Singapore

4 Chapter How to Make Regional Headquarters

    • Regional Supervisory Function in Singapore and Hong Kong

      A regional headquarter is an entity established as part of a group of companies where bases are located in various countries and is divided into several areas around the world with plan to execute strategies on per area basis.

      Regional headquarters can be divided into the following two types:

       

      1. Established as a Parent Company with Substantial Capital Relationship

      (Invested in companies within a "Group company" on countries in the control area)

      In this case, as the parent company of  controlled companies, the regional headquarters has the purpose of not only managing operations but also functioning as a settlement base of funds.

       

       

       
       

       2. No Substantial Capital Relationship Established as a Parent Company

      (It has the function of supervising the operations of companies within the group in the control area)

      In this case, the establishment of the regional headquarter is for the purpose of simply managing the operations and other actions that may be, there is no capital relationship between the regional headquarter. Regarding the relationship between Japanese companies and regional headquarters, in case 1 above,  there is a capital relationship between the Japanese companies and the regional headquarters. On the other hand, there is a case where there is no capital relationship and only management of operations exists.
       
       
       
       

      Currently, many investment projects in the subsidiaries within the Asian region are  changing their scheme by not involving the home office in Japan. The project’s involvement will only be around the regional headquarters and the subsidiaries. By not going through home office in Japan, it will be possible to respond promptly in cases  such as  resolving the fund issues that are concentrated in the regional headquarters closer to the site.,Through this scheme, it will be possible to smoothly reinvest funds. In order to survive fierce competition in the Asian region, business models based on this scheme are becoming indispensable.

       

      ■ How to Utilize the Central Office

      Besides from supervisory function,  bases in Singapore and Hong Kong can also be used as an investment holding company  as a base for trilateral trade (offshore trade) activities.

       

      [Overall Base as a Holding Company]

      Originally, an investment holding company is a company that owns the shares of another company, effectively putting its business activities under its control and effectively controlling it. Moreover it is a mean for a Japanese company investing overseas other than Singapore and Hong Kong in avoiding customs clearance and tax risk that may arise.

       

      [Base for Trilateral Trade (Offshore Trade) Activities]

      Trilateral trade (offshore trade) is a trade that actually carries freight from the home office  not directly to the subsidiary but through the regional headquarters established in a country with relatively low taxes.  . For example, in Singapore and Hong Kong, offshore profits are not taxed. In the said countries also, if you properly create documents of transfer pricing and properly manage them according to offshore rules, you will be able to receive remittances without being taxed on profits. 
       
       
       

    • Model Case of Establishing Regional Headquarters

      We will examine what kind of methods are  available when establishing regional headquarters.

      For the sake of convenience, assuming that a regional headquarter is located in Singapore,  based on examples below two methods will be explained, "Method by stock transfer with cash as consideration" and "Method for making in-kind investment".

       

       

       
       

      ■ Cash ownership (method by transfer of shares in  consideration for cash)

      Cash ownership refers to a method of paying cash as a consideration for stock transfer.

      Using this method, a scheme to establish a regional headquarter in Singapore is broadlydivided into two categories: "When establishing a regional headquarter by original investment" and "when promoting an existing company to a regional headquarter". Details of Case ① and Case ② in the table above are as follows.

       

       [Model case ①]  When creating a regional headquarter by newly establishment or original investment

      In the case 1) Pharmaceutical company in 2008, as a sales management company in the Asian region, established a subsidiary with 100% ownership of the parent company in Singapore.

       

      Singapore's sales management company oversees sales subsidiaries from five Asian countries (Taiwan, Thailand, Philippines, Indonesia, China), aims to expand further market share in Asia, advances into new market, improves present  strategy.

      Since Singapore’s branch is a newly established company, without existing cash on hand, the parent company will take over Singapore's funds by investing cash in consideration of the shares that the branch will issue. 

      [Model case ②] When promoting an existing company to a regional headquarter

      In case 2, a company in the retail industry increased its capital in 2011 to acquire shares in subsidiaries located in Thailand, Myanmar and Singapore in order to promote the existing subsidiary in Singapore to a regional headquarter. Subsidiaries of other country will transfer shares to Singapore branch.  

      In other words, the Japanese parent company will transfer the shares of other foreign subsidiaries to the existing Singapore subsidiary, and pay cash as consideration of the transferred shares. , thereby establishing a regional headquarter company with affiliated foreign subsidiary.

       

      　　　　　　　　　　　　　【Conceptual diagram in the case of ①②】

       
       
       
       
       [Points to be Noted in Investment of Cash]

      In the case of establishment through monetary investment, since the shares transferred from the parent company in Japan will be valuated at the latest market price, there will be gains and losses between the transfer value and the book value. In general, except for certain countries (Singapore, Malaysia, etc.), gains that will arise in the transfer of shares is  subject to capital  gain tax.

      Therefore, you can also choose a method that does not use cash as a consideration for share transfer, and this method is called investment in kind.

       

      Investment in kind

      The scheme for establishing a regional headquarter in Singapore by  investment in kind, just like investment through cash is roughly classified into two cases, "When creating a regional headquarters by new establishment" and "when promoting an existing company to a regional headquarter".

      Details of Case ③, Case ④ in the above table are as follows.

       

      [Model case ③] When creating a regional headquarters by new establishment

      In the case of manufacturing company in Case 3, in 2009, the Japanese parent company  established a new subsidiary in Singapore. The new  regional headquarter was established by investing the shares of other subsidiaries owned by the same parent company.

      In other words, in this case, a regional headquarter will be established by 100% stake of the parent company in Japan and by investment in kind by other foreign subsidiaries in consideration of the shares to be issued by the newly established headquarter.

