Establishing a business in Singapore legal guide Published November 2012
HERBERT SMITH FREEHILLS Establishing a business in Singapore 03 Introduction This guide provides an overview of common issues encountered when establishing a business in Singapore. Laws in Singapore and market practice may change from time to time. It is important to note that this guide does not constitute legal advice and should not be relied on as such. Specific advice should be sought about specific circumstances. We are one of the world s leading law firms. We advise many of the biggest and most ambitious organisations across all major regions of the globe. Our clients trust us with their most important transactions, disputes and projects because of our ability to cut through complexity and mitigate risk. The Singapore office offers a unique blend of corporate, finance and dispute resolution expertise. We focus on complex and high-value matters, including M&A, capital markets, corporate finance, takeovers, reorganisations, projects and project finance, structured finance, privatisations, regulatory advice and disputes, arbitration and litigation. We have a market leading reputation for a number of sectors, including energy and natural resources, telecoms and techonology, and we have a global reputation as the leading disputes practice. The office has over 46 lawyers and 12 partners who speak Bahasa Indonesia, Bahasa Malaysia, English, Mandarin and French. The team acts for clients throughout the region, in Singapore, Malaysia, Indonesia, Thailand, Korea, the Philippines, Myanmar, Vietnam, Cambodia, Laos and the Indian subcontinent. We have advised on some of the most high profile transactions and disputes in the region. We can help you thrive in the global economy. With 2,800 lawyers in offices spanning Asia, Australia, Europe, the Middle East and the US, we can deliver whatever expertise you need, wherever you need it. in Singapore We have significant experience of operating across South East Asia. The Singapore office opened in 1995 and is the centre of our South East Asian practice. In 2008, the office was one of the few international firms awarded a Qualifying Foreign Law Practice licence, enabling us to advise on local law in Singapore. This reinforced our standing as one of the select members in the international elite of full service law firms. In addition, our unique association with the leading Indonesian law firm, Hiswara Bunjamin & Tandjung (HBT), with which we work to provide international level advice on the Indonesian market, gives us a market leading position in the region.
04 Establishing a business in Singapore HERBERT SMITH FREEHILLS Primary options for establishment Singapore law permits various options for establishing operations in Singapore, including: Company limited by shares Branch of a foreign entity Representative office Limited liability partnerships Limited partnerships Partnerships Factors which determine which option is chosen include: Tax considerations Number, and extent of liability, of owners Legal status Ability to engage in trading activities and conclude contracts Licensing requirements Ongoing compliance requirements Sensitivity surrounding the business arrangement Continuity and transferability of ownership Cost of incorporation The Accounting and Corporate Regulatory Authority of Singapore or ACRA (www.acra.gov.sg) administers the registration of most corporate structures in Singapore except for representative offices which are administered by International Enterprise Singapore (www.iesingapore.com). The laws regulating business structures in Singapore are derived from various sources, including the UK, Australia and New Zealand. A company limited by shares is the most common business structure in Singapore. If documents are in order, a company registration can be completed relatively quickly and in a matter of days. As a consequence, it is not market practice to purchase shelf companies in Singapore.
