Singapore Glossary of Useful Terms for Company Set Up
1. Who may incorporate a company in Singapore?
Persons who wish to form an incorporated company must meet the following eligibility requirements for company incorporation in Singapore:
i. Any person (either local or foreigner) can start or register a new company in Singapore;
ii. The company must have a local registered address;
iii. The company must have a local qualified company secretary;
iv. The company must have a minimum of one director and one shareholder;
v. The company must have at least one director who is a local resident director (i.e. Singapore citizen, Permanent Resident of Singapore or an expatriate holding a valid employment pass);
vi. 100% foreign ownership is allowed; and
vii. The minimum paid-up capital is S$1.
2. Documents to be filed for incorporation
All companies must file the following documents with the Registrar of Companies (the “Registrar”) to effect the registration:
i. Constitution of the company – Each subscriber to the Constitution shall, if the company is to have a share capital, make a declaration to the Registrar, either by himself or through a registered qualified individual authorised by him, as to the number of shares (not being less than one) that he agrees to take.
ii. Consent to act as directors – The directors of the company must sign their consent to act as directors in a prescribed Form 45 and statement of non-disqualification to act as director with leave of court and/or written permission of the Official Assignee.
iii. Directors’ undertaking – a person named as director of the company must also sign an undertaking to take from the company and pay for his/her qualification shares, or sign a statement stating that a number of shares (not less than his/her qualification) is registered in his/her name.
iv. A notice of registered office address must be lodged.
All lodgments of information and/or submission of documents with the Registrar are done electronically via the Accounting and Corporate Regulatory Authority’s (“ACRA”) portal: http://www.bizfile.gov.sg (“bizfile”).
Only the Registered Qualified Individuals are authorised to lodge the required information and documents with the Registrar via bizfile.
3. Company Name
The Constitution of the company must state the company’s name. A company cannot be registered under a particular name unless that name has been reserved. A name (for a Singapore incorporated company) cannot be registered if it is:
• Undesirable;
• Identical to that of any other company, limited liability partnership or corporation, or to a business name; or
• A name, or a kind of name which the Minister has directed the Registrar not to accept for registration;
• Every limited company must have a “Limited” or “Ltd” as part of and at the end of its name unless exempted by the Minister.
• Every private company must have a “Private” or “Pte” As part of its name immediately before “Limited (or in the case of an unlimited company, at the end of its name. No description is inadequate or incorrect in Singapore because of the abbreviation “Co” for “Company”, “Pte” for “Private”, and “Ltd” for “Limited” (section 27, Companies Act Cap. 50).
We typically request our client to list a minimum of three (3) names in order of preference when checking the availability.
4. Types of Business Entities in Singapore
i) Sole-Proprietorship
A sole-proprietorship is a business owned by one person or one company. There are no partners. The sole-proprietor has absolute say in the running of the business.
It is not a separate legal entity and the owner bear unlimited liability.
From January 1st, 1994, all self-employed persons are required to top up their Medisave account with CPF Board before they register a sole-proprietorship or partnership, become the new partner of an existing sole-proprietorship or partnership, or renew their business registration. This requirement is only applicable to Singaporean Citizens and Permanent Residents.
ii) Partnership
A partnership is a business firm formed by two (2) to twenty (20) partners. If there are more than twenty (20) partners, the partnership must be registered as a company under the Companies Act, Chapter 50.
A partnership is not a separate legal entity and therefore partners bear unlimited liability. Partners can be personally liable for a partnership’s debts and losses incurred by other partners.
iii) Limited Liability Partnership (“LLP”)
A LLP offers the flexibility of operating as a partnership while enjoying many benefits that come with a corporate body like a private limited company.
Primarily meant for carrying a profession (e.g. accountants, law firms, architects etc.) where two (2) or more professionals would like to build a joint practice in a common field.
Agreements stipulates on how profits and management responsibilities are divided amongst the partners.
There must have at least two (2) partners at all times.
iv) Limited Partnership (“LP”)
A LP is a partnership consisting of a minimum of two (2) partners, with at least one general partner and at least one limited partner. An LP does not have a separate legal entity from the partners. A general partner is responsible for the actions of the LP and is liable for all debts and obligations of the LP. A limited partner is not liable for debts and obligations of the LP beyond his agreed contribution, provided he does not take part in the management of the LP. Profits are either taxed at partners’ personal income tax rates (if individual) or corporate tax rate (if corporation).
v) Company
a) Private Limited Company (“Pte. Ltd.”)
• Shares are held by less than fifty (50) persons.
• Shareholders can be an individual or corporation or both.
• Has its own legal identity, separate from its shareholders and its directors.
• It can acquire assets, go into debts, enter into contracts, enjoys perpetual succession, sue or be sued in its own name.
• Liability of the members to contribute to the debts of the company is limited to the amount that each member contributes as capital to the company.
For the first three financial years of operation, qualifying new start-up companies (excluding investment holding and property companies) are given a tax exemption of 100% on the first S$100,000 of chargeable income (income to be taxed at the prevailing corporate tax rate) and a further exemption of 50% on the next S$200,000. A maximum of S$200,000 can therefore be exempted and profit exceeding $300,000 is taxed at the standard rate of 17%.
As an alternative to the exemption for start-up companies, all companies can enjoy a 75% exemption on the first S$10,000 of normal chargeable income and a further 50% tax exemption on the next S$290,000 of normal chargeable income (maximum exemption to be enjoyed is S$152,500). Any profit exceeding $300,000 is taxed at 17%.
In addition to the tax exemption that may apply, all companies are currently given a corporate income tax rebate of 50% of the corporate tax payable, capped at a maximum amount of S$20,000.
