What is an Authorized Capital

Staff Writer

January 24, 2022

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An authorized share capital is the maximum amount of capital that a company can achieve through the issues of shares to the shareholders. This is a capital amount with which a company is registered with the registrar of the company. The authorized capital is the limit. The company has to raise their shares up to that limit, and not beyond that. The company cannot issue share beyond their maximum capital allotted to the shareholders.

Key Facts About Share Capital in Singapore

In Singapore, there are some specific key facts about share capital one needs to know. These include:

  • The minimum capital of the share should be SGD $1.
  • The private limited companies should have between 1-50 shareholders.
  • Private limited companies in Singapore can have 100% foreign or local shareholding.
  • In any kinds of major currency, the share/s can be issued.
  • Unless the company's constitution explicitly restricts this, shares can be openly transferred between shareholders.

Requirements of Share Capital

If you want to start a new business, then the most important question will come into your mind that how much the share capital should be introduced? Actually, share capital is the money that has been invested by the shareholders in the company in exchange of shares. There is a difference between paid up capital and share capital.

Paid up share capital is the amount of money for which shares were issued to the shareholders. Paid up capital should be less than the authorized capital. It cannot be higher than the authorized share capital. Paid up capital is referred to the actual amount deposited in company’s pocket.

The Different Types of Shares

There are different kinds of shares, such as:

  1. Ordinary Share - These types of shares do not carry special rights and restrictions. Different classes of ordinary shares have different nominal values. These kinds of shares offer voting rights. One vote per share is the system.
  2. Non-Voting Ordinary Share - In the ordinary share, the voting right is restricted. If certain conditions are met, then they can vote. In the non-voting ordinary shares, there is no right for the shareholders to give their vote.
  3. Preference Shares - These kinds of shares have the right to receive a fixed amount of dividends every year. The company can choose to issue dividends to the preferred shareholders. These kinds of shares are mainly non-voting.
  4. Alphabet Share - The company can easily choose to make different classes of shares such as Class A and Class B, and with this they can also offer different privileges to the shareholders.
  5. Management Share - Shareholders with this type of share are actually offered extra voting rights in the company.
  6. Redeemable Preference Share - These kinds of shares are a combination of preference shares and redeemable shares, hence the name.
  7. Deferred Share - A company can issue shares that will not pay dividends until all the classes of shares received a minimum amount of dividend.

Requirements for Being a Shareholder

There are some specific laws in Singapore that relate to being a shareholder. According to one law in particular, the private limited company must have limited their shareholders in between 1 to 50. They cannot exceed past 50 shareholders. An individual should purchase company shares in order to become a shareholder. Eventually, they will be the owner of the company after buying the share of the company. Shareholders have also some responsibilities, discussed below.

Rights of a Shareholder

There are various rights that shareholders are entitled to have. These are:

  1. Right to share profitability - The common shareholders have the right to participate in the company’s profitability. In terms of profit generated by the company, shareholders also have the right to income distribution through the dividend payments.
  2. Right to buy new shares - If the company issues new shares in public, then the current shareholder has the right to buy from this.
  3. Right to vote - The shareholders can give their vote in the company’s general meetings. It is the biggest right that they have. According to regulation, one shareholder can cast one vote.
  4. Rights to dividends - They also have the right to receive dividend payments.

Responsibilities of a Shareholder

Apart from these rights, there are also responsibilities that a shareholder has. These are:

  1. They have the responsibility to pay the full amount of shares.
  2. They can present their voice and decisions in the general meetings of the company.
  3. They can easily transfer their shares according to the company’s rules and regulations.
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