      [Model case ④]  When promoting an existing company to a regional headquarter

      In the case of the export / import / sale company in Case ④, in 2007, we invested shares of Thai, Taiwanese, Hong Kong and Korean subsidiaries in existing Singapore subsidiary in kind and promoted it to a regional headquarter. With this method, it becomes possible to set up a headquarter company without using cash as consideration, and you can save time and effort on cash procurement.

      In other words, in this case, the Japanese parent company will establish a regional headquarter  with  foreign subsidiary  by subsidizing other foreign subsidiaries’  shares in the existing Singapore subsidiary in kind.

       

      　　　　　　　　　　【Conceptual diagram in the case of ③ ④】
       
       
       
       
       

       [Items to be Considered by the Japanese Side in Case  of Investment in Kind]

      In the case of investment in kind capital,  tax problem may arise in Japan. For tax purposes, investment in kind is treated as transfer of assets. Therefore, it is necessary to pay attention to tax etc. that may arise at the time of transfer.

       
       

      Requirement for Qualified Cash Contribution

      When a domestic corporation makes an  investment in kind to a foreign corporation, it is classified into qualified cash investment and nonqualified cash investment under Article 62 paragraph 4 of the Corporation Tax Law. With respect to those that fall under the qualified cash equity investment, the valuation of the assets transferred to the foreign corporation is based on the book value, but for the nonqualified cash  equity investment, the valuation is based on its market value. The requirements for qualified cash  contribution are as follows:

       
       
       
       

      Gain / Loss on Transfer

      In the case of establishing a regional headquarter in Singapore through investment in kind, it is considered that it corresponds to qualified investment in kind as the  reorganization of the subsidiary is 100% depends on the group. If it falls under the qualified cash equity investment, the shares will be handed over at the book value, so no transfer profit will be incurred.

       

      Foreign Exchange Gains / Losses

      When other  overseas subsidiaries are investing  in the Singapore subsidiary in kind, the foreign exchange rate fluctuations at the time of establishment and the rate at the time of actual transfer of contribution in kind are considered. In that case,  gains or losses arising from such fluctuations are not gains or losses on the transfer that must be subjected to capital gains tax, instead because they are foreign exchange gains or losses, they are permitted to be included as expense or income.

       

      Appointment of Inspector

      If the acquisition of shares was made through investment in kind, the fact must be stated in the articles of incorporation. In addition, apetition for election of an inspector is required to be held at the court.

      When the value of property is significantly short compared to  the value stipulated in the articles of incorporation, the incorporator and the director at inception date are jointly obliged to pay the deficit.

       

      [Items to be Considered by Singapore in Case of Investment in Kind]

       

      Taxation on Margin of Transfer

      Although  investment in kind is accordingly  invested, for tax purposes it is considered to be similar to stock transfer. In other words, it is deemed that you sold shares as a consideration to the regional headquarters, so it is necessary to pay attention to capital gain tax that may arise on stock transfer.

       However, in Singapore, there is no tax being imposed on capital gains, so it can be said that tax risks is small.
       

    • Singapore as a Business Base

      It is being said that Singapore is the country that is best suited as the most centralized base in the world. The corporate tax rate is as low as 17%, and the reduced tax rate of up to 5 years can be applied when setting up a central office. There are also various advantages such as infrastructure enhancement compared to other countries and easy access to neighboring countries.

      In order to make the most of this merit, there is an increasing number of companies establishing regional headquarters in Singapore in recent years.

      When establishing a regional headquarter in Singapore, they must conduct the establishment procedure in accordance with the Singapore company regulations. In this section, we will explain the flow of company establishment procedures in Singapore and the specific  company regulations concerning company establishment.

    • Establishment by Local Company

      In general, there are certain business types to be considered in establishing a business in Singapore, depending on the purpose of entry and business details, they are: local corporation, a branch office or a representative office.. In this section, we will focus on overseas affiliates in the sense that it serves as a regional headquarter.

       

      ■ Features of Overseas Affiliates in Singapore

      When a foreign corporation established a subsidiary in Singapore, it will be treated as a domestic corporation in Singapore. As an advantage, there are  points where the company can  enjoy  treatment in license approval similar to those local domestic corporations. In addition, procedures for business establishment in Singapore can be completed more easily and quickly than in Japan. The following points can be cited as characteristics of overseas affiliates:

       

      · Can be established with 100% foreign capital

      · There is entry regulation depending on industry

      · Permanent  loss carryforward can be applied (when shareholding virtually does not fluctuate more than 50%)

      · Free activities are possible compared to branch office and representative office

      · Quick decision making is possible

      · Company Secretary (Company Secretary) needs to be appointed

      · You must enroll in a Singaporean citizen holder or a Singapore Permanent Resident

       

      ■ Forms of Corporation Singapore's corporate form can be roughly divided into eight types.Different laws and regulations is applicable for each form. In addition,  branch office and representative office are said to be unique forms based on the Company Law of  Singapore. When registering in such a unique form, as a caveat you must enroll in a Singaporean citizen holder or a Singapore Permanent Resident holder. The subsidiary in Singapore is a form of corporation  based on the Companies Act.

       Forms of Corporation based on Corporation  Law

      · Branch (Branch)

      · Representative Office

      · Sole Proprietorship

      · Partnership (Partnership)

      · Limited Partnership

      · Limited Liability Partnership

      · Form based on the Business Trust Law

       

      In addition, forms based on the Company Law are classified as follows.

       

      【Local company (form based on company law)】
       
       
       
       

      [Unlimited Liability  Company and Limited Liability Company]

      A corporation may be  divided into Unlimited Company and Limited Liability Company according to the scope of shareholder's equity investment at company liquidation.

      The unlimited liability company has no restriction on the legal liability of shareholders to creditors. Therefore, even at the time of company liquidation, the shareholders (present and past shareholders) must bear the unrestrained responsibilities by themselves, beyond the assets the company owes to the creditors. However, in practice, there are only rare cases of establishing this form of corporation. 

