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Surrender shares to exit company

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dela2927
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Surrender shares to exit company

Post by dela2927 » Thu, 21 Mar 2024 4:28 pm

Hello all, hope someone can help with this. I am a minority shareholder in a pte ltd company together with 1 other partner who is majority shareholder and director. I want to leave the company, and I offered to transfer my shares to the other shareholder without compensation (that is, for 1$ a share) but he refused without citing reasons. I have no debts, my share has been paid in full, and I have not participated in any operation for a while. The other shareholder and I barely contact because of a previous dispute, he wants to continue working on the company and I dont, and I am willing to cut my loses and just leave without anything.

I have heard that it may be possible to surrender my shares to the company, and that ACRA may accept that even if the other shareholder does not accept it. I would like to give it a try. Could anyone advise or has experience with this?

Thank you so much

Thank you!

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Strong Eagle
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Re: Surrender shares to exit company

Post by Strong Eagle » Wed, 27 Mar 2024 12:25 pm

dela2927 wrote:
Thu, 21 Mar 2024 4:28 pm
Hello all, hope someone can help with this. I am a minority shareholder in a pte ltd company together with 1 other partner who is majority shareholder and director. I want to leave the company, and I offered to transfer my shares to the other shareholder without compensation (that is, for 1$ a share) but he refused without citing reasons. I have no debts, my share has been paid in full, and I have not participated in any operation for a while. The other shareholder and I barely contact because of a previous dispute, he wants to continue working on the company and I dont, and I am willing to cut my loses and just leave without anything.

I have heard that it may be possible to surrender my shares to the company, and that ACRA may accept that even if the other shareholder does not accept it. I would like to give it a try. Could anyone advise or has experience with this?

Thank you so much

Thank you!
Surprisingly, there is not much in the Companies Act regarding giving back shares when no one wants to take them.

Your simple solution would be to forget about the whole thing... put the shares in the drawer and it were... and move on. It's the other guy that has the problems. If the company is wound up with assets, they have to be distributed in proportion to the stock holdings. Same thing if dividends are ever declared. You retain your shareholder rights.

On the other hand, you're not particularly liable for anything. You're a minority shareholder and can't make any decisions. You also can't lose more than your share value, which is zero, so nothing to lose.

You might be able to force the issue and give yourself some additional protection, should issues ever arise. You should take a look at Section 128 of the Companies Act

https://sso.agc.gov.sg/Act/CoA1967?ProvIds=P14-#pr128-

Essentially, it says that if you request a transfer of shares, the company must act upon that transfer or give you a valid, legal reason why the company will not allow the transfer. If the company refuses to do this, then they can be held liable.

So, check your Articles of Incorporation to see what they say regarding notice of intent to transfer shares. One way or the other, write up a Memorandum of Intent to Transfer Shares. State the number of shares to be transferred, to whom they are being transferred, the date of transfer, and the amount of money changing hands. Request that the director inform the Registrar (that's the ACRA Bizfile) within 30 days. Send this letter by registered mail, signature required.

If this does not work, send another letter by registered mail, with notice of intent to appear before the Court to enforce the transfer. At the same time, contact ACRA with your issue.

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PNGMK
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Re: Surrender shares to exit company

Post by PNGMK » Sun, 31 Mar 2024 8:39 am

OP - who is the company secretary? Normally that is a third party. Speak to them about this.
I not lawyer/teacher/CPA.
You've been arrested? Law Society of Singapore can provide referrals.
You want an International School job? School website or http://www.ISS.edu
Your rugrat needs a School? Avoid for profit schools
You need Tax advice? Ask a CPA
You ran away without doing NS? Shame on you!

dela2927
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Re: Surrender shares to exit company

Post by dela2927 » Tue, 02 Apr 2024 4:04 pm

Hello! Thank you for your answers and help. I have a couple of additional questions:

>>>Essentially, it says that if you request a transfer of shares, the company must act upon that transfer or give you a valid, legal reason why the company will not allow the transfer. If the company refuses to do this, then they can be held liable.

@Strong Eagle Given the situation in the company, it would be next to impossible to find a new person to transfer my shares to, no one would have an interest in entering/buying into such a company. That means the only person I could transfer my shares to is the existing shareholder. Does what you said apply also if I want to transfer my shares to the other shareholder, but he does not want to accept them?

>>OP - who is the company secretary? Normally that is a third party. Speak to them about this.
@PNGMK Our company secretary has indicated that they cannot get involved in what they consider to be an internal dispute. They have listed the legal options available (transfer of shares, share buy back, share reduction) which is what one can also read on ACRA, but have not indicated what steps to take or what can be done if the other shareholder does not agree.

Thank you all and kind regards

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Re: Surrender shares to exit company

Post by PNGMK » Tue, 02 Apr 2024 6:10 pm

I'll buy them off you for $2. I'm serious. I've done this before. I do need to see some basic co docs to understand if there are liabilities.
I not lawyer/teacher/CPA.
You've been arrested? Law Society of Singapore can provide referrals.
You want an International School job? School website or http://www.ISS.edu
Your rugrat needs a School? Avoid for profit schools
You need Tax advice? Ask a CPA
You ran away without doing NS? Shame on you!

dela2927
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Re: Surrender shares to exit company

Post by dela2927 » Tue, 02 Apr 2024 9:13 pm

@PNGMK please send me a PM, I do not have that option enabled since I am a new user.

