What is a Shareholder Agreement?

A shareholder agreement is a document that creates the foundations of how a company is to be managed. Shareholder agreements typically cover several important issues, such as, the companies’ business plans, dividend policies, capital structure and board composition. A shareholder agreement also establishes the rights, powers, and responsibilities of groups such as shareholders, company directors, and investors. An example of a shareholder agreement in action would be where the shareholders are given the power to appoint the Board of Directors. Once appointed, those directors may be granted control over certain management decisions by the shareholder agreement. Shareholder agreements are not legally required in Singapore, but our experts always recommend creating one to protect the interests of shareholders.

What are the advantages of a shareholder agreement?

A shareholder agreement can provide several advantages, including: Clarity of ownership: The agreement can clearly define the rights and responsibilities of each shareholder, including their ownership percentage and voting rights. Protection of minority shareholders: The agreement can include provisions to protect the rights of minority shareholders, such as the right to approve major decisions or the right to sell their shares. Transfer of shares: The agreement can include provisions for the transfer of shares, such as restrictions on who can buy shares or a right of first refusal for existing shareholders. Dispute resolution: The agreement can include a mechanism for resolving shareholder disputes, such as mediation or arbitration. Continuity of management: The agreement can provide for the company’s management in the event of the death or disability of a shareholder. Flexibility: Shareholder agreements can be tailored to suit the specific needs of the shareholders and the company and can be amended as the needs of the company change. In Singapore, a shareholder agreement is not open for public viewership, unlike the company constitution. A shareholder agreement can clarify and establish rules to govern matters not covered by the company constitution. A shareholder agreement can be used to protect the company’s IP, or to specify confidentiality and non-competitive obligations

Why do you need a shareholder agreement?

A shareholder agreement can be used alongside the company constitution to cover areas that may not have been clarified or previously mentioned. Shareholder agreements are beneficial when: The company uses the Model Constitution template provided by the Accounting and Corporate Regulatory Authority (ACRA); or The shareholders would like to include additional or specific clauses in their agreement. The Model Constitution provided by ACRA only sets out broad provisions relating to a company’s governance. In contrast, a shareholder agreement has more detailed and relevant provisions that address the specific business requirements of the company as well as the concerns of the shareholders. Shareholder agreements also provide an extra level of protection for a minority shareholder. This is because a shareholder agreement can only be altered with the consent of all parties to the contract. At the same time, the company constitution can be changed through a majority vote.

What are the limitations of a shareholder agreement in Singapore?

Like any legal document, a shareholder agreement in Singapore has certain limitations that should be considered. These include: Limited enforceability: A shareholder agreement is a contract between the shareholders and the company, and as such, it is only enforceable between the parties to the agreement. It cannot be enforced against third parties, such as creditors or potential investors. Public policy: Certain shareholder agreement provisions may be unenforceable if they are against public policy, such as provisions that restrict competition or prohibit the exercise of statutory rights. Governing law: The shareholder agreement should be governed by Singapore law, but it may need to be recognized or enforceable in other countries. Changes in law: A shareholder agreement may become obsolete or unenforceable if the laws and regulations change, so it’s essential to review the agreement regularly to ensure that it is still accurate and relevant. Dispute resolution: Disputes between shareholders may still arise despite a shareholder agreement, so it’s crucial to include dispute resolution mechanisms in the agreement, such as mediation or arbitration. Conflicting agreements: There may be other agreements, like the company’s constitution, which could conflict with the shareholder agreement. It’s important to review all agreements and reconcile any inconsistencies. Identify the amount of assets under the funds management. Establish the number of Directors and their experience Identify the minimum base capital requirements - Venture Capital Fund Management Company does not have exact minimum base capital criteria. Identfy the investor type

How should the Shareholder Agreement be executed in Singapore?

In Singapore, a shareholder agreement is typically executed by having all parties sign a physical or electronic copy of the agreement. The signature of all shareholders should be affixed to the agreement to make it legally binding. As a shareholder agreement is a private contract, it does not need to be registered with ACRA. However, certain clauses that may be contained within a shareholder agreement will need to be registered with ACRA. Examples include: Rights and restrictions of shares The transfer of shares Any buy/sell provisions

When is the Best Time to Draft a Shareholder Agreement?

