3 key considerations when setting up a company in Singapore
Singapore is a popular domicile for businesses seeking to establish a foothold before entering the East Asian and Southeast Asian markets, such as establishing a regional headquarter or holding company. It is home to a wide range of human resource and the government is known to be business-friendly. However, the stability and certainty comes at the cost of consistent
compliance, and foreign businesses would do well to take note of the following when setting up in Singapore:
1. Declare the company’s Registrable Controllers
As Singapore has become a popular financial hub, the requirements for anti-money laundering have also increased over the years. The government now requires companies to declare who the beneficial owners are, particularly those who have more than 25% ownership or voting rights, or exercise significant influence or control over the business. While nominee directors and shareholders are permitted for ease of administration, companies will have to declare their substantial owners and controllers to maintain the integrity of the local business ecosystem.
2. Have a shareholder’s agreement
This is especially important where a joint venture company is being set up in Singapore. Without clearly stating the applicable exit conditions and dispute resolution procedures before commencing business, a minority shareholder may be faced with the unsavoury prospect of having to seek a court order to be bought out by the majority. A shareholders agreement can go a long way to reduce the amount of time and money spent on adversarial proceedings (which can be substantial, despite the Singaporean courts having a reputation for being efficient), and pave the way for a smooth working relationship.
3. Get advice on appropriate government assistance
Singapore’s Economic Development Board assists foreign businesses who wish to set up shop in Singapore. Besides providing advice on setting up, it also helps to establish connections to working partners and service providers. Foreign businesses may also wish to take advantage of assistance schemes such as the Pioneer Certificate Incentive and Development and Expansion Incentive, which are intended to encourage companies to conduct new economic activities and set up their global or regional headquarters in Singapore.
Due to the wide range of available assistance schemes, Singapore is also home to many business consultants which specialize in optimizing the advantages of these schemes. Getting connected to such grant consultants early on will give a substantial financial boost to the Singaporean entity.
Of course, these are not exhaustive considerations and various advisors may highlight different issues depending on their expertise and experience. However, dealing with these basic issues as soon as possible will set a solid foundation for setting up your business in Singapore.
3 tips when doing business with Singaporean counterparts
Singapore has a reputation for being squeaky-clean and rule-abiding. While the business culture in Singapore may vary depending on the type of organization, in general we prefer to have clear rules and can be straightforward with our expectations. In the midst of an increasingly connected world, we will encounter more cultural differences as we bring our business to foreign shores – but luckily, Singaporeans have been ready to do business with the rest of the world for quite some time.
Having served both Singaporean and foreign clients, and sometimes having to bring them together, I’ve observed that the connection becomes much easier when both sides know what to expect. For Indian compatriots coming to Singapore, keeping the following in mind will help you close the deal:
1. Negotiate rather than bargain
Asking for the "best price" is a surefire way to turn off Singaporean businesses – because at best we have no idea what that really means, and at the worst it&’s an insinuation that we are overcharging. However that does not mean that Singaporeans want to present their counterparties with a “take it or leave it” situation – with the right approach, you can meet each other partway without having to leave any benefits on the table.
By focusing on the underlying interests, parties will be able to get to the core issues and find out quickly whether they can work with each other. Singaporeans appreciate getting straight to the point, and the best way is to be transparent about key concerns (of course, subject to non-disclosure agreements where necessary).
2. Take your time to hammer out the contract
Singaporeans like clarity and predictability. In a business context, that means having a contract before the transactions start (although the degree of sophistication can vary widely depending on the type of company which you deal with). Singaporean businesses which are ready to deal with foreign companies are likely to have standard forms ready and even legal advisors to help them navigate with requests to deviate from their standard contracts.
The upside is that since both Indian and Singaporean contract law shares roots in English common law, parties can focus on the commercial terms rather than the boiler plates. If both sides understand the key concerns, then the discussion will lead the contract instead of parties dancing around the phrasing of the terms and conditions.
3. Singaporeans trust our local institutions
The vast majority of Singaporeans by default have no issue going to our local courts, or having their disputes resolved by local arbitration and mediation institutions, because our institutions have been able to keep up with our demands for time and cost efficiency.
The result is that Singaporean businesses may be wary of being asked to resolve their disputes in a foreign court. While arbitration and mediation have gained traction over the years, Singaporean counterparts are likely to ask that these procedures be conducted by Singaporean institutions which are well known both locally and internationally, such as the Singapore International Arbitration Centre and the Singapore International Mediation Centre. Having said that, this aspect of the business relationship is usually negotiable and showing that the chosen forum or institution is mutually beneficial will go a long way in building the relationship.
Article written by
Ng Boon Gan,
Vanilla Law LLC, Locum Solicitor
Singapore
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