      On the other hand, the limited liability company limits the legal liability of shareholders to creditors to the amount of their contribution.

      Limited (Ltd.) Or Berhad (Bhd.) is used as part of the trade name for a limited liability company, except for rare exceptions.

      It is also possible to change from an unlimited liability company to a limited liability company or vice versa.

       

      [Limited Liability Guarantee Company and Limited Liability Company]

      Limited liability company is further classified as limited liability guarantee company and limited liability company.

      The limited liability guarantee company is a form of company on which the  decision of the extent to which the guarantor is responsible  and the range of the amount guaranteed is determined in advance by the company's memorandum of association. Companies that were established in accordance with  this form are companies doing nonprofit activities, such as highly public charity projects and missionary activities.

      LIMITED LIABILITY CO., LTD. Is a  form almost the same as with Japanese company. The legal liability is limited to the unpaid amount of shares held. Limited Liability Co., Ltd. is the most common form of corporation in Singapore because it can issue shares to shareholders and procure the payment as working capital.
       
       

       

      [Public Company and Private Company]

      Limited liability corporation is classified as a public company or a private company depending on the content of the articles of incorporation. If both of the stock transfer restrictions and restrictions on the number of shareholders described below are included in the company's articles of incorporation, it is deemed to be a private company (Article 18 paragraph 1 of the Companies Act),otherwise the company is considered public.

       

      Stock Transfer Restriction

      The format for stock transfer restriction is not stipulated, but generally it takes one of the following:

       

      · It is impossible to transfer shares without approval of the Board of Directors

      · In the case of transferring shares, pre-emptive rights (the right to preferentially purchase shares) must be given to other shareholders

       

      Number of Shareholders (maximum of 50 people or less)

      A joint shareholder is counted as one  excluding those who are former employees of the company or its subsidiaries or the former employees of the company or its subsidiaries that  become employed as a shareholder while employed in the company.

       

      Previously, only public companies were permitted to offer funds by publicly inviting shares and corporate bonds, but due to amendment of the Company Law on April 1, 2004, it became possible for private companies to publicly offer stocks and corporate bonds. Upon public offering of shares or corporate bonds of the company, it is necessary to issue a prospectus in accordance with the relevant provisions of the Securities and Futures Act.

      In addition, it is possible to change from a private company to a public company or vice versa. In this case, a special resolution by the General Meeting of Shareholders is required (Article 31 (1) to (2)).

       

       [Exempt Private Company and Non-Exempt Private Company]

      Private companies are classified as exempt private companies and non-exempt private companies.

      Exempt Private Company refers to a company whose number of shareholders is 20 or less in addition to the fact that there is no corporation in the shareholders that composed the  private company (Article 4 paragraph 1).

       

      ■ Scope of Activities and Restrictions of Overseas Affiliate Company

      Local subsidiaries are  not be subject to any constraints on their activities unless they restrict the project purpose in the articles of incorporation. Therefore, we can do the  activities freely compared with other forms of entry such as branch office and representative office.

      However, it is necessary to acquire a separate license for specific industries.

    • Establishment Procedure of Subsidiary

      When establishing a company in Singapore, the the establishment procedure will be held in accordance with the Company Law. In doing so, we must decide on the following items:

       

      ■Determination of Trade Name

      The trade name refers to the name by which a company displays himself on the market.

      Therefore, of course the company must have a business name. In establishing a company, it is necessary to first reserve and decide the company name to be used in Accounting and Corporate Regulatory Authority (ACRA) (Article 27 paragraph 10).

      Also,  using the same trade name as the existing business’ trade name and using a tradename judged by the regulating government agencies to be not suitable as business name or business names that are prohibited by the regulation is not allowed. (Article 27 (1) ).

      On the other hand, certain restrictions are imposed on similar business names. Specifically, if ACRA judges that there is a risk that general consumers will be confused about the similar trade name, or if an opposition is filed by another person having a similar business name within 12 months after the establishment of the company, ACRA may order the company using the similar company name to change its trade name. This aimed in preventing confusion of general consumers and securing market stability.

      In this case, there is a possibility that you will be asked to change the name afterwards.So, you need to investigate the availability and status of the trade name first before making a trade name reservation. In addition, it is practically necessary to prepare several number of  trade names in advance in preparation for the situation that you will be  forced to change.

       

      ■ Construction of Articles of Incorporation

      There are two kinds of articles of incorporation, the basic articles of incorporation and the by-law articles of incorporation. The Articles of Association is the article in which the regulations and matters required by the law must be stated while the By-Laws of a corporation is an article that describe the company’s operating rules.
       
       
       
       

      [Shareholder, Director]

      There is no strict requirements in terms of being a shareholder or a director, regardless whether the shareholder be an  individual or corporation, whether a citizen or resident of the country or not. I It is necessary to select directors from among the  shareholders or not (subject to the condition that the director is 18 years of age or older in the case of individuals). It is possible for one person to be a shareholder and director at  the same time.

      In Singapore, "Representative Director" has  no legal status just l  like in Japan, and for ACRA it will be registered as "Directors".

       

      [Capital]

      In Singapore there is no minimum capital system unlike  in other countries. Therefore, fundamentally it is possible for a Singapore corporation to be establish from 1 S dollar capital. I In many cases, the authorized capital amount and the paid-up capital amount are made to be equal in practice in order to avoid excessive capital registration fee.

      Also, payment period must be done within 2 months after the establishment of the corporation.

      Furthermore, as a point greatly different from Japan, it is not necessary to submit a proof of investment contribution etc  before proceeding to the registration of the establishment. From this point, we can also see that in Singapore authorities prioritize the establishment of a company quickly rather than securing a sound financial base, unlike in Japan.

