Can a shareholder be less than 18 years old in Singapore?
3 minute read
According to Singapore law, every incorporated company must have at least one shareholder. A shareholder in a company is a company member who has a portion of ownership in the company.
A shareholder does not necessarily need to be a person. It can be a legal entity too.
The key requirement is that this entity or person has invested a certain amount of money (or share capital) and that is why they receive a percentage of company shares.
But can an underage individual be a shareholder in Singapore? What are some basic eligibility requirements that need to be met by shareholders in Singapore? Our article answers these questions below.
Minimum age requirement for shareholders
To answer your question: no, we do not recommend a shareholder being less than 18 years old.
While the Companies Act of Singapore does not explicitly state the minimum age for a shareholder, minors are presumed to have no contractual capacity when signing legally-binding contracts. As such, they are not bound to any contract that they enter before the age of 18.
This could raise potential issues for your business in the future.
Instead, it is possible for a minor to be the beneficial owner of shares that are held by their legal guardian. These shares could then be transferred back to them once they reach 18 years of age.
If you choose to proceed with this, we recommend engaging in a law firm that can help you draft the necessary legal documentation such as a nominee shareholder on trust for the minor.
Other shareholder requirements for Singapore businesses
Here are some other requirements to take note:
- A private limited company must have at least one shareholder and cannot exceed a maximum of 50 shareholders.
- Shareholders can be persons, or local or foreign corporations.
- Singapore allows for 100% company ownership by foreign shareholders (individuals or legal entities).
- A shareholder must at least own shares of the company first.
- Considering that the company is a separate legal entity, the shareholder does not hold any assets of the company nor are they liable for the debts of the company.
As owners of the company, shareholders are granted certain rights and these rights bring various responsibilities. These are the most important rights that a person obtains once they become a shareholder:
- First, let’s start with voting rights. The usual ordinary share gives a shareholder one vote. Shareholders exercise their voting rights when an ordinary resolution is required.
- The second most important right is the right to attend and call meetings. Shareholders have the right to attend Annual General Meetings (AGMs).
- Shareholders also have the right to speak directly to other shareholders and the board of directors. In certain cases, minority shareholders can call meetings between AGMs.
- According to the Singapore company law, two or more shareholders who own at least 10% of the share capital of the company can call an Extraordinary General Meeting (EGM).
It is also worth mentioning a few rights that are not so well known:
- Right to be treated fairly. According to a section of the Companies Act, a shareholder can seek remedy from the government if certain rights breaches happen.
- Rights to dividends. The company directors have the right to recommend the payment of a dividend of a fixed amount. But to officially distribute a dividend, the company has to pass an ordinary resolution through a shareholder vote.
- Right to wind up the company. In various scenarios, shareholders can seek to wind up a company.
- Right to assets when winding up. Shareholders have the rights to company assets if the company winds up.
- Shareholders hold the power to adopt or change the company’s Articles of Association. They also enjoy veto power when there is an issue regarding the capital reduction.
- Also, in public companies in Singapore, shareholders have the power to remove directors and approve auditors.
Clearly, there are numerous rights and powers that belong to the shareholders of Singapore companies. Some rights are as important as a right to vote on the winding-up while some only deal with the rights to remaining assets (office material and equipment).
If you are a shareholder or you are about to become one, it is recommended to carefully go through the most important shareholders’ rights to really know your power in the company.
It is worth stressing again that we recommend shareholders for businesses to be at least 18 years.
Companies can issue new shares at any time by passing an ordinary resolution of the shareholders and filing a return of allotment with ACRA within 14 days of issuing new shares.
Shareholders enjoy various rights such as voting rights, rights to dividends, the right to attend general meetings and vote on company issues. They also have various responsibilities such as the one to pay the full amount for their shares or the one dealing with expressing their opinion and interests to the company secretary between general meetings.
If you have any further queries, feel free to reach out to us here.