A brief overview

Singapore is one of the easiest places to start a business and has consistently been ranked highly in the World Bank’s Ease of Doing Business reports.

All businesses of any sort must be registered before commencing business in Singapore. The type of business structure one chooses depends on the business needs. Tax implications vary according to the structure and professional advice is essential before commencing business.

In addition, some businesses will require additional licensing to operate. For example, financial institutions must be licensed by the Monetary Authority of Singapore (MAS), and firms intending to manufacture or sell certain restricted goods will need appropriate licenses.

Potential investors need to be aware of additional regulations and permits that apply and should consult the relevant regulatory body to establish whether additional licenses are necessary.

Common methods foreign businesses use to enter Singapore

When looking to set up in Singapore, it is important to understand the different requirements of each of the common business structures as well as the business environment, e.g. taxes. We have highlighted some information below.

 

Set up a representative office

Foreign entities that are interested in exploring potential business opportunities in the region may set up a representative office in Singapore to assess the business environment in Singapore and the region before deciding to set up more permanently. 

A representative office is a temporary set-up with no legal status so it cannot engage in any trading or business activities which yield a profit. The activities of a representative office in Singapore are limited to market research and feasibility studies. 

Approval for the establishment of a representative office must be obtained from Enterprise Singapore (except banking, finance, financial exchanges and insurance sectors which are regulated by the MAS and foreign law practices which are under the purview of the Ministry of Law). If granted, the approval is usually valid for a duration of one year only.

An extension will be granted on a case-by-case basis, up to a maximum period of 3 years. Foreign entities which intend to continue their presence in Singapore thereafter should register their operations (such as a local company or a branch of the foreign company) with the Accounting and Corporate Regulatory Authority (ACRA). 

 

Incorporate a subsidiary (local company)

Foreign entities that wish to undertake activities that will generate profits can choose to incorporate a subsidiary (i.e. local company) with ACRA. 

A company is a legal entity separate and distinct from its shareholders and directors. The members of a company have limited liability. It can sue and be sued in its own name. 

A company will be required to comply with the statutory and disclosure requirements of the Singapore Companies Act. There are statutory requirements which include financial statements, general meetings, directors, company secretary, auditors, and annual returns, amongst others.

A company must have at least one director and one secretary who are ordinarily resident in Singapore. There are statutory provisions for exemption from preparing and/or filing financial statements and holding annual general meetings if prescribed conditions are met. 

Companies with paid-up share capital of SGD 500,000 and above will automatically become members of the Singapore Business Federation (SBF). Find out more about SBF membership.

 

Register a branch of a foreign company

Foreign companies that intend to establish a place of business or carry on business in Singapore may register a branch with ACRA.

A branch office is an extension of a foreign company. The ownership of a branch office belongs to the foreign company and the foreign company will be liable for the debts of the branch office in Singapore. 

As part of the registration process, several factors must be taken into account: 

  • The name of the Singapore branch must be the same as the name of the foreign company.
  • At least one authorised representative who is ordinarily a resident in Singapore must be appointed for the Singapore branch.
  • The Singapore branch needs to have a registered office located in Singapore.
  • To register a Singapore branch, the foreign company’s documentation including certified true copies of its certificate of incorporation, constitution and audited financial statements are required.

The Singapore branch must also comply with the statutory and disclosure requirements of the Singapore Companies Act. It is required to file its audited financial statements and the financial statements of the foreign company with ACRA annually. 

 

Transfer of registration (re-domiciliation)

Foreign corporate entities that want to relocate its regional and worldwide headquarter to Singapore and still retain its corporate history and branding may apply to ACRA to transfer its registration to Singapore.

In doing so, the foreign corporate entity will become a company limited by shares in Singapore and will be required to comply with the Singapore Companies Act. Re-domiciliation will not affect the obligations, liabilities, properties or rights of the foreign corporate entity.

A foreign corporate entity will have to satisfy the following conditions amongst others in order to transfer its registration to Singapore: 

  • A foreign corporate entity must be a body corporate that can adapt its legal structure to a company limited by shares structure under the Companies Act.
  • The foreign corporate entity must meet the prescribed minimum size and solvency criteria.
  • The foreign corporate entity is permitted to transfer its incorporation under the law of its place of incorporation. 

Do note however that re-domiciliation is not reversible as Singapore currently does not allow for outward re-domiciliation to another jurisdiction.

