Company Registration Singapore| CNBC on 8 Oct 2019 reported that “Singapore is ranked as the #1 competitive country in the world to do business”.
Today we see many business owners both from Singapore or from overseas come to Singapore to do business and are looking to register a company in Singapore.
This article aims to share 8 tips you need to note before registering a company in Singapore.
Tip #1: What types of companies are there in Singapore?
There are two general types of companies, public companies and private companies. Public companies are those companies with more than 50 shareholders. Private companies are companies with fewer than 50 shareholders.
For more business owners starting out, the entity of choice would be the Singapore private limited company.
Tip #2: Can my company qualify as a Singapore private exempt Company?
An exempt private company is a Singapore company with less than 20 shareholders, and does not have any corporate shareholders. The benefit of this type of company is that it can file simplified annual returns on ACRA.
EPCs were previously exempted from having their accounts audited if they had an annual revenue of $5 million or lower. However, with effect from 1 July 2015, only “small companies” are exempt from audit requirements.
A small company under the Companies Act is one which:
A company is deemed a “small company” if it:
- Is a private company; and
- Satisfies any two of the three criteria listed below for each of the two preceding consecutive Financial Years (FYs):
- Annual revenue does not exceed $10 million
- Value of total assets does not exceed $10 million as at the end of the FY
- The company has a maximum of 50 employees at the end of the FY
Any Exempt Private Company that satisfies the above criteria is likely to be exempted from audit, and consequently be able to reduce its day to day operational and compliance costs.
Tip #3: The requirement for a Singapore resident director when carrying out Singapore Company Formation
Under Section 145 (5) of the Companies Act (Cap. 50), every Singapore Company is required to have a Singapore director who is ordinarily resident in Singapore when you register your business in Singapore.
So who is eligible to be this Singapore resident director?
- Singapore citizens;
- Singapore permanent residents;
- A Singapore employment pass holder (provided that there are no exclusions from such EP holder in the terms and conditions to be a Singapore director).
If you need a Singapore nominee director, you can contact us for our nominee directorship services. However, you would need to buy our corporate secretarial package as well at the same time for this.
A Nominee director in Singapore will typically require a deposit and the shareholder to sign an indemnity letter for this nominee director Singapore service.
Tip #4: Choosing and Reserving a company name when Company registration Singapore and carrying out Singapore Company Formation
Prior to carrying out a company registration in Singapore, you would need to do a name check with the online system and then reserve the name. Some key steps to choosing a name:
- Google your prospective name to see if any one has already registered a company with a similar sounding name as that party may apply to ACRA to reject your name application if its too close to the company name that you intend to choose;
- Go to IPOS, the intellectual property office of Singapore to check the trademark register to see if there is any other company with a similar name to yours;
- Go and look for a website domain name that you want to use for your company to see if its easy to type and also to see if your clients may end up going to your competitors website instead of your website;
- Then prepare 3 different variants of your company name before trying to do a name reservation on ACRA;
- Make a name reservation and see if its approved, if not congrats, otherwise try going down to the second variant of your company name on your list.
Tip #5: Choosing your board of directors
Directors represent the top level of management of your company and have strict duties under Singapore law known as fiduciary duties (which is the subject of a separate article). So when choosing your directors, do choose people who you can trust the company’s money with.
For the purpose of ACRA filing, you would need a copy of each director’s NRIC or passport. If you have an external company secretary, the external company secretary may require a latest copy of a utility bill of each director and a proof of address (dated within the last 3 months).
Also remember that at least one of your board of directors needs to be a Singapore resident director.
Tip #6: Determining your list of shareholders and their shareholding proportions
The shareholders are the owners of your company and are there to fund the operations of the company. At the point of incorporation, most shareholders would fund a company with minimal capital unless your company is a regulated entity in Singapore with statutory minimum capital requirements like for example insurance companies or banks. In Singapore a company can be incorporated for a minimal share capital of S$1 for 1 ordinary share.
One quick trick that most owners do, will be to incorporate a company with minimal share registered share capital and then treat the excess funds injected from the shareholders into the company bank account after incorporation as a quasi-equity shareholder’s loan. If you need accounting help with this, do let us know as some accountants are not so familiar with such accounting treatment. The benefit of this is that as a creditor you have priority in winding up of the company.
Tip #7: Choosing your form of Constitution
When registering a company in Singapore, you have a choice either to: (a) get a company secretary to use their in house form of the constitution or (b) use the latest ACRA model constitution. The choice is yours. We would suggest using the latest ACRA version unless your company is well capitalized then you may wish to use a more sophisticated version of the constitution at incorporation. In any event, you can change the form of the constitution during the lifetime of your Singapore company later.
Tip #8: Whether to engage a lawyer to draft a shareholders’ agreement
Under common law and the Singapore Companies Act, there are very few implied provisions that are included into the standard form constitution from ACRA. This means that if shareholders want to contractually agree on how they would grow the company or share the profits of the Company, the standard form constitution does not usually cover these things. This also means that when shareholders or directors quarrel or fight especially when the company is profitable, they do not have any agreement in place and in the end usually have to sell the company to a third party or wind up the company or sell off the assets, which is a waste if the shareholders spent many years building up the business.
Engaging a lawyer to draft a shareholders’ agreement is a good way to deal with disputes and quarrels without having to litigate and most quarrels are usually about control of the company and the sharing of profits. A shareholders’ agreement can set out some key items:
- Which shareholders are entitled to appoint director nominees to represent their interests and how many each shareholder is entitled to appoint to the board. The more directors the stronger the voting power of such director nominees at the board;
- Right of first refusal. This is a provision which states that if any shareholder wants to sell to a third party, he should first offer those shares to the existing shareholders. This is important as shareholders enter into a business venture with individuals and do not want their business partner to suddenly change overnight;
- Anti-Dilution: This clause says that if the company needs to raise funds by issuing new shares, the existing shareholders will have the first right to subscribe for such shares before the company goes to third parties to fund raise; and
- Dividend policy. When the company is profitable, how much of the profits will be retained for growth and how much of such profits will be distributed to shareholders as dividends.
Finally, we quote Steve Jobs, Co-Founder, Chairman and CEO, Apple
“Your work is going to fill a large part of your life, and the only way to be truly satisfied is to do what you believe is great work. And the only way to do great work is to love what you do.”
Company Registration in Singapore is a relatively simple matter, but with these 8 Key Tips to registering your company in Singapore as set out above, we hope that your Singapore business journey will be less fraught with complexity.
Do contact us if you need our assistance in your Company Registration in Singapore.
About Raffles CPA
Raffles CPA is a niche professional firm headquartered in Singapore with a relentless dedication to help global and local clients in solving their complex business problems in areas of corporate services, accounting, capital market, legal and compliance.
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