bananapunks wrote:Hi oracle forum members! I realise this question has been asked before and I have looked through many threads, there's a lot of good info by Strong Eagle. However I wanted to ask your opinion on this specific example before I dig myself a hole.
I'm an EP holder, been here for 4 years. I'm planning to open either an Exempt Private Limited or Sole Proprietorship company. From the info I have gathered it seems that as an 'ordinary resident of Singapore' I'm eligible to be a director. I can also nominate another EP holder as secretary. HOWEVER I'm also aware that as an EP holder I'm not supposed to perform any work outside of my EP sponsoring company (I have done small freelance/lectures work before with an approval letter from my employer).
My questions are:
-Is the above mentioned correct or did I miss something?
-If I appoint another EP holder as secretary, wouldn't it mean that they're performing 'work' outside of their EP, therefore breach their EP regulations?
You can form a company. You can be a shareholder. More on the director issues below. It is very questionable whether or not someone on EP could be your secretary as there is a specific requirement in the companies act which states:
"The secretary or secretaries shall be appointed by the directors and at least one of those secretaries shall be present at the registered office of the company by himself or his agent or clerk on the days and at the hours during which the registered office is to be accessible to the public."
Also, there is actually work that has to be performed by the secretary for which a CPA will charge $500 to $1500 for a small company. Beyond the fact that the secretary actually needs to know what to do to avoid violating the companies act, I don't see how someone on an EP could perform this work without being in violation of the EP rules. Pay for a secretary.
-Since my EP regulations state I can't work, I can be an outside director as long as I appoint a local acting director, correct? I wouldn't draw any salary, instead, IF company becomes profitable I'd receive dividends or a loan.
-If I appoint a local acting director and secretary, are they considered employees I have to pay CPF for? Can they be one and same person?
Your problem with outside directors is this. Normally, you find outside directors in larger companies or companies that have been funded as growth opportunities. So, you might find a VP from a bank acting as an outside director to a tech company, where she would be advising on financial matters. Or maybe an economics guru from a local university who advises on regional markets.
This brings up the question: Why would you need/want to be an outside director except in an attempt to do an end around the rules? If you hire a nominee director, she/he won't be doing any work in actually managing the company, you will.
MOM does not inform me of their inner workings, and I suspect that if ACRA passes information to MOM, this entire setup will be suspect. You may rest assured that every trick in the book has been tried at one time or another, and it would be your burden of proof to show that you were indeed an outside director, acting in an advisory capacity only. But how are you going to do that when you've rented your managing director?
And what about things like a bank account? It would be unusual for an outside director to have signatory rights to the company bank account. How will you handle that? Who will be making customer contact? Who prepares the company's branding, website, proposals, etc? If there's only you and a rented director, it becomes pretty clear what is going on.
As for CPF, etc... normally secretaries and nominee directors are hired on a contract basis so they are not your employees and therefore you are not subject to any payroll rules. Note that a "nominee director" is not some special case of a director, this is a person who has agreed to be a director of your company for money, who has all the rights and responsibilities of a director, who can screw you over, and whom you can screw over by committing unlawful acts, including fraud. It is quite possible that no one will want to be your director, given the questionable arrangements you are proposing. You may get only, "EP cannot work, lah!"
If there is only one director in a company, then you must have an outside secretary. With more than one director, one of the directors can be secretary, but again, unless you know what you are doing, you still need outside services. Do you know how to file notice of AGM's/EGM's, agendas, resolutions, minutes, annual reports, and financial statements?
As a director, you can receive a salary or directors fees. Both are taxable income. A loan is a very bad idea, as you have to pay it back, you must pay interest, and in general, although allowed by the companies act for small private limiteds, this will come under scrutiny.
Dividends are paid to shareholders, not directors. Dividends must be paid equally to all shares for a given class of stock. If you are the sole shareholder, then, no problem.
-and Lastly, opening sole proprietorship is easier, but is it even an option?
It would be great if any of you could answer these questions, I have consulted a local CPA, but like with most of the dealings in Singapore, seems like they don't really know their sh*t
. Thanks in advance for any help.
Technically, you can form a SP but the question again becomes, "who is going to actually run and manage it?" You can't, legally, so you'd need to have someone as the manager, someone who handles finances, someone with access to the bank account, someone who runs the business on a day to day basis... if you do any of these things then you are working for the company, which you cannot.
Bottom line: It's pretty obvious that your intent is to try and circumvent the rules regarding EP. I think you will get a lot of pushback from the gahmen because you certainly aren't the first to dream up this scheme.
You really only have two viable options. a) Become a PR... with four years you might qualify, in which case you can open all the businesses you want, or b) change your relationship with your employer to that of a contractor... then you can legitimately open your own private limited, and take the steps to becoming the managing director. With a guaranteed contract in hand from your previous employer, your chances might be pretty good but there is still risk.