       

      [Business Purpose]

      It is optional in Singapore to describe the  purpose of the company operation to the  articles of incorporation. Therefore, a company can be engaged in any business operation unless there is a restriction stated  the articles of incorporation.  However, it is necessary to describe the main business purpose in the Business Registration Certificate (B / R). A company must secure necessary license from respective authorities if it will operate under  financial services, food and beverage industry, schools / education, real estate industry, recruitment industry etc.

       

      Required Documents

      In establishing a subsidiary in Singapore, the following documents are required:

       

      · Copy of the articles of incorporation

      · Establishment application form

      · Notice to ACRA

       

      ■ Method of the Establishment Procedure

      To establish a subsidiary in Singapore, follow the procedures below:

      In Singapore, it is possible to establish  quickly a local subsidiary. Specifically, it can be established around 2 days as long as necessary documents are available.
       
       
       
       

    • Procedure After the Establishment of Local Subsidiary

      ■ Corporate Secretary (Company  Secretary)

      Under the Corporate Law of Singapore, the assignment of a corporate secretary is mandatory. Because the corporate secretary must not be absent for more than six months (Article 171 (4)), the company must appoint one  within six months from the date of establishment. At the time of election, at least one Singapore resident (natural person) must be appointed by the Board of Directors (Article 171 (1)). The corporate secretary's role  plays a fundamental function in the  company management. Therefore, the director is obliged to appoint an appropriate person having certain ability, experience or qualification as a corporate secretary (Article 171). Practically, regarding the appointment, there are  cases where directors seeks corporate secretary from special company or law firm.  In addition, in the case of a company that has only one director, the director must not concurrently serve as a corporate secretary (Article 171 1E).

       

      The specific function that must be performed by the corporate secretary is not stipulated in the Corporate By-Laws, however in general, his/her role falls under the company’s compliance matters as described below: 

      Registration work for ACRA of registrable  matters under the Companies Act

      · General shareholders meeting

      · Notice of convocation at the Board of Directors

      · Preparation of necessary documents such as minutes

      · Shareholder registry book

      · Management of statutory documents and summons and stamps of articles of incorporation etc.

       

      ■ Holding a Board of Directors Meeting

      The Board of Directors Meeting is required  to be held at least once a year for the purpose of deciding the date of the General Meeting of Shareholders and the content of resolutions. Also, a meeting is required in case of important changes or amendments to be made in the company. 

      ■ Holding General Shareholders' Meetings

      Under the Singapore Company Ordinance, a general meeting of shareholders shall be held within 18 months after the establishment of the company.  The second meeting must be held within fifteen (15) months from the last general meeting of shareholders. The resolutions at the general shareholders meeting are as follows:

       

      [Allocation of Stock]

      Decide the paid-in capital within the range of the authorized capital and allocate shares to shareholders. There are no restrictions on the qualification of shareholders, whether a shareholder be an underage or not, or whether be an individual or a corporation.  You can also register a nominee shareholder (nominee).

       

      [Company Registered Address]

      Decide the address to register as head office.

       

      [Establishment of Bank Account and Determination of Settlement Date]

      A bank account can be opened  after acquiring corporate application permission.

      However, shareholders need to go directly to the bank for some problems may arise in signing necessary bank documents. .

      Also, after opening the corporate  bank account, we will decide on the settlement date. The first settlement date must be set within 18 months from the date of establishment.

       

      ■ Company Settlement

      The company's account settlement must be held in the first general meeting of shareholders.  The approval of statement of accounts such as the statement of comprehensive income and the financial statement must be obtained at the same time of settlement of accounts (Article 175). Report on settlement of accounts must be made six months after the settlement date. While its approval must be on the date of the shareholders meeting, the second and succeeding shareholders meeting is fifteen months after the previous one.

      The settlement date can be decided at the time of company establishment. However, the settlement date once determined cannot be changed unless there is a valid reason.

      In addition, it is required that the books of accounts and their related documents be stored for five years after settlement.

       

      Furthermore, under Singapore Companies Act, in principle, all companies are required to undergo accounting audit regardless whether it is a  public company or private company. The accounting auditor needs to be appointed within three months after the company is established, and after that it must be appointed for each general shareholders meeting (re-election is also acceptable).

      Examples of unnecessary audit by accounting auditors include the following companies:

       

      · Dormant Company

      · Private companies with less than 20 shareholders and with sales of less than 5 million S dollars in the relevant fiscal year.

       

       

      ■ Submission of Annual Report

      Apart from the approval of the financial statements, in principle, the company must submit the financial statements and the annual report to ACRA within one month from the date of the annual shareholders meeting (Article 197).

      Regardless of whether it is a public company or a private company, the submitted data will be publicly available.

       

      The contents of the annual report are as follows.

       

      · Director's report

      · Director's oath

      · Independent auditor report (unnecessary for corporations exempted from audit)

      · Comprehensive income statement

      · Statement of financial position

      · Statement of changes in equity

      · Cash flow statement

      · Notes to Financial Statements

       

      ■ Penalty

      A penalty will be imposed if the annual financial statements submission is delayed.

      As a general rule, no penalty will be imposed if the delay is less than 30 days, but a penalty will be incurred from a delay of 30 days or more. The management must be careful because the amount of penalty will  increase according to the delay period and a fine of up to 350 S dollars may be imposed.

    • Establishment Using Shelf Company

      Purchasing a shelf company is a method of purchasing an existing corporation (a corporation whose  establishment was already completed by the incorporator but lef with no acitivity) and acting as a base for the corporation.

      By using the shelf company, it is possible to save time and trouble of the usual  establishment procedure of new company and quick registration is possible.

      However, as the period required for company establishment procedures in Singapore has been shortened in recent years, the demand for shelf companies is decreasing.