The best time to draft a shareholder agreement is when the company is first formed, before shares have been issued or significant business decisions have been made. This allows all shareholders to have input on the terms of the agreement and ensures that everyone is on the same page from the beginning. Having a shareholder agreement in place early on can help to prevent disputes and misunderstandings down the road. It can also provide a clear roadmap for how the company will be managed and financed, which can be especially important for new companies. However, it’s important to note that a shareholder agreement can also be established at any time after the company’s formation as long as all shareholders agree to the terms of the agreement. Even though it’s best to have it in place when the company is starting, it’s better to have one later than never.

What Terms Should a Shareholder Agreement Contain?

A shareholder agreement should contain various terms that outline the rights and responsibilities of the shareholders, as well as how the company will be managed and financed. Some key terms that a shareholder agreement should include are: Voting rights: outlining how shareholders can vote on important matters, such as the appointment of directors or major business decisions. Share transfer restrictions: outlining any restrictions on the transfer of shares, such as pre-emptive rights or rights of first refusal. Management and decision-making: outlining how the company will be managed, including the role and responsibilities of the board of directors and any other management positions. Financing: outlining how the company will be financed, including any restrictions on issuing new shares or borrowing money. Deadlock resolution: outlining how disputes between shareholders will be resolved, such as through mediation or arbitration. Buy-sell provisions: outlining the terms and conditions for buying and selling shares, including any restrictions on the transfer of shares and any rights of first refusal. Share Option Plan (also called ESOP): outlining the plan’s terms, including the process for granting options, the vesting schedule, and the exercise price. ESOP rights are also often clearly specified in an ESOP letter. This letter will be sent to all employees who are eligible for the scheme. (see our article on ESOP here) Dissolution: outlining the process for dissolving the company, including the buyout price for shares and the distribution of assets. Governing law and jurisdiction: outlining the governing law and jurisdiction governing the agreement. Arbitration / Mediation Clause: Such clauses will be used to solve disputes between the shareholders if and when they arise. The specific terms will depend on the type of company, jurisdiction, and the particular needs of the shareholders. Our experts are available to help ensure your shareholder agreement is tailored to your situation.

Understanding Corporate Compliance in Singapore: A Guide for Businesses to Meet Standards and Avoid Mistakes

23/01/2023

Companies incorporated in Singapore are subject to many corporate compliance requirements and deadlines; failure to meet these deadlines could result in penalties and surcharges being imposed on the company.

In this article, we will explore some of the statutory and corporate compliance requirements for companies in Singapore.

Companies Act requirements

Singapore’s Companies Act infers the following compliance requirements for Singapore companies.

Registered office

A Singapore company must have a registered office address to which all communications and notices may be directed. This must be a physical location within Singapore and shall be open and accessible to the public for not less than three hours during ordinary business hours on each business day.

Company Secretary

A company in Singapore must have at least one company secretary, who must be a resident of Singapore.

The role of the company secretary is to ensure that the company complies with reporting and regulatory requirements in Singapore. The company secretary role can be occupied for up to six months at any given time.

A director can also serve as the company secretary if they are not the company’s sole director.

Resident director

A Singapore-based company must appoint at least one director who is a citizen or permanent resident of Singapore.

In some instances, a foreign individual holding a valid Employment Pass for employment with the company may serve as a resident director.

Additionally, the director must be:

at least 18 years old,
not currently bankrupt, and
not barred from acting as a director by Singapore’s authorities.

Data protection and data protection officer

According to the Singapore Personal Data Protection Act (PDPA), organizations must have a data protection policy and appoint a data protection officer (DPO). The DPO does not have to reside in Singapore, and the role can be outsourced to a third party.

Additionally, organizations must make the DPO’s business contact information (such as phone number or email) publicly available and ensure the DPO is reachable when contacted by individuals in Singapore to meet PDPA requirements.

Displaying the company name and unique entity number (UEN)

Upon incorporation, the Accounting and Corporate Regulatory Authority (ACRA) issues a Unique Entity Number (UEN) to a company for identification and government transactions such as tax filing.

Singapore companies must display their name and UEN on all company documents, including letters, invoices, statements of account, official notices, and publications.

