In order to enhance competitiveness as a business hub, Singapore has announced an inward re-domiciliation regime allowing foreign companies to transfer their registrations to the city-state.
Other than registering a subsidiary or branch, foreign businesses can now opt to re-domicile and incorporate in Singapore. Nevertheless, there are still minimum requirements that one foreign entity needs to satisfy in order to apply for such an option.
1. What is Re-domiciliation?
Re-domiciliation is a process in which a business entity transfers its registration from an original jurisdiction to a new one. With the introduction of the re-domiciliation regime in 2017, under Part XA of the Companies Act and the Companies (Transfer of Registration) Regulations 2017, foreign companies are now allowed to re-register to be Singapore companies.
Despite the similarity of establishing companies’ presence and starting operations in Singapore, re-domiciling to the city-state is quite different from setting up a subsidiary or branch.
When a foreign company aims for setting up a subsidiary, there will be 2 separate companies which are the parent company and its Singapore subsidiary. Particularly, the subsidiary is a legal entity separated from the share-owning parent company and it is regulated under Singapore laws. Meanwhile, the parent is still deemed as a foreign company that is governed and regulated under the laws of that foreign jurisdiction.
On the other hand, a branch in Singapore is only considered as an extension of a foreign parent company. A branch is not a Singapore-resident entity and the parent company is still governed and regulated under the laws of its original jurisdiction.
By contrast, by re-domiciling to Singapore, a foreign company can be converted into a Singapore-registered company, hence a resident company, primarily being governed and regulated according to Singapore laws. All the rights and liabilities of the applying foreign business would then be transferred over to only one re-domiciled Singapore entity.
2. Reasons for Re-domiciling to Singapore
The reasons why a foreign company can consider to re-domicile to Singapore are:
Similar to a resident company, re-domiciliation enables foreign companies to freely take advantage of the political stability, business-favorable policies, and excellent-skilled workforce.
Re-domiciliation brings good commercial value. Specifically, by applying for re-domiciliation, a foreign business entity can legally change its overseas registration of incorporation to Singapore while all of the track records and other related documents still remain intact. Hence, the corporate history, branding, and identity can be fully preserved, which is extremely important to foreign companies that have been in operations for many years.
Furthermore, re-domiciliation is an option of convenience and time-saving since it could be costly and especially time-consuming to undertake the long process of dissolving a business entity in a foreign jurisdiction and then registering a new company in Singapore.
- Re-domiciliation allows a foreign company to leverage on Singapore’s Free Trade Agreement memberships and its favorable tax system for businesses.
- Re-domiciliation to Singapore expresses the commitment of a foreign company to incorporate in the city-state.
- Re-domiciliation transfers all the rights and liabilities of a foreign business over to only one re-domiciled Singapore entity, hence eliminating the need for contract assignment within the same corporate group in case of registering a subsidiary.
3. Requirements of Re-domiciliation to Singapore
Essentially, under the Company Act, a foreign business entity is regulated to be registered as a company limited by share in Singapore after re-domiciling. Other than having the ability to adapt the legal structure of a company limited by share, the applying foreign corporate entity needs to meet the following minimum requirements:
The foreign entity must satisfy two out of the following three criteria:
- The value of total assets is more than S$10 million.
- The annual revenue is more than S$10 million.
- Total employees are more than 50.
All of the following criteria must be met:
- Under no circumstances could the foreign entity be proven unable to pay its debts;
- The foreign entity has to guarantee its ability to pay debts as they fall due over the next 12 months after the date of re-domiciliation application.
- The foreign entity has to guarantee its ability to pay debts in full within 12 months after the date of winding up (may it be the case in the next 12 months after the re-domiciliation application).
- The total assets’ value of the foreign entity is more than the value of its liabilities, including contingent liabilities.
- There must be laws regulating overseas transfer of registration in the original foreign jurisdiction and the foreign entity must comply with all the requirements regulated in such laws.
- The foreign entity has gone through the first financial year in the original jurisdiction at the time of applying for re-domiciliation to Singapore.
- The application for re-domiciliation is believed to not serve improper purposes.
- The foreign entity must meet the other requirements regulated in Section 7 (1) of the Companies (Transfer of Registration) Regulations 2017 such as not being under any judicial management, or not being wound up.