      Moreover some shelf companies also possess  approved special licenses. Therefore, it will be more advantageous for the purchaser of the shelf company if the same necessary licensed is required, since the shelf company being purchased already has the license. 

      In addition, as a matter of course, since the company name and the articles of incorporation are already decided at the time of purchase, the shelf company is required to change the articles of incorporation, etc. in order to operate as a new company. When changing the company name, just as with the newly established company, check if the new company name to be used is available and apply for the change of registration to ACRA if there is no problem incurred in the name to be used. At that time, it will take about two weeks to complete the re-creation of related documents.

       

      The following is a general procedure for purchasing a shelf company.
       
       

       

       
       [Reference material ①]
       


       

       
       

      [Reference material ②]

       

       

       Local Company Information

       

      Required Documents

       

      【Documents Related to Headquarters Information】

      ①    Certificate of head office registry (1 original copy  and its English translation version, within 3 months from date of issuance)

       

      【Documents Related to the Information of  Overseas Affiliated Subsidiary】

      ① A copy of the front and back of the National Registration Identity Card (NRIC) of all officers or a copy of the passport

      * At least one member of Singapore corporate director is a resident of Singapore or a holder of permanent residence

      The local director  must be PR (Permanent Resident)

      ※ The local director needs to sign himself / herself

      ※ When the director is staying in Japan, it is necessary to sign at the Japanese notary office

      ※ When delegating to an agent,  a notarized power of attorney, a certificate of incumbency, a certificate of registration (within 3 months from date of issuanc) and a seal stamp certificate are needed

       

      ②    Certificate of Singapore corporate registration address (copy of rental agreement etc.)

       

      ③    Company information or or agent information (name, address, contact address)

       of corporate or company secretary * For individuals, a copy of the back of the NRIC or a copy of the passport

       

      ④ Corporate information or Agent information (name, address, contact address) of a corporate auditor * Companies with less than 20 individual shareholders and total sales of  less than S $ 5 million are exempted from audit of financial statements.
       
       
       
       
       
       
       
       
       
       

    • Latest News & Updates

      * Revised Company Law Second Phase

      The Singapore Revised Company Act in 2014 makes  major amendment in the revised items, the first phase took effect on July 1, 2015 and the second phase took effect on January 3, 2016. The main revisions of the second phase on private company (Private Company) are as follows:

      1 Director / CEOThe revised Corporate Law defined an express statement on the CEO legally. The CEO is the chief executive officer of the company management. He/she does not necessarily have to be a director. The revised Corporate Law includes CEO in its title although the same was not included on the previous version. If you appoint a CEO (does not need to be a director), registration is required,also, Many of the legal obligations being done in the Division of the Board of Directors are  imposed.

      Changes in information on directors etc., such as change of name, address, passport number certificate and others, must be registered within 14 days. Any registered address even if  not a resident address can be accepted as long as it can be contacted.  (same domestic, not post office).

      An express statement provision was also established for the election and dismissal of directors. Regarding the appointment of directors, which provision is not stipulated in the second phase , unless otherwise prescribed in the articles of incorporation, they were regarded as ordinary resolution items in the general meeting of shareholders. Please take note that registration to  ACRA within 14 days after appointment is required. The dismissal of directors is also clarified in the same way and the requirements can be changed in the articles of incorporation, but unless otherwise stipulated in the articles of incorporation, it was also taken as an ordinary resolution of the General Meeting of Shareholders. In addition, for the resignation of the Board of Directors ,as long as there is one resident director remains in the board that will be available in any legal cases that needs a resident director, resignation by written notice is allowed.

      2 Articles

      Before the amendment, the company's articles of incorporation were divided into two, Memorandum on the Association and Articles of Association. But after the second phase, it was unified into one article . In addition, it is stipulated that after the enforcement of the revised provision the basic articles of incorporation and the by-laws are automatically considered as Constitution. So there is no need to create a new  articles of incorporation.

       

      23 Shareholders and Shareholders Meeting

      Regarding the transfer of shares and capital increase, in effect of the revised Company Law, registration to ACRA within 14 days is required. In addition, ACRA decided to consolidate shareholder registry.

       

      4 Debarment

      ACRA has the authority to take measures to prohibit directors and company secretaries of companies whose registrations are delayed by more than 3 months to enter as new directors or company secretaries of another company.

       

       * The Latest Trend of Singapore International Arbitration

       

      According to the annual report published in February 2016, the total number of arbitrations filed in the International Arbitration Center in Singapore in 2015 was 271, the highest record in the past. The draft amendment revised in 2016 has been released and major revised points are as follows.

       

      ① We will establish requirement for the consolidation of multiple claims and participation of third party's procedures and necessary procedure rules for smooth process.

       

      ② To make it obligatory for the arbitral tribunal to declare the termination of arbitration proceedings within 30 days after the hearing or final submission of the document. The amended rules prompt the arbitral tribunal to submit a faster arbitration award draft by setting a deadline for closing the proceedings.

       

      ③  Expedited Arbitration is the presence or absence of  holding a hearing for  arbitrator's discretion, also, with regard to the emergency arbitration, it is clearly stated that   an emergency arbitration copyright   must be made within 14 days from the arbitrator selection.

       

       

      Details will be updated soon.

    • Overview

      ■ Singapore's Legal System

      Currently, Singapore has established its own law based on the  case law (hereinafter common law). However, in the past, it was based on common law of UK.

      Common law refers to the legal system which is based on the consensus accumulated by many precedents. In other words, it is a law also well-known as based on common sense and custom that was used as judgement in the court, it is not based on details of the law being enacted.   

      In Singapore, codification is another important element that can be a source of law other than the common law method.

      This process of writing laws is broadly divided into law and dependent legislation.

       

      [Law]

      In addition to the law established by the Singapore Diet, they also includes laws enacted by institutions with legislative power over the past in Singapore, such as the British Parliament. The law enacted by these agencies will continue to be in force at the present unless it is abolished.

