your company, driving it towards new heights of success. So, embrace the power of shares and embark on a fruitful journey for your business in Singapore.