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Strong Eagle
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Re: Surrender shares to exit company

Post by Strong Eagle » Wed, 03 Apr 2024 3:01 am

PNGMK wrote:
Tue, 02 Apr 2024 6:10 pm
I'll buy them off you for $2. I'm serious. I've done this before. I do need to see some basic co docs to understand if there are liabilities.
Interesting move. The MOI, since it's a pte ltd, probably contains a clause for stock sales which includes a "right of first refusal". Dropping a letter to a recalcitrant majority partner, noting intent to sell, might get some action. And who knows, PNGMK, you might be buying into the next Nvidia.

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Re: Surrender shares to exit company

Post by dela2927 » Thu, 04 Apr 2024 3:37 pm

@Strong Eagle, thanks for your response. Does your advice also apply if I want to transfer my shares to the majority shareholder, but he does not want to accept them?

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Re: Surrender shares to exit company

Post by Strong Eagle » Thu, 04 Apr 2024 10:59 pm

dela2927 wrote:
Thu, 04 Apr 2024 3:37 pm
@Strong Eagle, thanks for your response. Does your advice also apply if I want to transfer my shares to the majority shareholder, but he does not want to accept them?
I've never been in the situation of wanting to divest shares to a majority shareholder who didn't want to take them, so understand that what I am about to write is what I would do if I were hypothetically in your shoes.

Let’s get a definition out of the way for clarity: You are the TRANSFEROR of shares since you have the assets and are conveying them to someone else.

Next, you want to login to Bizfile: https://www.bizfile.gov.sg/ngbbizfilein ... epage.jspx

This is the official Registrar records for the ACRA, and when the Companies Act is referring to “lodge with the Registrar,” they are referring to making updates in Bizfile.

You want at least three things from Bizfile. First, you want to verify all shareholders of record and their holdings. You need to make sure that you actually own the shares you think you own. You also want all other owners of record, names, addresses, etc, and you want the name of the director and the registered mailing address, where you will file your intent to transfer shares. All this will be in Bizfile.

Next, you want to download the Memorandum of Incorporation (or maybe constitution or articles or maybe certificate of formation)… the name has changed over the years… the governing document for your company. If the MOI is basically the boilerplate recommended by the ACRA (and most small pte ltd’s are), then there are two things to look for. Those items are the process for transferring shares and the instrument required to initiate the transfer.

Here is the boilerplate from a sample constitution on the ACRA website.

Image

Two points to note: The request to transfer can be “in any usual or common form”. Your MOI may read the same or different but this tells you how to write to the board of directors with your intent to transfer,

Second, the directors may decline to register the transfer, one of the conditions may be, “the directors do not approve of the transferee.” This might come up as an excuse if you were to sell your shares to PNGMK but if you are transferring to an existing shareholder, this is not a valid reason, and neither are the other reasons, so you have an absolute right to transfer the shares, I would make this point in your letter to request transfer.

So, send your letter requesting transfer of shares to the managing or only director at the registered address. If your request is refused or nothing is done, you send a second letter threatening action because the company has not reason not to comply with your request to transfer.

I refer you to Section 129 of the Companies Act. It is pretty clear that the company must, within 30 days, supply you with a valid reason for refusal to transfer, and if they do not, they are subject to financial penalties. And as you have seen from the MOI, there is no valid reason that the company can cook up.

Image

If a letter to the director quoting the applicable company law doesn’t force the stalled issue, then another letter threatening court action is in order, again delivered to the registered address. And then, do it… contact the SCT to determine the process for filing a complaint and invoking the application of fines against the director and the company.

That’s what I would do.

dela2927
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Re: Surrender shares to exit company

Post by dela2927 » Thu, 04 Apr 2024 11:05 pm

Thank you so much for your efforts and step by step answer. I will go through this in detail and try it.

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Re: Surrender shares to exit company

Post by Commoner » Wed, 17 Apr 2024 4:52 pm

dela2927 wrote:
Thu, 04 Apr 2024 11:05 pm
Thank you so much for your efforts and step by step answer. I will go through this in detail and try it.
Hello Dela,

Any update to this case, thanks.

Predicament
I used to be in a similar predicament. My ex-board doesn't approve sale of any shareholding agreement(s) regardless of private or public nature. The only way is to be deceased!

Resolution
To avoid conflict/discrepancy, I tried negotiating to conduct a buyout and not even one shareholder has the available funds to takeover.

So, what I proposed is for them to come up with a solution within a 3-month timeframe. Guess what, yes, no one responded.

The final judgment comes when I seek my competitor to do a hostile takeover via my value proposition to create an innovative product line (that exhausts my ex-company's resources), and the competitor bought over my company.

Reasoning
There's only so much we could do at the end of the day - no matter our expertise.

Thanks,
Commoner
Forum Member of Singapore Expat
Community of Business Partnership

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