       

      Subordinate Legislation

      Subordinate legislation is not a kind of law that is enacted directly by the Diet but by laws or other administrative agencies. It is a law that is enacted based on the authorization of the law or other lawful authority.

      Among   the subordinate legislation currently in force, "Singapore Republic Dependent Legislation" is famous.

       

      The company law in Singapore is being called as the Companies Act, which was established  from the time it was separated from Malaysia in 1966. It has been revised every 1 to 2 years thereafter.

      When a foreign company establishes and operates a company in Singapore, it will be subject to the Singapore Companies Act. In addition, corporate institutions, bankruptcy, collateral, listing etc. are also stipulated in the same act.

    • Organization of the Company

      Many enterprises entering Singapore are  limited liability companies and local private corporations. For this reason, we will explain about the institution design of a private company.

      The biggest difference in designing institutions between Singapore and Japan is whether  there is a corporate auditor or  board of corporate auditors system or none. In Japan, appointment of corporate auditors or board of corporate auditors is required in certain corporations in order to audit and supervise the execution of duties of directors for the benefit of protecting shareholders and creditors. On the other hand, appointment  in Singapore is not required. Other differences in basic institution design in Singapore and Japan are as follows.
       
       
       
       
       

    • Shareholders and Shareholders Meeting

      ■Number of Shareholders

      Just like in Japan, the required number of shareholders in Singapore is 1 or more.

       

       

       
       

      ■ Shareholder’s Rights

      Similar to Japan, the Singapore Companies Act also has minority shareholders' rights granted so that minority shareholders will not suffer in unforeseen damage caused by majority shareholders and directors.

       

      As right to protect the interests in advance, we have the right to request copies of the articles of incorporation (Article 40 of the Company Law), the registry of shareholders, the conference proceedings of the Board of Directors, and the documents related to settlement of accounts.

      Furthermore, as a result of exercising these rights and acquiring information, shareholders can propose agenda to the general shareholders meeting to prevent and correct in advance  problems caused by inappropriate decision making of directors and companies (Article 183).In addition, in order to protect his/her interest with regards to unfair treatment, a shareholder is permitted to exercise his/her  right to file in court (Article 216), the right to demand for dissolution to the court (Article 254) and other the representative action (Article 216), etc..

      With these exercise of rights, minority shareholders can avoid losses that may be incurred after such incident.
       
       
       
       

      ■General Shareholders Meeting

      The Board of Directors will decide on their annual meeting the schedule and resolutions of the general meeting of shareholders. The general meeting of shareholders for the first year is stipulated to be held within 18 months after the company establishment under the Corporate Law of Singapore. The second and succeeding meetings must be held within 15 months from the general meeting of shareholders in the previous year.

      In addition, the general resolution at the general meeting of shareholders shall be resolved by a vote of the majority of shareholders with voting rights present at the meeting. In the case of a special resolution, a vote of three or more quarters of shareholders with voting rights present in the meeting is required.

       

      ■ Types of General Meeting of Shareholders

      The general meeting of shareholders can be divided into general shareholders meeting and extraordinary shareholders meeting.

      At the ordinary general meeting of shareholders, statutory resolutions such as approval of the settlement of accounts and determination of dividends are being decided (other resolutions are also possible).

      On the other hand, at the extraordinary general shareholders' meeting, important resolutions such as assignment or merger of important assets and other relevant matters must be resolved.

      In addition, a corporation’s series of meeting also include organizational meeting,  a meeting body similar to the shareholders meeting.

      While the founding general meeting is composed of incorporators and resolves basic matters (establishment of shares etc.) regarding the establishment of the company.
       
       
       
       

      ■Venue

      As there is no provision under the Corporate Law of Singapore as to the place of the general meeting of shareholders, it is generally considered to be stated in the articles of incorporation in the same way as in Japan. The place where the meeting will be held must be indicated  in the notice of convocation.

       

      ■ Convener and the Convocation Notice

      Convocation holder etc. The comparison table between Singapore and Japan is shown below.
       
       
       
       

       As mentioned above, in principle, there is no difference between the two countries regarding the convocation of meeting except for the deadline.

      In other words, in both countries, there is also a common point that shareholders who hold more than a certain number of voting rights can request convocation of shareholders' meeting in the general meeting of shareholders (Article 176, Article 177). As an exception to convocation, on the other hand, shareholders are permitted to call a general shareholders meeting under the permission of the court in Japan (Article 296 (3), Article 297 (4)).

       

      As for the deadline of convocation notice, the Singapore Company Law is considered to be more protective to shareholders than the Japanese Company Law. In other words, because the deadline of notice is stipulated one week earlier than that of Japan both in public and private companies, shareholders are given opportunities for preparation and thus, can be able attend at the general meeting of shareholders, resulting in a strong shareholder's rights protection. 

      Regarding notification, generally, written notice is required  in both countries. However, as an exception, in Japan notification by electronic data is allowed as stipulated in the company law. (Article 387).

      On the other hand, as Singapore adopts company secretary system,  the company secretary is the one who will prepare and send notice of convocation to the shareholders, a point that is different from Japan.

       

      ■ Chairman of the Shareholders Meeting

      Regarding the authority of the chairman of the general meeting of shareholders, a comparison table between Singapore and Japan is shown below.
       
       
       
       

      In the above table, Singapore Company Law is not clearly stipulated. But in principle there is no difference in both countries regarding the purpose of the system.

      The method of election of the chairman must be included in the resolutions to be passed in the shareholders meeting. The decision will be based on the vote of the majority of the shareholders present at the meeting. Moreover, unless other method of selecting the chairman is stipulated in the articles of incorporation, the method of appointment may also be used. 

