8 Key Elements of Company Incorporation in Singapore
- Posted by Lee Bon
- On 11.03.2017
You have never been so close to opening your own company, but you don’t rush things as you want to make an informed decision you’ll never regret about. In order to have your ripe business idea bear its ripe fruits, you need to get up it properly and sort out lots of legal and administrative things. The country you have chosen for your business incorporation – Singapore – has some basic requirements for a company registration. Go through these 8 crucial elements and make sure that everything is ready for the final triumphant launch.
1. Company Name
Unless you set up a representative office or a branch of a foreign company, you need to give your new Singaporean company its own name. On top of being absolutely unique (it mustn’t sound like any other brand already existing in SG), this name mustn’t sound vulgar or abusive. How do you know that the name you suggest is unique on Singaporean business landscape? Your incorporation consultants can make a check for you in the ACRA (Accounting and Corporate Regulatory Authority) database so that you can be absolutely certain that there won’t be any name-related hassles during the registration. You probably will need a website, so it’s reasonable to combine a name check with a search of available domains for your business. Once you have found a perfect solution, you can reserve your business name for 30 days, and we will happily assist you in doing it.
2. Singaporean Mailing Address
To run a company in Singapore, you need to keep in touch with the relevant authorities, and you need to provide an address that can be used for official correspondence. Actually, you cannot even register your company without such address. Just a PO box won’t work, as the ACRA insists it must be a real physical residential/non-residential address. Your incorporation consultants will help you to find proper premises which address you can use. Many foreigners inquire about whether they can use their personal residential address (a flat or a private house in Singapore) for a business registration. The answer is yes for those who are going to set up small businesses if they participate in the Home Office Scheme.
3. Classify Your Business in Singaporean Style
Singapore uses Standard Industry Classification codes (SSIC) for categorising businesses. You need to find out the code of your niche. You can do it on the website of the ACRA. For example, the code for the “road construction” is 42102, and the restaurant business operates under the code 56111. You need to provide your SSIC code when you make a reservation of your company’s name.
Why is this code needed? For ACRA, it is a simple way to systematise various businesses and refer them to relevant authorities which is needed for getting necessary licenses. These codes are also used by the IRAS (Inland Revenue Authority) to find out which tax benefits (tax incentive programs) a company can claim for. Later, as your company grows, develops and submits tax returns, ACRA will use the code to check whether their record about your business activity is correct.
It often happens that a company has more than one activity (streams of income). Then how to classify them using only one code? Actually, ACRA allows one business to declare two of its activities (those ones that bring the biggest revenue) and get 2 different codes for them accordingly.
4. Choose Directors
According to Singaporean corporate regulations, a newly-incorporated company must have 1 or more resident directors. Residency, in this case, includes not only being a Singaporean permanent resident or a citizen but also residing in Singapore “ordinarily”. So a foreigner holding the Employment Pass or the EntrePass can also be appointed to the position of the director. How to find the perfect fit?
Your candidacy must be older than 18 years and healthy (physically and mentally) enough to shoulder your business. On top of being highly educated, professional, honest, objective, diligent and faithful to your business idea, this personality mustn’t be from any of these categories of people: an undischarged bankrupt, a person disqualified by the court or formerly convicted for frauds or a person having 3 or more orders (related to complying with the Companies Act) of the High Court.
The main duties of the appointed director will be to organize the Annual General Meeting and file tax returns within 1 month after the meeting. Of course, the director will have lots of other everyday duties, but the 2 above-mentioned are of paramount importance as the ACRA keeps its eye on how these requirements are fulfilled.
Appointing a resident director isn’t a formality especially if the founder of a new company cannot relocate to Singapore before or immediately after incorporation. Until the real director is capable of relocating, the resident director is the one who ensures a lawful and faultless corporate performance of the new Singaporean business. This person must be proficient enough to comply with the local laws; otherwise, the company may get penalised and have bad rates of statutory compliance. Ensure you don’t skimp on this appointment. Cheap directors will ultimately cost you lots of nerves and money.
5. Choose a Secretary
This task goes right after choosing a resident director as these two figures work in team to guarantee your company’s statutory compliance. The secretary must be appointed during the first 6 months after the company’s registration. Similar to the director, the secretary must be a resident of Singapore (meaning residing in the city-state) with the only difference that a holder of the S Pass can also be hired as the secretary. The person who acts as the sole director cannot be the secretary at the same time. If the company has 2 or more directors, one of the cohort can carry out the duties of the secretary.
The main duties of this personality include keeping company’s records and making reports to the authorities on a regular basis. The main criteria against which you should select a proficient secretary are related working experience and knowledge of the Companies Act and all statutory requirements. In order to play its role of guiding the director(s) in the legal field, the secretary must be honest, objective, diligent, and faithful to using their authority only in the interest of the company.
If the secretary fails to fulfil all statutory requirements, the company may get fined. In the worst scenario, the secretary’s unprofessionalism can lead the director to the dock.
6. Define Shareholders
Singapore doesn’t set restrictions on the foreign capital when forming a paid-up capital of a new company: the part of foreign shares can be up to 100%. You can involve both local Singaporean and foreign shareholders, both corporate bodies and individuals. For example, for the Private Limited Company (limited by shares), the number of members can reach 50. Inquire about the maximum number of shares you can issue.
If you choose another legal entity, find out whether there is any limit for the number of members. Directors you appoint for the company can also act as shareholders, but remember that if the company has only one director, this person must be the sole shareholder.
Getting everything ready for the company incorporation, don’t forget about writing a shareholders agreement where you define obligations and rights of present and future shareholders and relationships between them. This will help you to avoid conflicts in the future. Consider securing a controlling block of stock (20-50% of the shares or more) if the company’s business idea is your own brainchild.
7. Corporate Bank Account Setup
You don’t necessary have to form a big share capital right away: 1 Singaporean dollar would be enough for the company registration procedure. Later, you can issue more shares and involve more capital this way. But be prepared that when you decide to set up a corporate bank account (which is mandatory if you register a Private Limited Company), you will need much more money for making the initial deposit and securing a required minimum balance. These requirements will differ from bank to bank, so you should make a research and choose a “winning” bank to go with. Remember that the resolution about opening the above-mentioned account must be made on the board of directors. Some banks require a physical presence during opening of the account, so ensure the company is decently represented at the bank.
8. Choose an Auditor
Companies incorporated in Singapore must undergo annual audits. You need to ensure that a professional auditor is appointed no later than 3 months after the company registration. Nevertheless, not all companies are subject to a mandatory audit. If your firm has no more than 20 shareholders (and there are no corporate bodies among them) and its turnover doesn’t reach 5 million SGD, it can be exempted from annual audits.
If such exemption doesn’t work for you, the company’s secretary must prepare all financial accounts for the upcoming audit. If the firm’s transactions are scarce, you can handle the bookkeeping once a year or a quarter, but if you have piles of them every month, we recommend you to hire a professional bookkeeper in order to make required records on a regular basis and in a proficient manner.