Guide On Types of Shares That a Singapore Company Can Have

Posted by John Rikvin on November 23rd, 2020

What are Preference Shares? 

Normally, the Preference Share will have the preferred right over the ordinary share in the event of liquidation and distribution of profit.

Preference shares are usually non-voting shares, but they can also have voting rights based on the constitution or only have a vote when their owed dividend has not been paid.

Redeemable preference shares

Redeemable shares allow the company to redeem the shares if they wish to do so in the future. Less commonly, it might also mean that shareholders would also have the option to sell them back to the company.

The option to redeem the shares could happen on a certain date, generally, the redemption price of this class of share will depend on the terms layout in the constitution. It should also be noted that a company can only redeem these shares out its profits and new share issue proceeds, which may make it harder to redeem in the first place.

Cumulative Preference Shares

This class of share has a cumulative dividend in the event if a Singapore company is unable to pay a dividend in full on a particular year, then the amount in arrears will be paid when the company has enough to pay a said dividend. Lower class shareholders don’t get paid dividends until all of the arrears are paid for cumulative preference shareholders.

How to Name Your Different Share Classes for Your Singapore Company

There are some general guidelines that most Singapore companies will adhere to when naming their different share classes, but in fact, you can name them whatever you like. It’s for this reason that you shouldn’t assume that ‘Class A’ shares in one company mean the same thing as ‘Class A’ shares in another company. If you want to know exactly what a share class name means, you’ll need to look it up in that company’s constitution

As long as it constitution allows, a Singapore company can:

• Create a new share class in addition to existing share classes
• Convert an existing share class into a new share class

Read more about Types of Shares in a Singapore Company at Rikvin.com.