The launch of a business is an exciting start. As the owner of your business, you pumped some capital into your company when it was incorporated.
As business expands, your company may have developed great products and services that are well received by your customers. Now to bring your business to the next level, more capital is needed. What can you do at this juncture?
At this point, businesses may choose to bring in new investors who have the cash and resources to inject into the business. In return for their financial contribution, investors would often be issued shares of the company.
Issuance and allotment of new shares
There are several steps involved in the issuance and allotment of new shares.
Before the company can issue shares, shareholders must first give authority to the directors to do so through resolution.
Thereafter, directors will be authorised to issue and allot shares to the new shareholders. The shares allotted should adhere to any additional terms governing the company's capital structure (e.g. the shareholders' agreement as mentioned below).
You will need to provide your company secretary with details of the share allotment including the new shareholders' particulars, name, address and number of shares allotted for lodgement with ACRA.
When lodgement is completed, the company secretary will update the company's registers and arrange to issue share certificates to the new shareholders. The share certificates must be duly signed by the company officers. The certificates may also be affixed with the company's common seal.
Following through with the above is important so as to ensure statutory compliance. Apart from this, proper documentation is also essential to ensure that the share issuance is recognised legally. For these reasons, companies often acquire the services of a company secretarial provider to assist with this process.
Companies bringing in external investors sometimes enter into shareholders’ agreement. This is an agreement among the company's shareholders which describes how the company should be managed/operated and the shareholders' rights and obligations. This is a private agreement and serves to protect the interests of the various parties. If this is of relevance to your company, it may be useful to seek legal assistance to put in place a shareholders' agreement.