      One of the authorities given to the chairperson of the meeting is  to maintain the order of the conference body. Specially in Japan, the chairperson is given an authorization to order any shareholder who will cause disruption to exit from the shareholders meeting. (Article 3, Article 5, paragraph 2 of the Japanese Companies Act). Such authority can prevent shareholders  who will unjustly obstruct the management of shareholders' general meetings, such as general meeting organizations. As a result, it is possible to ensure that the   general meeting of shareholders will be held smoothly

      Also, although there is no stipulation regarding the qualifications of the chairman of the shareholders meeting, as long as he/she is a shareholder, in reality and in most cases, the president of the company is the one stipulated in the articles of incorporation as the chairperson. On the other hand in Japan, at the general shareholders' meeting convened by minority of shareholders, even though the chairperson was stipulated in the articles of incorporation if necessary, it is possible to change the chairperson through appointment for the protection of the minority of the shareholders.

       

      ■ Resolution of General Shareholders Meeting

      Under the Corporate Law of Singapore, there are two types of resolution at the General Meeting of Shareholders: Normal Resolution and Special Resolution.

      An ordinary resolution is a resolution method to be carried out on ordinary resolution items, while a special resolution is a resolution method applied to important matters of the company (mergers, etc.). For that reason, the two resolutions differ in terms of resolutions, quorums and approval requirements.
       
       


       

      [Quorum]

      In both resolutions, attendance by two or more shareholders is required if special provisions for the quorum are not stipulated in the attached by-laws. Normally, to prevent passing of resolutions easily, a larger quorum is being set to special resolutions than ordinary resolutions. 

      [Voting Rights]

      Regarding voting rights, we also adopt the principle of 1 share per 1 voting right as in Japan.

      Furthermore,  issuance of shares without voting rights is also permitted.

      Also note that shares without voting rights are not included in "voting rights of shareholders who attended the shareholders meeting" which is stipulated as a requirement for the resolution of the general meeting of shareholders.

    • Board of Directors

       
       

      ■ Number of Directors

      Under the Corporate Law of Singapore, one or more directors (at least one resident in Singapore) are required.

      Furthermore, as a requirement, it is necessary that the director  be a natural person over the age of 18. For public companies and publicly-owned subsidiaries, those who are over the age of 70 cannot take office as directors unless appointed at the annual shareholders meeting (Articles 145, 153).

      Also, since board of directors is an important organization of the company, the directors inauguration is prohibited if he/she meets the following requirements.

       

      • Bankruptcy

      • Person who received a disqualified order from the court

      • A person who has been convicted of by fraud or misconduct

      • Persons who repeatedly violate the registration obligation under the Companies Act

       

      ■ Election and Dismissal of Directors

      There is no provision under the Corporate Law regarding the election or dismissal of directors. In practice, election or appointment and dismissal of directors is often specified in the articles of incorporation (including the articles of incorporation) .

      However, in the case of a public company, a director can be dismissed even before the end of the term of his office at ordinary resolution of the General Meeting of Shareholders, regardless of the stipulation in the articles of incorporation (Article 15 2).

       

      ■ Term of Office of Directors

      As with appointment and dismissal, there is no provision under the Company Law, it is common to follow the provisions of the articles of incorporation.

       

      ■ Board of Directors

      It is mandatory to hold a meeting of the board of directors at least once a year. Since there is no provision in the Corporate Law of Singapore concerning the method of convocation of the Board of Directors, in general, the Company's Articles of Incorporation prescribe the method of convening the  meeting and the quorum required.

       

      In addition, general principles are stipulated by the non-statutory guidelines of the Board of Directors. Details are as follows:

       

      · Act sincerely for the benefit of the company

      · For proper purposes, the authority must be exercised for the benefit of the shareholders as a whole

      · Do not delegate the authority to others unless it is appropriate

      · Pay attention, demonstrate ability, and make efforts

      · It is necessary to avoid conflicts of interest between individuals and the company

      · Do not engage in any important transactions except in compliance with the law

      · Do not gain profits by using status

      · Do not use the property or information of the company illegally

      · Do not use personal status and receive personal benefits from third parties

      · Comply with the company's basic articles of incorporation and the company's articles of incorporation

      · It is necessary to attach appropriate accounting books

       

    • Other Institutions

      ■ Accounting Auditor

      In Singapore, listed companies need to establish an accounting auditor (Article 201).

      The appointment must be made by the Board of Directors within three months from the establishment of the company. However, if a company is considered as   a dormant company etc., auditing by the accounting auditor is substantially unnecessary, so appointment will also be not necessary.  (Article 205).

       

      ■ Statutory Auditors and Supervisory Board

      In Singapore, corporate auditors and Board of Corporate Auditors are not established as one of the company’s institutions as described above.

      In that sense, we can think that the auditing and supervision system for directors from within the company is not as strict compared to developed countries like Japan.

    • Stock

      ■ Preferred Stock

      Preferred stock refers to shares that can receive priority treatment on distribution of residual assets and dividends compared to ordinary shares (Article 75). Matters regarding preferred stock in Singapore is similar to those of Japan. It is necessary to include the description of stocks in the articles of incorporation.

      Below is a summary of the items stipulated in the articles of incorporation:.

       

      · Whether it is cumulative preferred stock or not

      · Payment of dividends, distribution of residual assets, presence or absence of respective priority

      · Presence or absence of voting rights

       

      In cumulative preferred stock, if the payout of one year does not reach the preferred dividend amount, the amount that was not paid will be accumulated in the current year and the payment of such amount will be prioritized in the current year’s declaration. (non-cumulative preferred stocks are preferred stocks that are not accumulated in the following years when not paid.)

      Basically the preferred stock is limited in voting rights. This is to facilitate financing from potential shareholders who are not interested in management of the company.

