Inward Corporate Redomiciliation To Singapore.
Legal News & Analysis - Asia Pacific - Singapore - Regulatory & Compliance
9 January, 2018
As of October 11, 2017, foreign companies are able to transfer their registration from their original jurisdiction to Singapore as per the new Companies (Amendment) Act 2017. Once the foreign company has successfully transferred its registration to Singapore, it will come under the purview of the Accounting and Corporate Regulatory Authority of Singapore (ACRA) and will have to comply with the regulatory requirements under the Companies Act (Cap 50). This will enable foreign companies to have a presence in Singapore without having to set up a subsidiary, which often involves some amount of restructuring of the business and could lead to operational disruptions.
Why Consider Redomiciliation?
The companies’ corporate history, branding and identity will be preserved if the foreign company changes its domicile under this regime. With an appealing tax environment, simple regulatory framework for many industries and strong business incentives, Singapore is an attractive place for companies to be registered.
Improved access to funds, financial incentives and capital markets, or wanting to be closer to investors are other reasons a company may choose to consider redomiciliation. The new regime allows a company to exploit Singapore’s highly skilled workforce, stable political and legal infrastructure, and gives it access to regional markets.
Furthermore, as a Singapore company, the foreign company would not be subject to capital gains tax payable in Singapore or restrictions on foreign ownership of businesses in the majority of industry sectors.
What Requirements Need to Be Met to Transfer Registration of a Foreign Company?
The foreign company has to be either a public or private company limited by shares. The minimum requirements are set out in the Companies (Transfer of Registration) Regulations 2017 (the “Regulations”).
The foreign company must meet any two of the following requirements:
- the value of its total assets must exceed S$10,000,000;
- its annual revenue must exceed S$10,000,000; or
- it must have more than 50 employees.
Where the foreign company has subsidiaries, whether it meets the criteria specified above will be determined on a consolidated basis using applicable accounting standards. If the foreign company is a subsidiary, then it may satisfy the criteria stated above on either a single entity basis or if its parent (being Singapore incorporated or registered through a transfer of registration) meets the size criteria.
There should be no ground on which the applicant company could be found to be unable to pay its debts (including debts that fall due during the period of 12 months immediately after the date of its application for redomiciliation) and the value of its assets must not be less than the value of its liabilities (including contingent liabilities).
The foreign company cannot be financially distressed. No receiver or manager may be appointed to have possession of, or have control over, any of the foreign company's property and the foreign company must not be under judicial or administrative management (ongoing or pending), under administration or have made a compromise or arrangement with its creditors, nor be in liquidation or wound up (ongoing or pending). If the foreign company is able to satisfy ACRA that it will apply for insolvency measures under the Companies Act, ACRA may exempt it from this solvency requirement.
The law of its place of incorporation must permit outward redomiciliation. Furthermore, the foreign company must have obtained all consents and waivers as needed, given notice to all existing shareholders and contract counterparties regarding its transfer of registration, and met all its filings and other statutory obligations required in its home jurisdiction.
The foreign company must apply for a transfer of registration in good faith without the intention to defraud its existing creditors.
How to Apply to Transfer Registration of a Foreign Company
The Regulations require applicants to first complete the prescribed form and pay a nonrefundable fee of S$1,000 to ACRA.
Furthermore, the directors of the foreign company will be required to declare that the company meets the minimum requirements as set out above, that each director agrees to act as director for the company after it has successfully redomiciled and that the director is neither disqualified nor disbarred from acting as a director.
The foreign company must also submit a certified copy of its constitution and certificate of incorporation.
What Are the Effects of Redomiciliation?
Redomiciliation does not:
- create a new legal entity;
- prejudice or affect the identity of the body corporate constituted by the redomiciled company or its continuity as a body corporate;
- affect the obligations, liabilities, property rights or proceedings of the redomiciled company; or
- affect legal proceedings by or against the redomiciled company.
What Other Issues Should Be Considered?
- How the transfer would be treated in the foreign company’s home country in addition to tax consideration in Singapore.
- The foreign company will only be able to domicile if the original jurisdiction in which the company is registered has a redomiciliation regime, or at least allows for inward redomiciliation.
- At present, Singapore does not have an outward redomiciliation regime. Therefore, if the foreign company decides that Singapore is not a suitable jurisdiction to conduct its business, there is no option to reverse the transfer of registration.
- It can take up to two months from the date all required documents are submitted to process the redomiciliation.
- Foreign companies should register pre-existing charges within 30 days of registration.
For further information, please contact:
Jaya Malhotra, Duane Morris & Selvam