Introduction

For entrepreneurs entering the Singaporean business landscape, issuing different share classes can be an effective way to raise capital while maintaining control over decision-making. This approach helps companies balance investor interests and management oversight, making it a strategic tool for structuring ownership.

Many Small and Medium Enterprises (SMEs) in Singapore are incorporated as private companies limited by shares, meaning that the company is a separate legal entity from its shareholders. This ensures that potential losses are limited to the value of shares held by each shareholder. However, if a company issues only ordinary shares, all shareholders will have equal voting rights.

Under the Companies Act (CA), businesses can issue different classes of shares, each granting unique shareholder rights. For instance, some shares may provide preferential dividends in exchange for forfeiting voting rights. This flexibility enables founders to maintain control even with minority ownership.

Key shareholder rights include:

• Voting & Attendance at general meetings.
• Profit Participation through dividends.
• Asset Distribution Priority in case of company winding up.

Types of Share Classes in Singapore

Companies in Singapore can issue various types of shares, each offering distinct advantages:

1. Ordinary Shares

• The most common type.
• Provides voting rights and equal dividend participation.
• Entitles shareholders to a share of surplus capital during winding up.

2. Non-Voting Shares

• Holders cannot attend meetings or vote.
• Often issued to employees or family members of shareholders.

3. Redeemable Shares

• Can be bought back by the company.
• Secures holders’ right to capital repayment at a predetermined time.

4. Preference Shares

• Offer preferential dividends and priority in capital return.
• Often structured to provide fixed dividend payouts.

5. Deferred Ordinary Shares

• Delay dividend payments until other share classes receive a minimum amount.

6. Management Shares

• Provide extra voting rights.
• Often issued to founders to retain control over company decisions.

7. Alphabet Shares (e.g., Class A, Class B, etc.)

• Introduce variations in rights and privileges.
• Used to create customized shareholder structures based on investment levels.

Conclusion

While many startups begin with equal share rights, Singapore’s legal framework allows for customized equity structures to accommodate investor preferences and management needs. Entrepreneurs should carefully evaluate the rights and obligations associated with different share classes to ensure alignment with long-term business goals.

If you are considering structuring your company with multiple share classes, our experts can provide guidance to help tailor an equity framework that meets your strategic objectives.