HERBERT SMITH FREEHILLS Establishing a business in Singapore 05 Establishment issues Ownership requirements Companies incorporated in Singapore must have at least one shareholder, which can be a natural person or an incorporated entity. A private company cannot have more than 50 shareholders. If it has more than 50 shareholders, it will be regarded as a public company with more onerous compliance obligations. Foreign ownership restrictions apply in very limited circumstances (for example, in the newspaper industry) and it is possible to establish a company that is 100% owned by foreign investors. There are certain industries for example, gas, telecoms, electricity and financial services where a change of control or substantial shareholder (thresholds generally vary from 5% to 30%) would trigger a requirement to obtain approval from the relevant regulator. In addition, public companies and listed companies may also have to comply with disclosure and mandatory general offer obligations in the Singapore Code on Takeovers and Mergers, the Listing Manual, the Companies Act and the Securities and Futures Act. Officer requirements Singapore companies must have one director who is ordinarily resident in Singapore. He does not need to be a Singapore citizen. A foreigner with an employment pass would generally satisfy the residency requirement to be a director of a Singapore company. There are agencies which provide Singapore resident nominee director services for clients who are not able to satisfy the director residency requirement when they incorporate a company in Singapore. Certain industries for example, newspapers and financial services may impose additional residency and nationality requirements and fit and proper criteria guidelines for directors. Please note that Singapore company law does not permit corporate directors. A Singapore company must have at least one company secretary who has his principal or only place of residence in Singapore. Share capital requirements Singapore abolished the concepts of par value and authorised share capital in 2006. It is possible to incorporate a company with an issued share capital of S$1 or in a foreign currency. However, please note that certain regulated industries prescribe detailed rules on capital requirements. Capital gains tax Singapore does not tax capital gains. Goods and services (GST) tax Businesses in Singapore may have to register with the Inland Revenue Authority of Singapore for GST purposes. Withholding tax and foreign exchange controls There are no withholding tax or foreign exchange restrictions on outbound dividends paid by a Singapore company to its foreign shareholders. Licensing requirements Depending on the nature of the business to be carried out and subject to any applicable exemptions, appropriate licences would have to be obtained from the relevant regulator before carrying out a regulated activity. It is possible to obtain a general indication as to the licence(s) required for your operations by searching the Online Business Licensing Service (OBLS) at www.business.gov.sg. Timing for obtaining a licence will depend on the industry and regulator and clients are encouraged to approach the relevant regulator early in the process.
06 Establishing a business in Singapore HERBERT SMITH FREEHILLS Establishment issues Company formation documents Documentation to register a business in Singapore can be prepared relatively quickly. The key documents needed to incorporate a private company include: application to reserve company name submitted online memorandum and articles of association signed by the initial shareholder(s) consent form to act as director signed by each director As all documents have to be filed in English, any foreign language documents will have to be translated and authenticated by the relevant High Commission or Embassy. Employment Singapore has an Employment Act which prescribes certain minimum employment terms and conditions. However, these terms and conditions generally do not apply to a person who is employed in a managerial or an executive position. In such situations, employment issues are essentially a matter of contract between the employer and employee. Foreign employees must obtain an employment pass before they can commence work. In the case of new operations, employment pass applications should be submitted after the relevant entity has been incorporated. Employment pass applications (and passes for dependants accompanying the employee) can be made online at the Ministry of Manpower website (www.mom.gov.sg). The Retirement and Re-employment Act (formerly the Retirement Age Act) (the RRA) took effect on 1 January 2012. Under the RRA, employees who turn 62 have an option to work for another three years, if they want to. The RRA sets out the re-employment eligibility criteria, a dispute resolution mechanism and penalties for errant employers. The onus is on an employer to prove that an employee is not eligible for re-employment. Social security Singaporean employees and their employers must make monthly contributions, at specified rates, to the Central Provident Fund (CPF), a social security savings plan administered by the CPF Board. Employers must be registered with the CPF Board to make such contributions. Registered office All Singapore companies must have a registered office within Singapore to which all communications and notices may be addressed. In practice, the registered office address does not have to be the premises where the business operations are actually carried out. There are agencies in Singapore which provide registered office address services. Real estate There are generally no restrictions on a foreign entity acquiring, holding and disposing of non-residential property. Leases in Singapore are usually for a fixed term of three years with an option to renew for a further three years, although leases for industrial properties are for a longer term. Early termination may be possible if provided in the lease. Terms and conditions of business leases may be negotiated depending on the relative bargaining position of the parties. Industrial premises in Singapore are generally leased from either the Housing & Development Board or the Jurong Town Council.
