Question 1

How do I transfer my shares?

Accepted Answer

You must prepare the following required documents before proceeding with a share transfer application;
Instrument of transfer
Notification of transfer
Board resolutions
Certificate of shares (document evidencing ownership of shares)
Form of transfer of shares
Inland Revenue Authority of Singapore (IRAS) Stamp Duty Confirmation Letter
Depending on the situation, other documents may be required, such as a pre-waiver of use consent form.

Question 2

Crucial Information on transfer shares 1

Accepted Answer

A typical equity transfer occurs when:
A shareholder owns a minority stake in the business and wishes to achieve a return on their investment through a share transfer.
Companies use employee share ownership schemes where employees change jobs after having already acquired shares and need to sell their shares through a share transfer.
Founders of a company sell their shares through a share transfer in order to raise capital or exit the company.

Question 3

Crucial information on transfer shares 2

Accepted Answer

It is essential to ensure that shareholders follow the correct procedures and pay the appropriate stamp duty when selling their shares.

In this way, no objection can be made on the grounds that the transfer is invalid and no allegation can be made that the director’s duties have not been discharged.

Question 4

Provide basis for transfer

Accepted Answer

The assignor are advised to have the lawyer prepare a contract for the sale of the stock, for example: if they are selling 100% of the shares of a private company, they must have an appropriate stock purchase agreement.

Most importantly, the sale price should be clearly indicated in the contract. For example, the sale price may not be easy to calculate if the amount payable is to be adjusted based on the company’s future profits. However, the price may be predetermined sometimes.

​This is common in the case of shareholders’ agreements with “drag-along” drag clauses or “tag-along” tag clauses.

Question 5

What is a "Tag Clause" 1

Accepted Answer

The tag clause gives minority shareholders the right to purchase shares on the same terms (including price) as majority shareholders. This is done by imposing a restriction on the majority shareholder, that they may not first cause an outsider to offer to purchase the minority shareholder’s shares on the same terms before selling his shares to an outsider.

This  allows minority shareholders to carry the burden of the majority shareholder’s ability to find a buyer at an attractive price. Minority shareholders, especially if they are involved in running the business, often lack the resources to find such buyers. This also benefits the majority shareholders, as it gives them a sense of fairness in the transaction, which makes them less resistant to the possibility of an outright sale.​

Question 6

What is a "Tag Clause" 2

Accepted Answer

It is provided that if the majority shareholder wishes to sell their shares, they must first sell them to the minority shareholder. If the minority shareholder refuses to purchase these shares, he or she may decide to “list” with the selling shareholder and then sell his or her shares together to a third party. The following safeguards can be implemented:

Establishing a minimum price for the shares so that majority shareholders cannot be forced to sell shares at a less than fair price.
Provisions limiting the time at which major shareholders may use “tagging clauses”, such as an expiration date, or securing a minimum share price only after the company has reached a certain level of profitability.
Allow the minority shareholder to find alternative purchasers for all higher-value shares for a certain period of time before he decides whether to exercise his “follow-on” option. If this clause is included in the shareholders’ agreement, it must also allow the minority shareholder to request that he is given the right to decide to “follow through” on the sale of shares to the highest bidder.
Provides that in the event of a sale, only the majority shareholder can make and be responsible for corporate representations and warranties to the buyer, as the majority shareholder controls the management and operations of the company.

Question 7

What is "Towering Clause" 1

Accepted Answer

Towering clause gives the selling shareholder the right to compel all other shareholders to sell their stock to a third-party purchaser on the same terms as the shareholder who approved the sale. It prevents a minority shareholder from refusing to sell his or her stock if the majority shareholder wishes to sell to a third-party purchaser interested in acquiring the company.

Question 8

What is "Towering Clause" 2

Accepted Answer

If the shareholder agreement contains a drag-and-drop clause, and if the majority shareholder sells its shares to a third party, the minority shareholder must also be forced to sell his shares at the same price.

Alternatively, if the shareholder agreement contains a tagging clause, the minority shareholder can force the majority shareholder to demand that the buyer also purchase his shares at the same price.

Knowing the basis of the transfer helps prevent fraudulent transfers.

Share Transfer

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