A company may be formed as a Sole Proprietor, Partnership or a Limited Company. To know more about starting a business or company in Singapore, please log on to ACRA. A limited company is a company limited by liability, i.e. the shareholders’ liability are limited to the capital invested. Personal assets cannot be seized to settle the company debt obligation in time of insolvency. There are two types of limited company, a private limited company and a public company.
A private company cannot have more than 50 shareholders. When a company becomes “public”, it has the opportunity or choice to be listed on a regulated (stock) exchange. You will noticed that all listed companies do not have the abbreviation “Pte Ltd” after the company’s name. The benefits of listing a company:
- Shareholders can easily buy or sell the company’s share he or she owns.
- Enhance market’s awareness of a company and its product/services.
- Give company opportunity to raise more funds through secondary issues or other securities.
- Offers investors an opportunity to invest in the company.
There are also drawbacks of going public such as adhering to more rules and regulations set by governing bodies and potential hostile takeover.
A company is listed through a process known as an Initial Public Offering (IPO) where it offers ordinary shares (most of the times) to the general public. There are two types of shares a company can issue - ordinary shares and preference shares.
1) Ordinary Shares are the more common type of shares issued. They carry no rights to a fixed dividend but are entitled to all profits left after payment of any preference dividend. However, usually only a part of such remaining profits is distributed, the rest being kept as reserve. Ordinary shares carry voting rights and ordinary shareholders are effectively, the owners of the company.
2) Preference Shares gives the shareholders the rights to a dividend that is a fixed percentage of the shares nominal value. The preference shareholders also (as the name implies) have a priority over the ordinary shareholders when it comes to receiving dividends. A preference share may be cumulative, participative, convertible and redeemable.
- Cumulative preference share. If the company does not have distributable profit for a year, then the preference dividend for that year shall be carried forward. It will then be paid together with next year preference dividend.
- Participative preference share. A participative preference share gives a preference shareholder an opportunity to enjoy additional dividend over and above the fixed entitlement.
- Convertible preference share. A convertible preference share gives a preference shareholder the option to convert preference shares into the ordinary at a specific date and price.
- Redeemable preference share. The company issuing the preference shares has the option to redeem the shares back from the preference shareholders at a specific date and price.
A private company cannot have more than 50 shareholders. When a company becomes “public”, it has the opportunity or choice to be listed on a regulated (stock) exchange. You will noticed that all listed companies do not have the abbreviation “Pte Ltd” after the company’s name. The benefits of listing a company:
- Shareholders can easily buy or sell the company’s share he or she owns.
- Enhance market’s awareness of a company and its product/services.
- Give company opportunity to raise more funds through secondary issues or other securities.
- Offers investors an opportunity to invest in the company.
There are also drawbacks of going public such as adhering to more rules and regulations set by governing bodies and potential hostile takeover.
A company is listed through a process known as an Initial Public Offering (IPO) where it offers ordinary shares (most of the times) to the general public. There are two types of shares a company can issue - ordinary shares and preference shares.
1) Ordinary Shares are the more common type of shares issued. They carry no rights to a fixed dividend but are entitled to all profits left after payment of any preference dividend. However, usually only a part of such remaining profits is distributed, the rest being kept as reserve. Ordinary shares carry voting rights and ordinary shareholders are effectively, the owners of the company.
2) Preference Shares gives the shareholders the rights to a dividend that is a fixed percentage of the shares nominal value. The preference shareholders also (as the name implies) have a priority over the ordinary shareholders when it comes to receiving dividends. A preference share may be cumulative, participative, convertible and redeemable.
- Cumulative preference share. If the company does not have distributable profit for a year, then the preference dividend for that year shall be carried forward. It will then be paid together with next year preference dividend.
- Participative preference share. A participative preference share gives a preference shareholder an opportunity to enjoy additional dividend over and above the fixed entitlement.
- Convertible preference share. A convertible preference share gives a preference shareholder the option to convert preference shares into the ordinary at a specific date and price.
- Redeemable preference share. The company issuing the preference shares has the option to redeem the shares back from the preference shareholders at a specific date and price.
In Singapore context, a company may choose to be listed either on the SGX Mainboard or SESDAQ. Both platforms will have different listing requirements and obligations. The SESDAQ has a more lenient requirements. The IPO process starts off with a company appointing an underwriter (bank or financial institution) to do all the necessary. The underwriter will submit the application and prospectus to the SGX for review and then lodge the prospectus with the MAS. Assuming everything goes on smoothly, the company will then invite the public to subscribe for its shares.
No comments:
Post a Comment