joel3000 wrote: ↑Wed, 13 Dec 2023 10:26 pm
Hello everyone! I am in a sticky situation and I would appreciate any help!
I am a shareholder in a pte ltd company, with 40% of shares. There are 3 other shareholders, and one of them is the director. Following several disputes due to untransparent activity, the shareholders and I do not communicate any longer and they have excluded me from management as well as denied me access to company accounts. Given this, as well as the fact that the company is neither profitable nor worth much, I would like to exit the company for good. I do not want any compensation for my shares.
However, I have been told by our corporate secretary that the only way for me to exit the company is share transfer or share buyback, and that both require agreement of the shareholders and director. I have made an attempt and offered my shares to the other shareholders via the standard share transfer procedure, for 1SGD, but they have ignored it.
I don't know why they are doing this, but what I do know is that I don't want to be associated with these people or the company any longer.
Does anyone here know if there is any legal mechanism, circumstance and/or workaround for me to exit the company? Or does the law in Singapore mandate that they can keep me formally tied (on paper only) to the company forever, against my will? I would like to also add that there are no outstanding debts or legal/financial obligations preventing my exit. In addition, we do not have a shareholder agreement, only the standard company constitution act.
I would also like to highlight that I would rather not enter into litigation.
Thanks, and I appreciate any input!
It has been a very long time since I've had my own Singapore Pte Ltd, and, my reading of the applicable parts of the Singapore Companies Act suggests that they cannot stop you from transferring your shares to another shareholder in the company, assuming that you are otherwise in compliance with the shareholder agreement.
First, write a formal letter, offering your stock, in proportion to current holdings, to the other 3 shareholders. Include the necessary instrument of transfer so that the company has the correct legal documents. See the following Section 126 of the Singapore Companies Act for details (see also 127 and 128 for the mechanics). Company directors normally do not have the right to refuse the transfer of shares from one shareholder to another.
https://sso.agc.gov.sg/Act/CoA1967?ProvIds=P14-#pr126-
Now, according to Section 129, the company has the right to refuse the transfer of shares if it would violate the terms of the shareholder agreement, for example, not giving shareholders the right of first refusal. But, they must give you the justifications for refusal in writing, and failure to do so can result in a penalty to the company. They must do this within 30 days.
https://sso.agc.gov.sg/Act/CoA1967?ProvIds=P14-#pr129-
Now, they are going to be hard pressed to refuse your shares turned back over to existing shareholders but if they do, your next step is to file a letter of warning with them that you will file a notice of oppression with the courts under Section 216 of the Companies Act. This section is designed to protect minority shareholders from abuses from the majority, something they are clearly doing with you right now. One would hope that a threat of a court filing, especially if they are in the wrong, would be enough to get them to cave.
https://sso.agc.gov.sg/Act/CoA1967?ProvIds=P17-#pr216-
A couple of observations. You own 40% of the stock. That means the other 3 own 60%, and you only need one shareholder (and 11%) to vote with you at an EGM to have your share transfer approved by a majority of the shareholders. See if you can stir the pot by making individual offers to each shareholder. The person who says yes will then have an absolute majority interest in the company.
Second, I appreciate that you don't want to litigate but you do need to take the steps to threaten to get them to see things your way. Get hold of a CPA well-versed in the Companies Act. I'd recommend by old CPA, Tan Saw Bin (
https://sbtan.com/). She will be able to create the exact legal documents required to effect the transfer. I can't recommend a lawyer to write your demand letters for you but perhaps Saw Bin can. And, don't be afraid to file a lawsuit with the court. That is simple and pretty cheap, and it's usually a strong incentive for folks to see things your way.