Other business structures in Singapore

Sole-proprietorship

A sole-proprietorship is a business owned by one person. It can be owned and controlled by a local resident individual, company or limited liability partnership.

Sole-proprietorship is the simplest and most flexible business structure. However, it is not a separate legal entity from the business owner and the business owner has unlimited liability over all the debts and losses of the sole-proprietorship.

A sole-proprietorship can only be set up by a Singapore citizen, a Singapore Permanent Resident or an eligible employment pass holder. A local resident authorised representative must be appointed if the owner is not a resident in Singapore. The foreign owner must also engage a registered filing agent to submit the application to ACRA.

Partnership

A partnership is a business owned by at least 2 partners. The partner can be an individual, a company or a limited liability partnership.

Partnerships can be:

  1. General partnership

A general partnership can have up to 20 partners. Once there are more than 20 partners, the business must be registered as a company under the Companies Act 1967.

Like a sole-proprietorship, a general partnership is not a separate legal entity and the partners are personally liable for all the debts and losses of the partnership.

A general partnership can only be set up by a Singapore citizen, a Singapore Permanent Resident or an eligible employment pass holder. If all the partners are residing outside of Singapore, they must appoint a local resident authorised representative and must also engage a registered filing agent to submit the application to ACRA.

  1. Limited Liability Partnership (LLP)

A Limited Liability Partnership (LLP) is a business structure that offers all its partners limited liability while allowing them to retain the flexibility of operating the LLP as a traditional partnership.

An LLP has a separate legal identity like a private limited company. It can sue or be sued in its own name. The partners of an LLP will not be held personally liable for any business debts incurred by the LLP.

A partner may be held personally liable for debts and losses resulting from his own wrongful act or omission but will not be held personally liable for such wrongful acts or omissions by any other partners of the LLP.

There is no limit to the maximum number of partners in an LLP. As such, LLPs are commonly used by professional firms. An LLP must also appoint at least one manager who is ordinarily resident in Singapore.

There are no statutory requirements for general meetings, directors, company secretary, etc. However, an LLP is required to keep accounting records, profits and loss accounts and balance sheets that will sufficiently explain the transactions and financial position of the LLP. A declaration of solvency or insolvency must be submitted to ACRA annually.

  1. Limited Partnership (LP)

A Limited Partnership (LP) is a partnership consisting of at least one general partner and one limited partner. There is no limit to the maximum number of partners in an LP.

An LP does not have a separate legal identity from its partners, as such it cannot sue or be sued in its own name. Limited partners of an LP enjoy limited liability but are unable to take part in the management of the LP. The limited partner can be an individual, a company or an unregistered foreign company.

The general partner is responsible for the actions of the LP has unlimited liability and is personally liable for all debts and obligations of the LP.

Appointing a local manager is not mandatory unless all the general partners are residing outside Singapore. The foreigner must engage a registered filing agent to submit the application to ACRA.

For an LP which is registered primarily for the purpose of establishing a fund for investment and the fund is managed by a licensed fund manager, the details of the limited partners of the LP and any document containing the particulars of such limited partners filed with ACRA will not be open to inspection by the public.

As such, the LP structure would appeal to investors who wish to be ‘silent partners’ in a business, and whose liability is limited to the extent of their investment in the LP.

Variable Capital Company

The Variable Capital Company (VCC) is a corporate structure for investment funds constituted under the Variable Capital Companies Act 2018. It complements the existing suite of investment fund structures available in Singapore.

All VCCs must be managed by a Permissible Fund Manager which is regulated by the MAS.

Some key features of a VCC

  • A VCC has a variable capital structure that provides flexibility in the issuance and redemption of its shares. It can also pay dividends out of capital (and not only out of profits), which gives fund managers flexibility to meet dividend payment obligations.
  • A VCC can be set up as a single standalone fund or an umbrella fund with one or more sub-funds, each without legal personality and holding a portfolio of segregated assets and liabilities.
  • A VCC can be used for both open-ended and closed-end fund strategies.
  • A VCC is not required to disclose its register of members to the public. It will only be required to disclose this register to public authorities upon request for regulatory, supervisory and law enforcement purposes. 

In addition, there are statutory requirements which include financial statements, general meetings, directors, company secretary, auditors, and annual returns, amongst others.

Grant Thornton
Doing Business in Singapore

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