Yes, a Singapore company can give founders shares carrying more than one vote each, but the route depends on the type of company. A private company can do it if its constitution provides for it, because section 64(3) of the Companies Act 1967 lets the constitution alter the default of one vote per share. A public company must also comply with section 64A, which requires the constitution to set out the rights and a special resolution to approve the issue. When weighted voting shares are used to entrench control unfairly, ordinary shareholders can turn to the court, most often through the oppression remedy in section 216.
What are weighted voting shares?
Weighted voting shares, also called multiple voting shares or founder shares in a dual-class structure, carry more votes per share than the company’s ordinary shares. A founder holding 20 percent of the issued shares might control a majority of the votes if each founder share carries ten votes. The economic rights, such as dividends and the return of capital, can stay the same as the ordinary shares or be set differently.
The starting point in the Companies Act 1967 is section 64(1): subject to the Act and the constitution, a share confers on its holder one vote on a poll on any resolution. Anything different must be built into the company’s constitution.
What does the Companies Act allow for each type of company?
| Company type | Can it issue weighted voting shares? | Key conditions |
|---|---|---|
| Private company | Yes | The constitution must provide for the different voting rights (section 64(3)). Section 64A(6) confirms that section 64A does not affect a private company’s right, subject to its constitution, to issue different classes of shares. The Act does not set a maximum ratio. |
| Public company, not listed | Yes | Under section 64A, the constitution must provide for the class and set out the rights attached, the issue must be approved by special resolution, and notices of general meetings must state the voting rights of each class. |
| Company listed on SGX | Yes, under SGX’s dual-class listing rules | In addition to section 64A, SGX rules apply. MoneySense, the national financial education programme, summarises the safeguards: a cap of 10 votes per multiple voting share, automatic conversion on certain events such as the holder leaving the board or selling, and one vote per share on key matters such as constitutional changes, varying class rights and appointing or removing independent directors and auditors. |
Most founder-control disputes in Singapore arise in private companies, where the only limits are the constitution, the shareholders’ agreement and the general law. If you are new to share classes, our guide on creating different share classes in a Singapore company explains the building blocks.
Is there any vote the constitution cannot take away?
Yes. Section 64(4) protects holders of shares that would otherwise carry no vote at general meetings. Even if the constitution says otherwise, they keep at least one vote per share on a poll on a resolution to wind up the company voluntarily and on a resolution to vary the rights attached to their shares. Weighted voting structures sometimes pair founder shares with non-voting investor shares, so this floor is worth knowing.
Separately, section 74 governs any variation of the rights attached to an existing class of shares, discussed below.
How do founders set up weighted voting shares in a private company?
- Amend the constitution. The constitution must create the class and set out its voting rights, any conversion events and how the class can be varied. This is done by special resolution under section 26(1), and a copy of the resolution and the altered constitution must be lodged with ACRA within 14 days (section 26(2)). Our guide on amending a Singapore company’s constitution covers the mechanics.
- Get approval to issue the shares. Under section 161(1), directors must not issue shares without the prior approval of the company in general meeting. An issue in breach of section 161 is void (section 161(6)).
- Or convert existing shares. Founders often convert some of their ordinary shares into the new class instead of being issued new ones. A private company’s conversion does not take effect until the Registrar updates the electronic register of members, a trap explained in our guide on filing a conversion of shares under section 74A.
- Lodge the filings and update the registers. Lodge the return of allotment or the notice of conversion, update share certificates and check the Bizfile profile shows the new class correctly.
- Align the shareholders’ agreement. Make sure reserved matters, drag-along and transfer clauses work with the new voting maths.
The cleanest time to do this is at incorporation or before outside investors come in. Introducing weighted votes later, when other shareholders have already invested on a one share, one vote basis, is where disputes begin.
When can ordinary shareholders challenge weighted voting shares in court?
Holders of ordinary shares usually challenge a founder-control structure in one of four ways.
