Opening a local business bank account

[rbasia]

Greetings,
Recently we established a business in Singapore (Pte Ltd) with 3 foreign (off shore directors) and 1 nominee diretor. We used a business service company to do all this and they inferred it was standard procedure.
Our company is about Technology Services and we want to have a regional base and felt Singapore was the right place based on taxation as well as legal code. Our directos all have decorated resumes and have worked for well known global companies.
We applied for banking at UOB who turned us down and OCBC who said we could only have an off-shore foreign account with a minimum balance requirement of 30,000 USD. For a start-up endevaour this is a heavy burden and not the path we would like to take.
I'd like to ask if anyone has had a good experience with banking for a startup and can recommend or suggest anything for opening a local business bank account for a majority foreign owned company based out of Singapore?

With Thanks,

RBAsia

[ecureilx]

Greetings,
Recently we established a business in Singapore (Pte Ltd) with 3 foreign (off shore directors) and 1 nominee diretor. We used a business service company to do all this and they said it was \standard procedure.
Our company is about Technology Services and we want to have a regional base and felt Singapore was the right based on taxation as well as legal code. Our directos all have decorated resumes and have worked for well known global companies.
We applied for banking at UOB who turned us down and OCBC who said we could only have an off-shore foreign account with a minimum balance requirement of 30,000 USD. For a start-up endevaour this is a heavy burden and not the path we would like to take.
I'd like to ask if anyone has had a good experience with banking for a startup and can recommend or suggest anything for opening a local business bank account for a majority foreign owned company based out of Singapore?

With Thanks,

RBAsia

I wonder if your company incorporation service advised you correctly.

Is the directors country making the banks fret a lot ? Which country are the directors from ?

You can still reach out to Hsbc or Citi, who, if they refuse, will give proper explanation than diverting you to a offshore account. Explanations I got from HSBC have included specific nationals not allowed to have certain types of accounts etc.

[PNGMK]

All I'll say is that the banks here have gotten bloody difficult about anything except plain vanilla account holders who are resident in Singapore in the last few years. It's a shame as it's hurting Singapore in some people's eyes but after the US ranked Singapore as a 'grey' banking nation on the index the gahmen made great efforts to clean it up.

[ecureilx]

It's a shame as it's hurting Singapore in some people's eyes but after the US ranked Singapore as a 'grey' banking nation on the index the gahmen made great efforts to clean it up.

At least one Asian country passport holders I know can't open accounts since last year

[Strong Eagle]

There is actually no such thing as a "nominee" director. There are only directors, offshore or otherwise. The local director is a full fledged director and as such, has powers that exceed those of the foreign directors.

If you've done it right, you've had an AGM/EGM where the shareholders have approved directors resolutions to open local bank accounts, resolutions that specify the signatories to the account.

Here's some food for thought. Who are the shareholders? Where do they reside? How much share capital has been invested? How much in the way of loans has been injected into the company, and by whom?

Who is going to sign on the bank account? Foreign directors must be physically present to sign the signature cards. You're taking a risk by allowing your local director, who actually works for the business service company, to be a signatory on the account. So, who can write checks and take money out?

I judge that, because of your setup, your company is being viewed as a potential money laundering mechanism, especially if you have no local bank signatory. It looks like this. You do all your business offshore and have no local business (after all, you only have a rented director in Singapore - if you actually had Singapore employees one of them would be your director), so it automatically makes it difficult to determine the source of funds that might be deposited into the account. Funds deposited could be for technology services, or for money laundering services. And if you don't have a local signatory to the account, then funds can be taken back out by someone else (foreign directors?), making it difficult to determine where the funds went.

Moreover, you say you want to have a "regional base" in Singapore, yet all your directors are offshore, except for your rented director. Doesn't sound like much of a base, and indeed, if you are earning money through the provision of technology services in other countries you need legal entities in those countries anyway, making one wonder, "What's the point of this Singapore Pte Ltd, anyway?"

That's my S$0.02 on the subject, and as much as I usually don't have anything positive to say about Singapore banks, I think they've made the correct call in this case. Too many unanswered questions. Now, if you're willing to be transparent about business plans, funds, pro forma statements, and can explain why your "regional base" doesn't actually have real people working for it, perhaps you'll be able to convince them otherwise.

[rbasia]

Thanks for all your replies so far. 1 director is UK citizen, 2 are US (but originally from Switzerland and Poland).
To answer questions:
- for signing we intended to use internet banking services once the account was established.
- local director has limited powers as per written agreement. We could consider them for opening the account and instating temporary powers and then trasnfering the account over.
- HSBC and Citi may certainly be worth a try.

Thanks for your sharing.

RBasia

[ecureilx]

Thanks for all your replies so far. 1 director is UK citizen, 2 are US (but originally from Switzerland and Poland).
To answer questions:
- for signing we intended to use internet banking services once the account was established.
- local director has limited powers as per written agreement. We could consider them for opening the account and instating temporary powers and then trasnfering the account over.
- HSBC and Citi may certainly be worth a try.

What you explained, in my understanding is bound to raise a lot of suspicions...

Btw, to clarify - Citi and HSBC, may still refuse but should explain more clearly why they are refusing ...

[PNGMK]

I'm in tears of laughter. OP's explanation makes it WORSE not better. I can't breathe.

[Strong Eagle]

Thanks for all your replies so far. 1 director is UK citizen, 2 are US (but originally from Switzerland and Poland).
To answer questions:
- for signing we intended to use internet banking services once the account was established.
- local director has limited powers as per written agreement. We could consider them for opening the account and instating temporary powers and then trasnfering the account over.
- HSBC and Citi may certainly be worth a try.

Thanks for your sharing.