HERBERT SMITH FREEHILLS Establishing a business in Singapore 07 Bank accounts Banks in Singapore, as in most jurisdictions, conduct anti-money laundering and know your customer checks when bank accounts are opened. The documentary requirements to open a bank account vary in practice from bank to bank but will generally include copies of the incorporation documents, memorandum and articles of association, bank account opening authorisation and signing mandates. These documents will have to be in English. common seal of the company is affixed to the contract in accordance with the company s articles of association. There are currently legislative proposals to dispense with the use of the common seal to execute a contract as a deed. ACRA has also launched an online service to allow all business entities to apply for a bank account with a local bank after completion of the incorporation process. Contractual relations and formalities Contract law in Singapore is derived from the common law and statutes. Singapore has enacted legislation such as the Unfair Contract Terms Act, the Sale of Goods Act, the Misrepresentation Act and the Contracts (Rights of Third Parties) Act which are based on the equivalent legislation in the UK. It is customary for contracts entered into with Singapore entities to provide for a choice of Singapore law. However, it is possible for a local entity to choose a foreign law. This will be given effect to by the Singapore courts unless the choice was not made for legitimate reasons or was illegal or the application of the law chosen by the parties would be contrary to public policy. Save for contracts which are executed as deeds, there are no specific Singapore law formalities or requirements applicable to the signing of contracts. A contract is executed as a deed if it lacks consideration or if specific legal requirements dictate that the contract be executed as such. A contract is validly executed as a deed if it is expressed to be executed, and is delivered, as a deed and the
08 Establishing a business in Singapore HERBERT SMITH FREEHILLS HERBERT SMITH FREEHILLS KEY CONTACTS Michael Walter Managing partner, South East Asia Partner, corporate T +65 6868 8028 michael.walter@hsf.com Veronica O Shea Partner, corporate T +65 6868 8004 veronica.oshea@hsf.com Kwok Hon Yee Of counsel, corporate T +65 6868 8064 kwokhon.yee@hsf.com The contents of this publication, current at the date of publication set out in this document, are for reference purposes only. They do not constitute legal advice and should not be relied upon as such. Specific legal advice about your specific circumstances should always be sought separately before taking any action based on this publication.
notes
notes
HERBERTSMITHFREEHILLS.COM ABU DHABI T +971 2 813 5000 F +971 2 813 5100 BANGKOK (Thailand) Ltd T +66 2657 3888 F +66 2636 0657 BEIJING T +86 10 6535 5000 F +86 10 6535 5055 BELFAST T +44 28 9025 8200 F +44 28 9025 8201 BRISBANE T +61 7 3258 6666 F +61 7 3258 6444 BRUSSELS T +32 2 511 7450 F +32 2 511 7772 DAMMAM Al-Ghazzawi Professional Association associated firm T +966 3 8331611 F +966 3 8331981 DOHA Middle East LLP T +974 4452 8955 F +974 4452 8960 DUBAI T +971 4 428 6300 F +971 4 365 3171 HONG KONG T +852 2845 6639 F +852 2845 9099 JAKARTA Hiswara Bunjamin and Tandjung associated firm T +62 21 574 4010 F +62 21 574 4670 JEDDAH Al-Ghazzawi Professional Association associated firm T +966 2 6531576 F +966 2 6532612 LONDON T +44 20 7374 8000 F +44 20 7374 0888 MADRID Spain LLP T +34 91 423 4000 F +34 91 423 4001 MELBOURNE T +61 3 9288 1234 F +61 3 9288 1567 MOSCOW CIS LLP T +7 495 363 6500 F +7 495 363 6501 NEW YORK New York LLP T +1 212 519 9855 F +1 212 519 9856 PARIS Paris LLP T +33 1 53 57 70 70 F +33 1 53 57 70 80 PERTH T +61 8 9211 7777 F +61 8 9211 7878 RIYADH Al-Ghazzawi Professional Association associated firm T +966 1 4632374 F +966 1 4627566 SHANGHAI T +86 21 2322 2000 F +86 21 2322 2322 SINGAPORE T +65 6868 8000 F +65 6868 8001 SYDNEY T +61 2 9225 5000 F +61 2 9322 4000 TOKYO T +81 3 5412 5412 F +81 3 5412 5413 2012 0141B /091112 Establishing a business