In this article, we will be discussing what will happen to a Singapore company shareholder’s shares when he dies. First, we must be familiar with the difference between a share transfer and a share transmission.
A share transfer occurs when one shareholder chooses to transfer his shares to another individual. This act is his choice and there will be an instrument of transfer, most likely a share transfer agreement between transferee and transferor. Stamp duties need to be paid for such a transaction.
A share transmission occurs when one shareholder passes on. In such an instance, the shares will be passed on to another individual without the need for an instrument of transfer. Stamp duties do not need to be paid for such a transaction. This is the same for both private and public companies.
To whom shares are transmitted to are spelt out in the company’s constitution.
If a company is using the model constitution and there are other shareholders other than the deceased, the company will recognise the remaining shareholders as recipients of the shares.
If the deceased is the sole shareholder then the shares of the company will be transmitted to his or her beneficiaries in accordance with his or her will. In this case, the executor will apply to the court to obtain a Grant of Probate before proceeding with the share transmission. In the absence of a will, the transmission of shares will be administered in accordance with the intestate succession act. In this case, the administrator will apply to the court to obtain the Letters of Administration before proceeding with the share transmission.
The model constitution also allows the directors to reject an incoming shareholder and refuse to register him or her as the holder of the company shares. There may be reasons for the rejection, most commonly is that the directors may have a perception that having that individual as a shareholder is not in the best interest of the company.
It would be wise for company shareholders to draft an agreement as to how shares should be transmitted in the event of the death of a shareholder. This should be spelt out clearly in the company’s constitution. Some may include such arrangements in a separate shareholders’ agreement but then the shareholders’ agreement only binds those who signed the agreement whereas the constitution binds all shareholders.
When in doubt, seek legal advice or consult an experienced ACRA Filing Agent.
The editorial team at Singapore Secretary Services
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