RBasia

1. You will still need those people who are authorized to dispense money with internet banking to be physically present in Singapore to sign the internet banking agreements in front of a bank officer.
2. If you give the rented director signatory powers, then transfer to another person, that other person will have to be physically present to sign the internet documents.
3. You may attempt to limit the powers of a local director through an agreement but nothing in that agreement can contravene your Memorandum of Incorporation or the Companies Act. Generally, one protects oneself against a rogue rented director by having a pre-signed, undated letter of resignation that you fill out if there is a falling out.

I used online banking with UOB for my business for many years and it is a hassle to get people and authorizations changed... all done on paper, at the bank, in the presence of a bank officer.

[rbasia]

I'm in tears of laughter. OP's explanation makes it WORSE not better. I can't breathe.

Makes what Worse? I thought the idea of a forum was for people to share and connect.

[Strong Eagle]

I'm in tears of laughter. OP's explanation makes it WORSE not better. I can't breathe.

Makes what Worse? I thought the idea of a forum was for people to share and connect.

PNGMK is referring to the perception that your company could be potentially used for money laundering, will be made worse by your intention to use internet banking services, and not have a local signatory.

If you think about it, this is exactly the kind of setup corrupt politicians and businessmen would like to have. Create a Singapore business entity and a Singapore bank account. Create a Malaysian or Indonesian business entity. Funnel profits, aka bribes and payoffs, to the Singapore company. Return money to foreign directors in the form of nice and clean directors fees. Sure... there's the transaction costs of required withholding on foreign fees paid... you get the drift.

I judge that you will need to rethink your approach to your Singapore based company, either by including a new Singapore investor/partner (citizen or PR), or by using your business service to apply for an EP for one of your foreign directors. Unless of course, you get a bank to open an account for you.

Timing is not too good, though... the Monetary Authority of Singapore (MAS) is busy exploring Goldman Sachs role in the 1MDB Malaysian corruption scandal, and have essentially shut down Swiss private bank BSI for money laundering, while investigating private bank Falcon for similar activities. DBS, UBS and Stan Chart claim to have filed reports of suspicious activities with MAS, and have been upbraided by MAS for weak detection activities. You can bet your bippy that every bank in Singapore has hidden in the corner and won't do anything to attract attention.

[Strong Eagle]

Parenthetically speaking, I'm surprised that the rented director agreed to take on the role. Directors of the company are personally liable for malfeasance of the company, and the Companies Act states:

172.—(1) Any provision that purports to exempt an officer of a company (to any extent) from any liability that would otherwise attach to him in connection with any negligence, default, breach of duty or breach of trust in relation to the company is void.

Put another way, there is no document you can sign that would protect the director from being liable for the acts of the company, and while I can see how a rented director might be OK with a bog standard pte ltd with local business activities, your setup ought to set off bells and whistles. There are so many places where a director could find herself liable... from foreign directors compensation and taxation issues, to reporting of offshore income, to the possibility that the company has been setup for nefarious purposes... even if you are legitimate, and it sounds like you are, the director has no way of being able to verify this.

I suspect no one at the business services company has thought any of this through, nor did they think through the implications of your ownership and management structure in light of the recent crackdown on illegal banking activities.

PS: Even HSBC got smacked down hard a few years ago for illegal activities.

[Strong Eagle]

- local director has limited powers as per written agreement.

I ought to be working, and, I offer one additional thought. The way you have worded the above suggests that the director has signed a document agreeing to limit his/her powers in the company. Such an agreement would not be valid under the Companies Act. Two clauses are worth considering.

25B.—(1) In favour of a person dealing with a company in good faith, the power of the directors to bind the company, or authorise others to do so, shall be deemed to be free of any limitation under the company’s constitution.

Powers of directors
157A.—(1) The business of a company shall be managed by, or under the direction or supervision of, the directors.

(2) The directors may exercise all the powers of a company except any power that this Act or the constitution of the company requires the company to exercise in general meeting.

So, two things are evident from these clauses:

1. The director is free to do anything within the confines of the Companies Act, and an attempt to limit that freedom won't hold water.
2. The only way to control which actions a director cannot take is to assign the actions to the shareholders at an AGM/EGM.

So, for example, if you wished to prevent a director from signing a resolution to open a bank account and name a signatory, you would have to assign this power to shareholders at an AGM/EGM. You couldn't simply say that a director cannot open a bank account.

Caveat: I am not a lawyer. I have setup and run companies in the USA, Singapore, Malaysia, Thailand, and Australia, and I am a student of business law, particularly in Singapore. Your business service should be able to verify what I have said with respect to restrictions on directors.

[PNGMK]

OP, if you legitimately wish to use Singapore as a Base you need to move some resources and activities here and/or hire actual local residents. The days of using Singapore she'll companies for what you want are disappearing. Note that there is one else last ploy and that would be to buy an existing company that has been in financial operation for some time and has all these accounts set up. You could do a merger or take over.

[BBCWatcher]

Thanks for all your replies so far. 1 director is UK citizen, 2 are US (but originally from Switzerland and Poland).

FYI, the two U.S. citizen (or U.S. permanent resident) directors probably each have, at a minimum, these annual filing requirements:

(a) IRS Form 5471;
(b) FinCEN Form 114.

If they're resident outside the United States they might also have certain filing requirements elsewhere. IRS Form 5471 is likely past tense now, meaning they already have that requirement. FinCEN Form 114 will be required as soon as you're successful opening a bank account with their "signature authorities." If they're as experienced as you claimed, they should know about these requirements (and other possible ones). But I mention them just in case.

Maybank Singapore offers its FlexiBiz account with no minimum balance and a $1000 minimum initial deposit. That would solve your minimum initial deposit problem, but Maybank will still have "Know Your Customer" requirements.