       

      Shareholders interested only in dividends demand a lot of monetary returns from the company. Therefore, they do not need voting rights which is held by ordinary shares.

      Therefore, by restricting "voting rights" owned by the original stockholders, the company can increase the dividend that can be received by stockholders holding shares with voting right.

      Doing so makes it easier to raise funds from potential shareholders who are not interested in the company's management. In addition, the company also has the merit of being able to prevent unstable management of accompanying raising funds.

       

      ■ Treasury Stock

      In Singapore, in principle, acquisition of treasury shares and holding company's shares is prohibited (Article 21, 76).

      On the other hand, in principle, the acquisition of treasury stock is permitted in Japan.

      If you allow free acquisition of treasury shares in the first place, the following harmful effects may occur: 

       

      [Adverse effect due to acquisition of free treasury stock]

      · Contrary to the principle of capital maintenance (capital refunds weaken the asset base)

      · Contrary to shareholder equality principle (validity of price in case of transaction with specific shareholders and presence or absence of sale)

      · Harm the company control and the fairness of stock trading (such as fluctuation of the shareholding ratio and the manipulation of stock price in the case of transactions with specific shareholders etc.)

       

      Various regulations are established to prevent such harmful effects.
       
       

       
        In this way, it is only common  that the acquisition is approved in principle or not and   the  regulations related to the acquisition procedure exists.

       

      Procedure Regulation

      Acquisition of treasury stock approved in Singapore is as follows.

       

      · Acquisition of preferred shares with purchase request (Article 70)

      · Acquisition by the method approved at general shareholders meeting (Article 76C)

      · Acquisition from the outside  market based on the agreement approved by the special resolution of general shareholders meeting (unlisted company 76D article)

      · Acquisition based on the agreement approved by the special resolution of shareholders general meeting (indefinite sales contract) (Article 76DA)

      · Acquisition of treasury shares from the market when approval is given by ordinary resolution of shareholders meeting (Listed company 76 E)

      · Acquisition under the order of the court (Article 216)

       

      In order to acquire treasury shares, in addition to the above procedures, it is necessary to stipulate in the by-laws of the company that it is possible to acquire treasury stock i .

       

      Funding Restrictions

      Acquisition of treasury shares is against the principle of capital maintenance as described above. Therefore, various regulations are established to secure company property.

      In Singapore, the purchase of treasury stock is regarded as the amount not exceeding the amount of liabilities of the company (Article 76C etc.).

      On the other hand, it is basically similar in Japan, and the financial resources for purchasing treasury stock are within the scope of the distributable amount (Article 461 etc.).

       

      Director's Responsibility

      A director who gave permission to acquire treasury shares knowing that it will be in excess of  company’s liability amount will be subject to a fine with maximum amount of 100,000 S dollars or imprisonment of up to  3 years (Article 76).

      In Japan, on the other hand, in the event of excessive liability amount to the purchase of treasury stock, the director who purchased the treasury stock will be jointly and severally liable for the company (Article 465).

      The provisions related to the responsibilities of these directors have the function of maintaining and securing corporate property and protecting creditors, etc., in order to secure the damage of the company's property in the event of acquiring treasury shares afterwards. Moreover, based on these regulations,  it also has the function of preliminary prevention such as checking the acquisition of inadvertent treasury stock by directors.
       

    • Withdraw (Liquidation)

      The company liquidation is the process of converting  the company's assets into cash and paying its liabilities. But if surplus funds still exist after the payment of liabilities, the procedure of distributing them to the shareholders is to be performed.

      The Bankruptcy Law in Singapore is roughly divided into two types, Bankruptcy Law Against Individuals and Bankruptcy Law Against Corporation.

      I will explain the bankruptcy law against corporations here.

      The outline of liquidation in corporate bankruptcy law is as follows.
       
       
       
       

      ■ Optional liquidation

      Arbitrary liquidation refers to liquidation that does not involve the court. Liquidation by shareholders is a liquidation proceeding on the assumption that all corporate obligations are paid, and the company to be liquidated has payment ability.

      On the other hand, the liquidation by the creditor means a liquidation procedure necessary in the case of excess unpaid liabilities, and refers to the liquidation procedure when the company has no payment ability. In other words, in the case of excess liability, the effect of liquidation procedure may have a big influence on the interests of the creditors, so procedures different from ordinary liquidation are stipulated.

       

      ■ Court Official Resolution

      Distribution by court officials differs from arbitrary liquidation as described above in that the court is involved, but in terms of liquidation procedures in the absence of payment capacity for the subject company to be liquidated,  commonly  creditors' liquidation procedures will be followed.

      Furthermore, Japan's special liquidation is similar in terms of liquidation under the control of the court.

      The procedure is limited to creditors, etc., and the factors for the application are also stipulated in a limited manner. Specific factors are listed as follows (Article 254):

       

      · When the company made a decision to the effect that the court will liquidate the company by a special resolution

      · When the company fails to default due to submitting a statutory report or conducting a statutory general meeting of shareholders

      · When the company does not start business operation within one year after its establishment, or when the business has been suspended for a whole year or more

      · The company cannot repay its obligation

      · A case in which a director acts on the part of the  company in a manner that is deemed to be unfair  to other parties, such as the fact that a director acts for his / her own interests rather than for the interests of the whole other stakeholders

      · The court thinks that it is fair and equitable to liquidate the company

       

    • Trends in the Company Law in the Future

      Amendment

      In the future, the Singapore Company Law will be revised substantially as follows.

       

      · Exemption from accounting audit by introducing Small Company system

      · Deregulation of dormant companies

      · Shareholders who hold shares for others have the possibility of prohibiting the exercise of voting rights

       

      For that reason, attention should be paid to the trend of revision in the future, and I think that it will be possible to enjoy the maximum benefits of revision by collaborating with appropriate legal experts when entering Singapore.