In order to save companies time and costs of an annual audit, Singapore introduced the concept of a “small company” in 2015. A small company is exempt from the requirement for an annual audit and any private company qualifies as a small company if it meets at least two (2) of the following three (3) criteria:
i. Total revenue does not exceed S$10million;
ii. Total assets do not exceed S$10million; or
iii. Number of employees does not exceed fifty (50).
Pte. Ltd. are the most popular corporate vehicles used to conduct business in and from Singapore.
b) Public Limited Company (Limited)
• Shares are offered to the general public.
• Must have at least fifty (50) shareholders.
• Subject to significantly more stringent rules and regulations.
• Usually listed on a stock exchange
5. Objective/Activities of Entity Are
i. Objects and powers
Companies are allowed to list all conceivable objects and powers in their Constitution of the company as the legal capacity of the company to carry on any activity is derived therefrom.
ii. Objects clause
A company has full capacity, rights, powers and privileges to carry on or undertake any business or activity, do any act or enter into any transaction (section 23(1)) unless the Constitution of the company contain a provision restricting its capacity, rights, powers or privileges (section 23(1B)). Although not compulsory, the Constitution of the company may still contain a statement of the objects of the company (section 23(1A)). By choosing not to include objects clauses in the Constitution of the company, companies would have the right to engage in any type of activity provided such activity does not contravene any provision of any written law.
However, for the purpose of data analysis in reviewing the significant changes in the structure of the Singapore economy and the emergence of new activities as well as to align with changes in the international standard, companies are to list two (2) main activities of the company. We will then match the business activity against the most appropriate classification of economic activities that are standardized and published as the Singapore Standard Industrial Classification (SSIC) since 1958.
6. Paid-up Capital
Is the amount of money that has been paid (or deemed paid) on shares actually allotted.
The minimum amount is S$1.00.
7. Share value
Each share (usually) has an issued value of S$1.00, which is paid into the company on issue. Value and currency can be selected according to the shareholders’ wish.
8. Nationality
The status of belonging to a particular nation, whether by birth or naturalization.
(Naturalization – being confer upon (an alien) the rights and privileges of a citizen.)
9. Source of funds
Origin where monies use to finance the investment (e.g. from personal savings, inherited wealth, business gains etc.).
10. Controlling function
An individual or legal entity has a “controlling function” in the company if the individual or legal entity:
i. Holds the right, directly or indirectly, to appoint or remove the directors of the company who hold a majority of the voting rights at meetings of the directors on all or substantially all matters;
ii. Holds, directly or indirectly, more than 25% of the rights to vote on those matters that are to be decided upon by a vote of the members of the company; or
iii. Has the right to exercise, or actually exercises, significant influence or control over the company.
11. Shareholder
An individual or legal entity who holds the shares in a particular entity.
12. Director
A director is the person responsible for managing the affairs of the company and providing it with directions. A director must make decisions objectively, act in the best interest of the company, and be honest and diligent in carrying out his duties.
Under the Companies Act, the minimum number of directors required is one (1).
A company must have at least one (1) director who is ordinarily resident in Singapore.
Being “ordinarily resident in Singapore” means the director’s usual place of residence is in Singapore. A Singapore Citizen, Singapore Permanent Resident or an EntrePass holder can be accepted as a person who is ordinarily resident here. Subject to compliance with prevailing laws and regulations on employment of foreign manpower, an Employment Pass (“EP”) holder may be accepted as a director who is ordinarily resident here. EP holders who wish to undertake a secondary directorship position in another company (apart from the company his EP is approved for), will have to apply for and be granted a Letter of Consent (LOC) before registering their directorship positions with ACRA.
Any person above the age of 18 years old can be a director of a company. There is no maximum age limit for a director. However, certain individuals (e.g. bankrupts and persons convicted of offences involving fraud or dishonesty) are disqualified from holding director positions.
13. Nominee
A person or organization named to act on behalf of someone else, especially to conceal the identity of the nominator.
14. Company Secretary
Every company must appoint a secretary within 6 months from the date of its incorporation.
The company secretary must be residing locally in Singapore and he/she must not be the sole director of the company.
The Secretary may also be held liable for the company’s failure to comply with the law in certain situations.
The secretary of a public company must comply with section 171(1AA) of the Companies Act i.e. must possess at least one of the following qualifications:
Been a secretary of a company for at least three (3) of the five (5) years immediately before his appointment as secretary of the public company:
- Qualified person under the Legal Profession Act (Cap. 161).
- Public accountant registered under the Accountants Act (Cap. 2).
- Member of the Institute of Certified Public Accountants of Singapore.
- Member of the Singapore Association of the Institute of Chartered Secretaries and Administrators.
- Member of the Association of International Accountants (Singapore Branch).
- Member of the Institute of Company Accountants, Singapore.
15. Registered office address
It is the location to which all official communications and notices may be addressed and which is open during the hours specified in section 142, Companies Act, Cap. 50.
Bank and official authorities like IRAS, CPF, MOM may differ but the authorities will use the registered address filed ACRA.
16. Financial year end
Any annual period at the end of which a company’s accounts are made up, whether that period is a year or not. It doesn’t need to match the calendar year end. FYE may vary depending on whether the shareholder is an individual or not. If it is an individual, there are some advantageous to time the FYE on the last day of the month prior the incorporation month. If the Singapore entity is a corporate shareholder based overseas, the FYE may be in line with the FYE of the shareholder to easy the consolidation process.
Disclaimer
Note that the information on this website is for general knowledge and should not be considered as professional opinion. Each client is different and will require specific advices.
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