Tranfer of Shares by cash or by gift

Transfer of Shares by way of consideration paid

The Companies Act, Cap 50 (the ‘Act’) defines a share as ‘a share in the share capital of a corporation and includes stock except where a distinction between stocks and shares is expressed or implied’. The interests of shareholders in a Company are measured by the monies and of interests entered into (for the purposes of liability and profits) by all the shareholders between themselves in accordance with the Company’s Memorandum & Article of Association. 

In a private limited Company, certain conditions are to be complied with during a share transfer:-

1.         the transfer has to be approved by the Directors of the Company; and

2.         the existing shareholder has to agree on transferring his shares 

In most cases, a share purchase/sale agreement is executed between the seller (transferee) and the buyer (transferor), as the shares are not by law offered to the public. Such agreement will be binding among the parties.  

Meanwhile, if the transfer of shares is done inSingapore, Stamp Duty is payable on the price or asset value of the shares – rated at 0.2% of the consideration or asset value, whichever is higher. The transferee is responsible for paying Stamp Duty. 

Before 31 August 2004, if the company had immovable properties in its balance sheet, the market value of the immovable property needed to be determined to arrive at the net asset value of the shares.  However after 31 August 2004 in an effort to reduce the taxpayers compliance cost it was no longer mandatory to determine the market values of the immovable properties to arrive at the net asset values.

Transferees may if they choose, use balance sheet values of properties to arrive at the net asset value. IRAS however will continue to carry out back-end audit checks to ensure that the amount of duty paid is indicative of the true value of the shares transferred.  This is especially so in transactions that are deemed to be non arms length or transactions that may manipulate transfer pricing issues.

Transfers of shares by way of gift 

(Gift cases refer to any conveyance or transfer in which no consideration, nominal or inadequate consideration is paid. See section 16(1)&(3) and Article 7 of the First Schedule to the Stamp Duties Act)

For any transfers operating as gifts, stamp duty will be based on the market value of the transfer. Therefore for the transfer as gift of immovable properties and or shares, the stamp duty will be based on the equivalent market value. 

The market value of the immovable property and or shares is to be determined as at the date of execution/signing of the document. The market value is the price that might reasonably be expected to be fetched in the open market on an arm’s length basis. 

In computing the Net Asset Value (NAV), the latest statement of accounts of the company should be taken and the accounts in question should not be more than 24 months from the date of the transfer document. 

For transfer of shares of a newly incorporated company, the allotment price as at the date of incorporation can be adopted provided the company in question is not more than 18 months old and that the company does not legally or beneficially own any immovable properties.

If the newly incorporated company owns immovable properties, even if it is less than 18 months from the date of incorporation, accounts have to be prepared to determine the Net Asset Value of the shares transferred. 

The brief explanation above is to highlight the processes involved in transferring of shares in a Singapore Company. Rest assured that with our vast amount of experience, we at Sandhurst are well aware of the rights, duties and obligations required for a share transfer process in Singapore.


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