Why should entrepreneurs set up a holding company in Singapore?
International companies and entrepreneurs alike choose Singapore to register their regional headquarters or holding company. As of February 2022 there are more than 500,000 companies registered in Singapore, with almost 10,000 new companies registered in January and February 2022.
Singapore is appealing for numerous reasons, from international recognition to quick and affordable company registration. A holding company in Singapore could open doors for your business in Asia.
In this article we take a look at some of the key advantages of opening a holding company in Singapore.
Why register a company in Singapore?
- Raising funds is easier in Singapore due to its international reputation as a place for doing business and English being an official language.
- Corporate Governance in Singapore is much more flexible in relation to things such as issuing shares and drafting shareholder agreements.
- Tax optimisation – Singapore has a very favorable tax regime for non-residents.
- Quick and affordable – new companies can be registered in 1 day.
Raising funds from international investors
When operating a business in Thailand, Vietnam or Cambodia, raising funds can sometimes be a challenging task. Foreign investors will always prefer to invest through a Singapore company. The main reasons for investors being reluctant to invest outside of Singapore is due to a lack of familiarity with the laws of Thailand, Vietnam or Cambodia. This lack of familiarity may lead to investors not trusting the legal systems in the event of litigation or dispute resolution.
Singapore offers a viable alternative due to English being an official language of the country. This means that in Singapore, all documents and contracts are written in English. If investors were to invest in a Thai company for example, they will be required to sign documents written in Thai. This could be problematic as the investors won’t be able to read all the documents and may not always feel comfortable due to fears of mistranslation or complex legal issues.
Singapore also supports various instruments for raising funds easily. Furthermore, these instruments are undertaken according to international practice with a SAFE or a convertible note being supported in Singapore. The wide acceptance in Singapore of such instruments allows investors to be confident in their investments.
Corporate laws in Thailand, Vietnam or Cambodia are not as flexible as in Singapore when it comes to issuing several classes of shares with different rights to shareholders, Employee Stock Option Schemes (ESOP), and written resolutions of the shareholders or board of directors.
For example, in Thailand there are only 2 types of share classes available to companies; Ordinary Shares and Preference Shares. Singapore on the other hand offers the following options: Ordinary Shares, Non-voting shares, Redeemable Shares, Preference Shares, Deferred ordinary Shares, Management Shares and Alphabet Shares. This provides companies with far greater options and flexibility to establish a company which best suits their needs and requirements.
Furthermore, Singapore allows companies to draft and enforce complex Shareholders Agreements to further detail the rights and obligations of each party. A more complex Shareholder Agreement is a valuable tool that provides the procedural framework for the operation of a company, while also regulating and governing the internal management of a company. Additionally, through a Shareholder’s Agreement, the parties can achieve greater protection of their rights, ensure a quick resolution if any deadlocks arises, and sufficient regulation of entry and exit rights for shareholders.
While Singapore is not a tax haven, it does offer a tax system that is advantageous for shareholders and directors who do not reside in Singapore.
Key advantages for non resident directors are the fact they are not taxed on any director fees paid out of a Singapore Company.
Furthermore, there is no tax on dividends and capital gains. This means that once a founder or investor has established their business, they can sell their shares in the holding company and they will not be taxed on their gains in Singapore.
On the contrary, in Thailand, if an individual shareholder sells his shares in a Thai company and realizes gains, he will be taxed at the personal income tax rate from 0 to 35%.
Quick and affordable
It is possible for a company to register their business within one day in Singapore. Prospective companies will need at least one shareholder and the minimum capital requirement is 1 Dollar. The whole registration process can be done online.
There are two main obligations that companies need to satisfy:
- The appointment a corporate secretary;
- One of the directors must be a Singapore resident.
The price for registering a company ranges from between a few hundred Dollars up to several thousand Dollars. The final price is dependent on whether you use an online service provider or a law firm. The reason for the vast difference in price is down to the quality of the service you will receive.
At Belaws, our company registration service is provided by a team of international experts who are familiar with the business flow between Singapore, Hong Kong, Thailand, Cambodia and Vietnam. Our experts will be able to assist you and provide reliable assistance in all these jurisdictions.
Please see the following list for an idea of the starting budget required for registering a business in Singapore:
- Company registration – 800 USD (plus an additional 315 USD for the official fees)
- Corporate secretary service for one year – 700 USD
- Registered address for one year – 300 USD
- Nominee Singapore Resident director (if you do not have one) – 2,500 USD per year (plus 2,500 USD deposit)
The fees for drafting a Shareholder Agreement and a Term Sheet starts at USD 3,000
How can the Belaws team of experts help?
If you need more information about establishing a holding company in Singapore, you can book a consultation with one of our market entry experts. This consultation will allow you to receive dependable advice and quickly figure out the best option for your particular needs.
During the call, we will notably cover key areas such as; company structure, taxes, accounting and other general aspects of opening a holding company in Singapore.
Please note that this article is for information purposes only and does not constitute legal advice.
Our consultations last for a period of up to 1 hour and are conducted by expert Lawyers who are fluent in English, French and Thai.
Consultations can be hosted via WhatsApp or Video Conferencing software for your convenience. A consultation with one of our legal experts is undoubtedly the best way to get all the information you need and answer any questions you may have about your new business or project.
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