Regulation of Foreign Investment
There are no controls on currency exchange.
Foreign investment in local banks and newspaper publishing companies is controlled. On the other hand, foreign investment in commercial, industrial or retail properties is unrestricted but certain restrictions are placed on foreigners acquiring landed and certain non-landed low-rise residential properties.
Approval, Permits and Licenses
There is no restriction on the types of business that may be undertaken as long as the proposed activities are permissible under the Singapore law. However, there are some activities that require special licenses from the government agency responsible for regulating the specific industries e.g. banks, insurance, fund management companies, private schools and travel agents.
Special import licences will also be required if the Singapore government categorises a particular product as being a threat to the general health, security, safety or social decency e.g. tobacco and tobacco products, liquor and cosmetics.
Singapore Incorporated Company
A Singapore incorporated company is a separate legal entity created under the Companies Act. It is able to own properties, enter contracts, sue and be sued in its own name. It is perpetual and any change of Directors or transfers of shares will not affect its continuity.
A Singapore incorporated company may be limited by shares, limited by guarantee or an unlimited company.
From a practical viewpoint, the limited company with share capital would be the type of company contemplated by a foreigner interested in investing in Singapore. Such a company may be either a public company or a private company.
1. Public Company
There are 2 types of public companies in Singapore. The first type is one which generally desires to raise capital from the public. It includes all those companies whose shares are listed on the Singapore Exchange Limited (SGX), either on the main board or the secondary board known as Catalist. A company with more than 50 shareholders is a public company even if its shares are not listed on the SGX.
The other type of public company is the company limited by guarantee. Commonly used for the purpose of charity or to serve other national or public interests.
2. Private Company (LLC or Pte. Ltd.)
A private company is easily identifiable by its name which contains the word “Private” (abbreviated to be “Pte.”) or “Sendirian” (a word in Malay and abbreviated to be “Sdn.”).
A private company is a locally incorporated company where the number of shareholders is limited to 50.
The liabilities of the shareholders in respect to its debts or the contribution of assets upon winding up is limited to the amount that the shareholders have committed to.
Incorporating a private company in Singapore is a simple and quick process. However, it should be noted that Singapore has strict Anti-Money Laundering regulations and therefore some time is required for professional services provers to perform corresponding checks.
An application must be made to the Accounting & Corporate Regulatory Authority (ACRA) for the approval of the proposed company’s name. A private company must have the word “Private” as part of its name, inserted immediately before the word “Limited” or abbreviation thereof. A proposed company name will not be approved if it is identical to or resembles the name of an existing entity. Undesirable names will also not be approved.
The minimum required paid-up capital when registering a Singapore company is $1. The concept of authorised capital no longer exists. Furthermore, the company should have a minimum of 1 director and 1 shareholder. At least one director must be a local resident director (Singapore citizen or person whose principle pace of residence is Singapore) who is a natural person and above 18 years of age. Every company must appoint a secretary, who must be a natural person and whose principal place of residence is Singapore, within six months from the date of incorporation. A private company may appoint a non-qualified secretary as long as the directors make sure the appointed secretary has a reasonable knowledge of regulations. The secretary of a public company must be qualified (i.e. accountant, lawyer or chartered secretary).
Every company must appoint auditors within three months from the date of incorporation unless exempt from audit requirements under Section 205B or 205C of the Companies Act.
Every company must have a registered office in Singapore, which must be open and accessible to the public during normal office hours.
The management control of a company is normally vested in the Board of Directors who holds fiduciary responsibility to the Company.
The first annual general meeting (AGM) of shareholders must be held within 18 months from the date of incorporation and thereafter an AGM must be held once in every calendar year and not more than 15 months after the last AGM.
There is a new criteria introduced for the exemption from audit which was implemented on 1st July 2015. A company qualifies as a small company and will be exempted from audit if it has been a private company in the financial year in question and meets at least 2 of 3 of the following quantitative criteria for the two immediate past financial years :
- (i) total annual revenue ≤ $10M;
- (ii) total assets ≤ $10M;
- (iii) number of employees ≤ 50.
Small company: If the company has not already qualified as a “small company”, the company will need to qualify for 2 years consecutively before being qualified as a “small company”. However, if it is already a qualified “small company”, it will continue to be a “small company” despite not meeting the quantitative criteria in the current financial year. Basically, the company will only be disqualified as a “small company” if it fails to meet the quantitative criteria for at least 2 preceding years from the current year
For a company which is part of a group, the company must qualify as a small company itself and its entire group must be a “small group” to qualify for the audit exemption. This also applies if the group has an overseas parent. Intermediate parents will be treated as a subsidiary.
For a group to be considered as a small group, it must meet at least 2 of the 3 criteria on a consolidated basis for the two immediate consecutive financial years.
In the case where the ultimate parent does not prepare consolidated financial statements, the aggregate revenue and assets of the group will be considered. The group does not include associates and joint ventures.
Though a small company is exempted from audit, it is required to keep relevant accounting records and to prepare financial statements and balance sheets. The financial statements must be laid before the members at an annual general meeting no later than 6 months for private companies and 4 months for public companies following the end of the financial period. The financial statements need to comply with the requirements of the Accounting Standards to give a true and fair view of the financial position and performance of the company.
A foreign company which intends to carry on business in Singapore but does not wish to incorporate a Singapore company may register a branch under the Companies Act. The registration must be completed before the branch commences business.
Under the Singapore Companies Act, a branch is classified as a foreign company. There must be at least 1 authorised representative (being a natural person resident in Singapore) who is duly appointed by the company (i.e. head office) by way of a power of attorney or memorandum of appointment.
A foreign company is required to file with ACRA audited Singapore branch accounts and its own audited accounts within 2 months of the company’s annual general meeting being held. These accounts are available for inspection by the public on payment of a small fee.
A foreign office may establish a presence in Singapore by setting up a representative office.
A representative office is prohibited from carrying on a business in Singapore, as technically it has no legal corporate status in Singapore. Registration of a representative office should be considered when a foreign company wishes to test the business environment in Singapore before making investment decisions. It must confine its activities to market research, feasibility studies, promotional and liaison work on behalf of the parent company.
Approval for the establishment of a representative office must be obtained from International Enterprise (IE) Singapore.
Sole Proprietorship or Partnership
These are the simplest forms of business organisation and are usually more suitable for small-scale businesses. Both the sole proprietor and the partners are subject to unlimited liability with regard to the debts of the business.
Any person who is carrying on business in Singapore either as a sole proprietor or in partnership is required to register a business firm with ACRA. However, some forms of businesses, which are carried out by professionals such as architects, engineers and doctors, are instead required to register with their respective professional bodies. A sole proprietorship or partnership may be required to appoint a manager who is responsible for the management of the business. Where the sole proprietor or each of the partners of a business firm is a foreigner, the manager must be a Singapore citizen, a Singapore permanent resident or a valid employment pass holder.
Limited Liability Partnership (LLP)
A Limited Liability Partnership (LLP) gives the owners the flexibility of operating as a partnership whilst giving them limited liability. It combines the benefits of a partnership with those of private limited companies.
The LLP is a body corporate and has a legal personality separate from its partners. The LLP has perpetual succession. Any change in the partners of a LLP shall not affect its existence, rights or liabilities.
The partners of the LLP will not be held personally liable for any business debts incurred by the LLP. However, a partner may be held personally liable for claims from losses resulting from his own wrongful act or omission. That said, a partner shall not be personally liable for such wrongful acts or omissions of any other partner of the LLP.
An LLP is required to keep such accounting and other records which sufficiently explain the transactions and financial position of the LLP.