Share capital reduction can be performed through share cancellation and share buyback. Companies reduce share capital for a variety of reasons, including increasing shareholder value and creating a more efficient structure of capital.
After share capital reduction, the number of shares in the company decline by the amount involved in reduction. The company’s market capital remains the same but the number of shares outstanding and allowed to be traded will be reduced.
Some of the reasons for share capital reduction include:
- Returning to surplus capital which the company holds to its shareholders
- To compensate not having enough profits to pay dividends to the company’s shareholders
- To reduce the number of shares to make sustainable dividends payments
- The company not requiring any more capital for current or future operations
- To reorganize the company’s capital structure for better financing option.
Methods of Share Capital Reduction in Singapore
There are two methods of reducing a company’s share capital in Singapore: the court-approval method and the non-court-approval method.
The Court-Approval Method
Here are some benefits of an offshore entity:
- The company must pass a special resolution through a general meeting and file the special resolution with ACRA
- The company must make sure that all the creditors agree to the reduction in share capital and that none of the creditors are adversely affected by the reduction
- The company can then apply to court for the approval of the resolution and the capital reduction
- After the approval, the company must file a copy of the court order and a notice containing the capital reduction with ACRA within 90 days of approval
- The company can then modify its shareholding according to the approved capital reduction
The Non-Court-Approval Method
- The company is required to pass a special resolution through a general meeting and file the special resolution with ACRA
- The board of directors will be required to make a solvency statement stating that the company can repay its debts in the next 12 months
- The special resolution and solvency statement must be made publicly available for inspection
- Once the lodgment of capital reduction is approved, the lodged information will be publicly available for up to 1 month after reduction
- Satisfy the public requirements
How Bluebox Can Help?
Bluebox can help companies to navigate the complex process of Share Capital Reductions and advise if such a move is beneficial for you. Speak with one of our experts to discuss.
Incorporation
Whether you’re a foreigner or local who wishes to set up a company in Singapore, we have a friendly and knowledgeable team of Singapore Company Incorporation specialists who are able to advise you on how your business can benefit.
Registration of branch
A foreign parent business incorporated outside of Singapore has a branch office in Singapore. The goal of a Branch Office is to make it easier for the foreign parent firm to operate and generate money in Singapore.
Nominee Director
All Companies in Singapore are required to have at least 1 locally resident director. We can assist you in meeting this obligation by appointing one of our team members to function as your company’s nominee resident director on a temporary or annual basis.