A company seal is optional, but if a company chooses to have one, it must display its name.

Upkeep of company registers and records

A Singapore company is obligated to maintain specific company registers, some of which are to be kept with the Accounting and Corporate Regulatory Authority (ACRA) and others at the company’s registered office.

The company must register and regularly update details of its directors, CEOs, secretaries, and auditors with ACRA, as well as any resolutions binding a class of shareholders and charges on the company’s assets.

Additionally, the company must keep the following registers at its registered office:

Register of substantial shareholders,
Register of registrable controllers (any person or entity that controls 25% or more of the company),
Register of Nominee Directors (a director who is expected or obligated to act per the directions or wishes of another person).

Private companies (those with no more than 50 members) must keep an up-to-date register of members (shareholders) with ACRA, created at the time of incorporation. In contrast, public companies must maintain their register of members either at their registered office or another office as long as ACRA is notified of its location.

Annual general meeting (AGM)

A private company is obligated to conduct its annual general meeting (AGM) within six months after the end of its financial year, while a publicly listed company must hold its AGM within four months after the close of its fiscal year.

Some private companies may be exempt from holding an AGM, such as when the company is inactive, or the members vote to waive the requirement.

However, most companies are required to hold an AGM.

Filing annual returns with ACRA

For private companies, the annual return must be filed within seven months of the end of the company’s financial year and within five months for public companies.

Exempt private companies (EPCs) that do not have their annual financial statements audited can file a simplified annual return without submitting financial statements, as long as the company has at most 20 shareholders and none of them are corporations.

For all other companies, the annual return must include the company’s financial statements, which must be submitted in eXtensible Business Reporting Language (XBRL) format. This is usually done by the company’s financial accountants or auditors.

Accounting requirements

Date of financial year-end

When applying for incorporation with the ACRA, a company must select a date for its financial year-end. The standard year-end in Singapore is December 31st, so many companies choose that date. However, a company can also select a date to align with the parent company’s balance date.

Companies can opt for their first financial year to be greater than 12 months, up to 18 months. For example, a company incorporated in October could choose to have its first financial year-end on December 31st of the following year, making the first accounting period 15 months. This can save time and money by avoiding the need to prepare financial statements for a short period of only three months (if the first-period end was December 31st in the year of incorporation).

Safekeeping of accounts and records

All companies are mandated to maintain accounting and other records that clearly explain the transactions and financial position of the company and allow for the preparation of accurate and fair financial statements. These records must be kept for five years after the end of the fiscal year to which they pertain.

Company directors must present the financial statements for the previous financial year at the annual general meeting. These accounts must conform to accounting standards and provide an accurate and fair representation of the company’s financial position and performance for the year.

Appointment of auditor

Within three months of incorporation, the directors of a company must appoint an auditor unless the company qualifies as a small company and is exempt. The auditor is reappointed at every annual general meeting of the company.

A small company is a private company that meets two out of three criteria in the two preceding financial years:

the company’s revenue does not exceed S$10 million per fiscal year,
the company’s total assets do not exceed S$10 million at the end of each financial year, and
the company does not have more than 50 employees at the end of each fiscal year.

If a Singapore company is part of a larger corporate group, the tests above are applied to the group as a whole instead of just the Singapore company. This means that even if a company has limited operations in Singapore, it may still be required to have an audit due to the functions of the rest of the group.

Tax requirements

Corporate income tax return

All foreign companies and branches must submit an annual income tax return.

The deadlines for filing are:

Eleven months after the end of the company’s financial year (for paper returns)
The 15th day of the 12th month after the end of the company’s financial year (for online filing)

GST registration and quarterly returns

The Goods and Services Tax (GST) is a consumption tax applied to most goods and services sold in Singapore.

A company must register for GST with the Inland Revenue Authority of Singapore (IRAS) if its annual taxable turnover exceeds SGD one million. However, under certain conditions, companies with lower turnover may still register.

After registration, the company must charge GST to its customers and file a quarterly GST return to the government, accounting for the GST collected from customers minus GST paid on inputs.

Employment law requirements

The Employment Act in Singapore outlines the rights and responsibilities of employers and employees and must be adhered to in all matters about the company’s employees.

