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Foreign Company Setting Up Subsidiary in Singapore

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Strong Eagle
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Foreign Company Setting Up Subsidiary in Singapore

Post by Strong Eagle » Sun, 07 Oct 2018 1:43 am

Folks,

I received an email regarding setting up a business in Singapore, different from other emails, so I have opted to answer it in the forums for all to view. I have changed company names and locations to maintain confidentiality.
I work at a company called Frammis-Hoopla, a company that makes widgets and buggy whips… OK… not really. We’re a German-based company that has offices in Germany, London, and New York. We’re looking to expand into Singapore in the next fiscal year and I’ve been researching the legal and regulatory obstacles we have to bypass before we can open a branch there.

While we’re looking to open a branch with 9-12 people from the US and UK, we’ve already got more than 70 employed in New York alone and several hundred more abroad. Would that change our landscape for applying for incorporation? Our tentative plan is to register as a Pte. Ltd. Company, but we must work with a resident director. Could you recommend any law or accounting firms that could assist us with the registration process so we could apply for an Employment Pass for one of our incoming directors there?
Let’s look at the two aspects of Singapore incorporation that you have asked, or seem to have asked. First, you have asked if having hundreds of employees would make a difference with respect to the type of legal entity you might use in Singapore. The answer is “NO”, the number of people working for the company, either in Singapore or worldwide, has no bearing upon the nature of the legal entity used to do business in Singapore.

I’m going to ignore the following legal entities in Singapore:
  1. Sole proprietorship – obviously not applicable
  2. Partnership – obviously not applicable
  3. Representative office – a temporary legal entity for a foreign company which is formed for business exploration but cannot do business from or in Singapore
  4. Branch office – an entity which has been incorporated under the charter and founding documents of the foreign company. Besides being a lot more complicated because the foreign articles of incorporation have to be reviewed and meet the standards of the ACRA, a branch office loses out on several significant tax and subsidy benefits available to true Singapore incorporated companies. So, you don’t want this, either, although somewhere in these threads PNGMK posted an example of there this made sense. Don’t think it is for you, though.
This leaves incorporated companies limited by shares. There are two kinds of these companies.
  1. Public limited – Unlimited number of shareholders, a public company, as the name implies and traded on the Singapore stock exchange. You will not find one single multi-national with a legal presence in Singapore formed as a public limited. This creates a truly independent company from the foreign company, and reporting rules for public limited companies are much more complex than for the alternatives.
  2. Private limited – EVERY last foreign company that has a legal presence in Singapore is incorporated as a private limited. For example, BASF, which employees hundreds, if not thousands of people locally in Singapore, and has tens of thousands employed worldwide is listed as “BASF South East Asia Pte. Ltd.” on its website in Singapore. I haven't looked and I'd bet money every last share is owned by BASF Germany.
Private limited companies can have a maximum of 50 shareholders, and in the case of the foreign corporations, they are usually the sole shareholder in the company, with often only one or two shares being issued. This means that any dividends that are paid out by the Singapore company pass directly to the foreign company.

Summary, without question, and unless you have very special circumstances, you will incorporate as a private limited in Singapore. I suspect that every other company you have outside of Germany is created under a similar legal vehicle.

Next, you speak of the need to acquire a resident director. This is not going to be necessary if you are a “real” foreign corporation. All these bookkeeping companies that offer a “rent a director” are directed towards foreign individuals that want to setup a company in Singapore.

Setting up a company in Singapore has been a time honored scam to get legal residence in Singapore, and more recently, a way to launder money through electronic funds transfer to dodgy offshore entities. The government investigates closely and the rented directors are fearful of being scammed.

You don’t need the resident, rented director. These people will require that you do everything through them… your books, your bank, your employment passes, your contracts, your payments… all for a substantial price… because they don’t want to become victims of the aforementioned scams.

You will notice that if you go to the ACRA website an enquire about creating a company owned by a foreign corporation, it will tell you that you need to do this through a qualified lawyer or accountant. This is because it is possible for your foreign company to both setup the Singapore entity and appoint your resident managing director, and this is the avenue you will want to take. Whereas, the rented director first forms the company with ACRA, then makes application for an employment pass with MOM, your accountant will work with both ACRA and MOM to ensure that the directors listed in the founding documents (at least the resident ones) also have employment passes.

You will need a competent accountant to guide you through the process and get your company setup. I can offer you the contact information of the CPA who served me well. Be aware that on the one hand she had pretty good knowledge of the ins and outs of Singapore law, including foreign companies setting up in Singapore but she is a small firm. Somebody like PWC can do it for you, at substantial cost. If my old CPA cannot do it for you, you’ll need to hunt for a Singapore firm that is larger than my CPA, but still below a PWC in terms of size and cost.

Hope this helps… post again here if you have more questions.

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PNGMK
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Re: Foreign Company Setting Up Subsidiary in Singapore

Post by PNGMK » Tue, 09 Oct 2018 6:41 am

the pte ltd that I work for (owned by a fortune 100) uses some of their Singapore local employees as directors. No need for nominee in this case.
I not lawyer/teacher/CPA.
You've been arrested? Law Society of Singapore can provide referrals.
You want an International School job? School website or http://www.ISS.edu
Your rugrat needs a School? Avoid for profit schools
You need Tax advice? Ask a CPA
You ran away without doing NS? Shame on you!

startinginsing
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Re: Foreign Company Setting Up Subsidiary in Singapore

Post by startinginsing » Tue, 09 Oct 2018 9:23 pm

Hi Strong Eagle,

Thanks for the detailed response! Our company has since incorporated as a private limited. Do you still recommend that we work with a CPA for the rest of the set up process? Or is the biggest hurdle solely incorporating, after which most of the difficulties dissipate?

In sum, what should our next step be? We have our resident directors and are on track to move come the spring.

Thanks again in advance.

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Re: Foreign Company Setting Up Subsidiary in Singapore

Post by Strong Eagle » Tue, 09 Oct 2018 10:36 pm

startinginsing wrote:Hi Strong Eagle,

Thanks for the detailed response! Our company has since incorporated as a private limited. Do you still recommend that we work with a CPA for the rest of the set up process? Or is the biggest hurdle solely incorporating, after which most of the difficulties dissipate?

In sum, what should our next step be? We have our resident directors and are on track to move come the spring.

Thanks again in advance.
Where did you get your "resident directors"? Are you planning on local employees as directors? Are one or more of your foreign employees planning on taking up residence in Singapore and assuming director duties?

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