4. How to Re-domicile to Singapore
After making sure to satisfy all the above-mentioned conditions, a foreign business can begin the process of applying for re-domiciliation to Singapore, including the following steps:
Step 1: Reserving the business name
The business name can be the same as that of the foreign company before re-domiciling, as long as it is still available to be reserved in Singapore. For certainty, a name research can be conducted via BizFile to check the availability of the proposed business name.
The same common practices to reserve a business name for local companies in Singapore can also be applied to the re-domiciliation application. For instance, for a higher chance of approval, the name should not violate any rules regarding trademark or copyright.
Step 2: Preparing and applying
Subsequently, the applying foreign company needs to fill in the Application form for Transfer of Registration the following information:
- Name of the foreign entity and the registration date in the original jurisdiction
- Original place of incorporation
- The registered office address in the original jurisdiction
- Date of the last financial year end
- The new registered office address in Singapore
- Proposed date of the first financial year end after re-domiciling to Singapore
- Proposed Financial Year Period in Singapore
- Particulars of proposed company officers, directors and shareholders
- Share capital details
Along with the application form, the following supporting documents in PDF format need to be submitted via BizFile:
- A certified copy of the incorporation certificate or similar documents of the foreign entity in the original jurisdiction
- A certified copy of the Memorandum and Articles of Association, or the constitution or other equivalent documents of the foreign entity in the original jurisdiction
- The proposed constitution which will be applied once the company has successfully re-domiciled to Singapore
- A written declaration signed by all directors of the foreign entity guaranteeing that the entity satisfies all the minimum requirements (as discussed above or in Section 7(1) of the Companies (Transfer of Registration) Regulations 2017)
Upon the payment of non-refundable $1000 and the submission of all required documents, it normally takes ACRA a maximum period of 2 months to process the application for re-domiciliation to Singapore. The mentioned processing period already includes the time required for further review for approval from additional government agency.
Step 3: De-registering the incorporation in the former jurisdiction
The outcome will be informed via email. Upon the application approval, the entity will officially be registered as a company limited by share in Singapore. At this point, the company should also register their pre-existing charges with ACRA within 30 days and deliver new certificates of shares or debentures to their holders within 60 days.
Furthermore, the newly re-domiciled company will have to submit evidence showing de-registration of its former incorporation in the original jurisdiction within 60 days. The period can also be extended for another 60-day period by submitting an Application for Extension of Time. Each application will cost a non-refundable fee of $200.
In case the entity fails to submit such proving document, ACRA may revoke the entity’s registration for re-domiciling to Singapore.
5. Effects of Singapore Re-domiciliation
The re-domiciled foreign company will become a Singapore company limited by share and be subject to the Singapore laws. However, re-domiciliation does not create a new legal entity or affect:
- The identity or continuity of body corporate constituted by the foreign entity
- The obligations, liabilities, property rights or legal proceedings of the foreign corporate entity
6. Alternative Options for Re-domiciling to Singapore
There are other considerations for re-domiciliation to Singapore. Generally speaking, it is a permanent decision to re-domicile a foreign company inward to Singapore due to the fact that there is no legal provision for re-domiciling a Singapore company outward to another foreign jurisdiction yet.
Moreover, the process of re-domiciling can sometimes be quite complicated since a foreign company also must comply with the legal provisions for overseas transfer of registration in its original place of incorporation. It may be liable for stamp duty in case the transfer is deemed a share sale in local law, for example. Thus, in order to make sure the process will be successful later, the foreign company may need plenty of legal advice.
The alternative option in this case is to establish a private limited liability company in Singapore. This local private company can operate independently from the foreign company, although it may take more resources, in both human and finance, to run separately the two companies in two different jurisdictions.
All in all, with the introduction of inward re-domiciliation regime in Singapore in 2017, foreign companies now can transfer their overseas registration of incorporation to Singapore. However, they have to satisfy some minimum conditions regarding mainly size and solvency, along with other legality requirements.
The general process to re-domicile to Singapore comprises submitting an application and subsequently submitting evidence of de-registration in the original jurisdiction. After being approved, the company will become a Singapore company limited by share.
Should you have further questions on the process of establishing companies in Singapore, or related questions in respect of incorporation in Singapore, please kindly message our experts! BBCIncorp will respond in no time!