Regarding tax, the company is not required to make any income tax deductions from employee salaries. Still, each is required to submit a statement of earnings to the Inland Revenue Authority of Singapore (IRAS) for each employee at the end of the calendar year.

Additionally, if the company employs Singapore citizens or permanent residents, the employer must contribute to the Central Provident Fund at the designated contribution rate for those employees.

How can Belaws help?

If you have a question about company compliance requirements for companies in Singapore, speak to one of our experts directly.

Talk to an expert

You can also view our Singapore incorporation services here.

Please note that this article is for information purposes only and does not constitute legal advice.

Our consultations last for a period of 1 hour and are conducted by our expert lawyers who are fluent in English, French and Thai.

Consultations can be hosted via WhatsApp or Video Conferencing software for your convenience. A consultation with one of our Blockchain experts is undoubtedly the best way to get all the information you need and answer any questions you may have about your new business or project.

Up to 1 hour

Web conferencing details provided upon confirmation

$150 USD

Book now

Get Your Guide to Applying for an Employment Pass (EP) in Singapore

By jonathan / February 28, 2023

28/02/2023 Learn how to apply for an Employment Pass (EP) in Singapore with this comprehensive guide. Get step-by-step instructions and...

The Company Registration Process in Singapore Explained

By jonathan / February 27, 2023

27/02/2023 Learn about the company registration process in Singapore with this comprehensive guide. Get a step-by-step explanation and start your...

Register of nominee shareholders in Singapore

By jonathan / January 27, 2023

27/01/2023 The register of nominee shareholders is a register relating to nominee shareholders that companies are required to maintain.

Winding up a company in Singapore

By jonathan / January 25, 2023

25/01/2023 Winding up a company can be complex and stressful, and it is important to understand the legal requirements and...

Understanding Corporate Compliance in Singapore: A Guide for Businesses to Meet Standards and Avoid Mistakes

By jonathan / January 24, 2023

23/01/2023 Companies incorporated and registered branches are subject to many corporate compliance requirements and deadlines.

Shareholder agreements in Singapore

By jonathan / January 20, 2023

20/01/2023 Shareholder agreements in Singapore are legal agreements between a company's shareholders that outline each shareholder's rights, responsibilities, and obligations.

Employee Stock Option Plans (ESOP) in Singapore

By jonathan / January 19, 2023

19/01/2023 ESOPs (Employee Stock Option Plans) are a tool that grants the employees of a company the right to purchase...

Holding companies in Singapore

By jonathan / January 11, 2023

11/01/2023 Holding companies in Sinagpore are business entities that own a controlling interest in other companies.

Starting a company in singapore

By bertrand_admin_belaws / January 2, 2023

01/01/2023 Follow the steps outlined in this guide to start your company in Singapore and leverage its numerous benefits.

New corporate disclosure requirements for Singapore entities

By jonathan / November 11, 2022

11/11/2022 This article explores the new corporate disclosure requirements for Singapore entities

+66 (0) 92 990 1046

We are open: Monday – Friday
9 am – 6 pm (UTC+7)

SERVICES

Legal

Incorporation

Accounting & Secretary

Visas

Immediate ConsultationNew

COMPANY

About

Careers

Press & Media

Terms of Services

Resources

Belaws Singapore Blog

Belaws 2017 - 2023 | Belaws provides information and software only. Belaws is not a "lawyer referral service" and does not provide legal service or participate in any legal representation. Belaws is not a law firm or a substitute for an attorney or a law firm. The use of Belaws is subject to our Terms of Use.

Understanding Corporate Compliance in Singapore: A Guide for Businesses to Meet Standards and Avoid Mistakes

Companies Act requirements

Registered office

Company Secretary

Resident director

Data protection and data protection officer

Displaying the company name and unique entity number (UEN)

Upkeep of company registers and records

Annual general meeting (AGM)

Filing annual returns with ACRA

Accounting requirements

Date of financial year-end

Safekeeping of accounts and records

Appointment of auditor

Tax requirements

Corporate income tax return

GST registration and quarterly returns

Employment law requirements

How can Belaws help?

Related Articles

Get Your Guide to Applying for an Employment Pass (EP) in Singapore

The Company Registration Process in Singapore Explained

Register of nominee shareholders in Singapore