Who is a shareholder ?
A shareholder is one when you own shares in publicly-listed companies (e.g. listed in SGX) or in a private company.
A company must have at least one shareholder. You will need to provide the personal identification details, contact information (telephone number and e-mail address), and residential address of each of the shareholders when submitting the application online.
Generally the power of management of a company are vested in the Board of Directors. Unless the Articles of Association (“AA”) restrict the power of the Board and reserve such powers to the members instead, members will not be able to override the board’s decisions on such matters.
Being a shareholder carries a number of rights and responsibilities, and you have to know what are your rights as a shareholder. In general, the rights of shareholders in Singapore private companies are:
- Right to attend and vote at members’ meetings
- Right to receive notices of general meetings
- Right to receive copies of the company’s accounts 14 days before AGM
- Right to receive dividends upon declaration and approval of final dividend by the company
- Right to observance of the company constitution and Companies Act
- Access to meetings and information
- Pre-emption rights
- Right to bring legal proceedings against or on behalf of the company
- Rights in the event of winding up due to insolvency
- Rights to transfer shares subject to any restrictions
Right to receive dividends upon declaration of final dividend and approval by the company
As a shareholder, dividends are not automatically given each year, regardless of whether the company makes a profit. This includes interim dividends, which are dividends declared by a company before its full-year financial statements have been issued.
The declarations of dividends may be made based on the quarterly or half-yearly results but are revocable at any time before payment.
Courts will generally not intervene to compel declaration of dividends, except in exceptional circumstances where such non-declaration of dividends amounts to oppression.
Final dividends are dividends declared by a company after its full-year financial statements have been issued. It is declared and approved by the shareholders in annual general meetings. Once the final dividend is declared and approved, shareholders have an irrevocable right to final dividend i.e. final dividends cannot be revoked and shareholders will have a right to receive the dividends, barring subsequent insolvency.
Right to Observance of the Company Constitution and the Companies Act
Right to demand adherence to company’s constitution
Every shareholder has the right to ensure that the company and all other shareholders adhere to all the provisions of the company’s constitution.
For example, if the company states clearly in its Constitution that its main business objectives is to trade in clothing, but it later decides to enter into a new venture into a different and unrelated business (e.g. going into an automotive leasing business ), a shareholder has the right to object to this new business venture.
Right to demand adherence to the Companies Act
Any shareholder whose interests are or may be affected by the company contravening any provision in the Companies Act may apply to court for an injunction to restrain such a contravention.
Access to meetings and information
Right to expect Annual General Meeting (AGM)
Shareholders of public companies have the right to expect at least one general meeting per year – the AGM. However, private companies may by resolution dispense with holding AGMs.
Right to call for or convene an Extraordinary General Meeting (EGM)
In addition to the AGM, 2 or more shareholders who collectively hold 10% or more of the company’s vote-carrying shares have the right to requisition the company directors to convene an EGM, or to themselves convene such meetings.
Right to attend meetings
Shareholders have the right to attend all of the company’s general meetings, and to speak on any resolution tabled at the meeting.
Right of access to important information
Shareholders have the right to access and inspect:
- The electronic register of members (for private companies)
- The register of members kept by the company itself (for public companies)
- Minutes of general meetings (however, members usually do not have the right to access minutes of board meetings)
- The company’s register of charges, to find out which (if any) of the company’s assets are encumbered
- The registers of key management personnel, directors’ shareholdings, substantial shareholders, and debenture holders
Right to financial statements
Shareholders have the right to receive a copy of financial statements, balance sheets, and auditors’ report at least 14 days before the documents are to be presented at a general meeting.
In the case of a private company which has dispensed with the holding of an AGM, shareholders have the right to receive a copy of financial statements and related documents within 5 months after the end of the financial year.
Right to vote
Each share paid by the shareholder normally entitles the shareholder to one vote on any resolution/issue that has been tabled for a vote. Unless the Constitution is stated otherwise, or if the type of share owned does not carry voting rights. Shareholders are free to vote in any way they see fit and purely in their self-interests.
Right to demand a poll if voting via a show of hands is not conclusive
Voting on any resolution is usually done via a show of hands of the shareholders. However, where a show of hands is not conclusive as to the actual balance of votes, any shareholder may demand that a poll be done, unless such a right has been curtailed by the Constitution.
A demand for a poll cannot be denied regardless of what the Constitution states if it is made by:
- 5 or more shareholders with voting rights;
- 1 or more members who hold 5% or more of the voting rights; or
- 1 or more members whose shares in total constitute 5% or more of the total sum paid on all shares conferring voting rights.
Pre-emption Rights
Pre-emption rights are rights giving existing shareholders priority in acquiring new shares issued by the company. The existence of such rights are not guaranteed, and depends on the Constitution.
Bringing of Legal Proceedings – Against or On Behalf of the Company
Right to bring legal action against the company
A shareholder has the right to apply to court to restrain the company from doing any act, or to seek any appropriate relief where the:
- Company’s affairs are conducted, or where the directors’ powers are exercised, in a manner oppressive to one or more shareholders; or
- Where the company has acted or threatens to act in a way that is unfairly discriminatory to one or more members under S216 of the Companies Act.
Right to bring legal action on behalf of the company
A shareholder has the right to apply to court for permission to commence legal action or arbitration on behalf of the company, or to intervene in a lawsuit or arbitration which the company is a party of, provided that the action is good faith and appears to be in the interests of the company.
Adequate notice must be given to the directors, and the directors must have decided not to commence the necessary proceedings, before the individual member can commence such action.
Right to apply for “just and equitable” winding up
A shareholder has the right to apply to court to wind up the company on “just and equitable grounds” in exceptional cases, such as where:
- Equal shareholders are at complete odds as to a company’s direction and therefore no decision can be made in terms of this or daily operations;
- Relations between shareholders have completely broken down; or
- The company is no longer able to carry out the main business for which it was formed.
Rights in the Event of Company’s Winding Up Due to Insolvency
Right to recover sums owed to you (subject to other creditors’ rights)
If a company a shareholder has invested in is being wound up due to insolvency, a shareholder may have the right to recover a portion of the dollar value of his shares plus other sums owed to him (e.g. where final dividends were declared but not yet paid to the shareholder).
However, the rights of a shareholder to such amounts will rank below the claims of all other creditors (who are not shareholders) such as secured creditors and employees who are owed salaries and wages.
The shareholder will only be paid if there are any remaining assets left after satisfying the claims of the other creditors. The shareholder may therefore receive less than his share investment in the company or promised to him or nothing at all in the end.
Right to protection of personal assets from company’s creditors
Shareholders have the right to have their personal assets protected in the event of the company’s insolvency or winding up. No person or company will be allowed to seize the shareholder’s personal assets to help satisfy the company’s outstanding obligations and liabilities.
The maximum financial loss that a shareholder may experience in the event of the company’s insolvency and winding up is the full amount of his share investment in the company.
Right to transfer shares subject to any restrictions
Unless there are share transfer restrictions stipulated in the AA of the company, shares in a company may be freely transferable from one shareholder to another person.
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