| Complaint | Likely route | Points to note |
|---|---|---|
| The weighted shares were created by varying the rights of an existing class | Section 74 | Holders of at least 5 percent of the class who did not consent may apply to the court to cancel the variation, normally within one month after the consent or resolution. The court may disallow it if it would unfairly prejudice the class. |
| The structure is being used to oppress or unfairly prejudice minority shareholders | Section 216 | Covers conduct and resolutions passed or proposed. The court may make any order it thinks fit, including cancelling or varying a resolution or transaction, or ordering a buy-out. |
| Directors issued the shares to entrench themselves rather than for a proper commercial reason | Breach of directors’ duties, often pleaded with section 216 | Directors must use the power to issue shares for a proper purpose. Issuing shares mainly to keep control is a classic improper purpose argument. |
| The shares were issued without proper authority | Challenge to the issue, or the company’s own application under section 72 | An issue in breach of section 161 is void. Section 72 lets the company, a shareholder or a creditor ask the court to validate an invalid issue if it is just and equitable. |
Whether creating a new weighted class actually varies the rights of existing ordinary shares is not always straightforward. Diluting the voting power of an existing class is not necessarily a variation of its rights in law, unless the constitution or terms of issue say so. Our guide to variation of class rights under section 74 explains the procedure, and where section 74 does not fit, section 216 is often the stronger route. Our explainer on the oppression remedy under section 216 covers how those applications run.
Can a defective weighted voting structure be fixed?
Sometimes the problem is the founders’ own paperwork: the constitution was never properly amended, the section 161 approval was missing or the conversion was never registered. The company should not simply keep treating the shares as valid. Two court tools may help. Section 72 allows the court to validate an issue or allotment that was invalid, and to confirm its terms, where it is just and equitable. Section 392 allows the court to declare that a proceeding is not invalid despite a procedural irregularity, provided no substantial injustice has been or is likely to be caused. Neither is automatic, and a minority shareholder who was disadvantaged by the defect can oppose the application.
Example: founder shares introduced before a funding round
Example: A software company has two founders holding 60 percent between them, and six angel investors holding the rest, all as ordinary shares. Before a new funding round that will dilute the founders below 50 percent, the founders propose a special resolution to amend the constitution and convert their shares into a new class carrying ten votes each. With their 60 percent they cannot pass a special resolution alone, so they persuade two angels to vote with them.
The remaining angels, holding 25 percent, object. Their lawyer first checks whether the ordinary shares are a separate class whose rights are being varied and, if so, whether section 74 applies. If not, the stronger route may be section 216, arguing that the conversion was designed to strip them of any influence while the founders’ economic stake fell. The court will look at the whole picture, including what the investors were told when they invested, whether they agreed to founder control in a term sheet, and whether the new structure was a genuine condition of the incoming investor. A buy-out order is a common outcome in this kind of dispute, rather than simply unwinding the structure.
What should founders and investors check before agreeing?
- Does the constitution clearly set out the votes per share, and on which resolutions the weighting applies?
- Are there sunset or conversion events, such as the founder leaving the board, transferring shares, death or incapacity?
- Do some matters stay one share, one vote, for example changing the constitution or appointing auditors?
- Has every necessary approval been passed: the special resolution, the section 161 approval and any class consents?
- Have the filings been lodged and does the register of members reflect them?
- Does the shareholders’ agreement give investors protection, such as reserved matters, information rights or a put option, that does not depend on voting power?
Frequently asked questions
Is there a maximum number of votes per share for a private company?
The Companies Act 1967 does not set one for private companies. The constitution decides. The 10 votes per share cap applies to companies listed on SGX under its listing rules, and investors in private companies sometimes ask for a similar cap by agreement.
Do weighted voting shares also get bigger dividends?
Not unless the constitution or terms of issue say so. Voting rights and economic rights are separate. Many structures give founder shares extra votes but the same dividend and capital rights as ordinary shares.
Does ACRA check whether the structure is fair?
No. ACRA registers the constitution and share filings that are lodged. It does not decide whether a share structure is fair to minority shareholders. Fairness is a matter for the shareholders’ agreement and, if necessary, the court.
What happens to founder shares if we later list on SGX?
The company would need to convert to a public company, comply with section 64A and meet SGX’s dual-class listing requirements, which include the 10 votes per share cap and conversion triggers. A private company structure that does not fit those rules would have to be restructured before listing.
Is there a deadline for challenging the structure?
For a section 74 application, the one-month window after the consent or resolution is short, although the court can allow further time. Section 216 has no fixed statutory deadline, but delay can count against an applicant. Take advice as soon as the proposal is circulated.
Need help with a dispute over founder voting shares?
If your company, or you as a director or shareholder, is dealing with a weighted voting share structure or a challenge to one, contact the Raffles Corporate Services team at [email protected] or on WhatsApp at +65 8501 7133 or +65 9018 0072. We will help you understand the documents and deadlines. Where your matter needs a lawyer, we will refer you to a firm on our panel of Singapore law firms that regularly handles share capital and shareholder disputes. Raffles Corporate Services is a corporate services provider, not a law firm, and this article is general information, not legal advice.
Willie Tan, Raffles Corporate Services