Well known for its business-friendly regulations, Singapore remains the best option for foreign entrepreneurs who wish to corporatise their business setup in Singapore in a foreign land without making much effort.
Government has made this quite easy by allowing foreigners to relocate and reside in the state by merely getting an Employment Pass from the government and fulfilling certain basic requirements.
However, those who do not intend to relocate and want to manage their local company in Singapore remotely might face challenges in constituting a directorship in the said company as per the state’s extent. So, if you are one such entrepreneur looking to setup company in Singapore, you are at the right place!
Here is the complete guide elaborating on options available for foreign-owned companies in Singapore to establish directorship in compliance with the Singapore Companies Act, 1967.
For Foreigners Who Wish to Relocate in Singapore
The Singapore government strongly encourages foreign entrepreneurs to carry on their business activities in the state while being physically present there, just like any other ordinary resident, so that they actively participate in its daily activities, leading to better growth in their business setup in Singapore.
However, in order to reside and legally operate in Singapore, you need to apply for an ‘Employment Pass’ to the Ministry of Manpower, Singapore. After obtaining this, you will be entitled to settle there and be formally appointed as the local director of your foreign owned company in Singapore.
Yet, if you haven’t applied for the Employment Pass so far, you are in one of two situations:
- Planning to start a business in Singapore, or
- Already have a running business in Singapore
Therefore, let’s understand how one should proceed in the above situations.
a) Planning to Start a Business in Singapore :-
The Singapore government has specifically designed an EntrePass permit for foreign entrepreneurs and investors who are committed to capitalising their businesses in Singapore.
To obtain the employment pass, you need to submit the required documents and detailed business plan along with the application for an Enter Pass to the Ministry of Manpower, Singapore. After receiving the in-principle approval, you will be allowed to enter Singapore and complete the remaining formalities. The permit is valid for 1-2 years initially and renewable thereafter.
This allows you to build up your own business, after which you can move for company registration Singapore/incorporation and apply for an employment pass to get yourself formally appointed as a director in your company, as detailed below, using Singapore incorporation services.
b) Already Have a Running Business in Singapore :-
In this case, you will need to re-register your sole proprietorship or partnership business as a local company with the Accounting and Corporate Regulatory Authority (ACRA) through its BizFile+ portal and then apply for an employment pass to the Ministry of Manpower, Singapore. The government does not grant an employment pass to a foreigner before the company’s incorporation.
Minimum requirements for a local Company incorporation in Singapore as per the Companies Act, 1967
- Local Director: At least one director must be a Singapore citizen, permanent resident, or employment pass holder with a registered address in Singapore. Since you must not have an employment Pass until this time, you will have to appoint a permanent resident or Singapore citizen as a local director.
- Shareholding – At least one shareholder. The Act also does not restrict foreigners to hold 100% company shares so you can fully own it if you think fit.
- Paid up share capital—At least SGD 1 or its equivalent in any internationally accepted currency. The company’s bank account must reflect this.
- Registered Office: A physical registered office that can be owned or rented.
- Company Secretary: Although your company will get incorporated without a company secretary, you must appoint one within 6 months of incorporation to abide by the statutory laws.
Application for Employment Pass
- Fulfil eligibility criteria for getting an Employment Pass (read more for detail) and prepare necessary documents such as passport, educational qualification certificates, and details of business, etc. Note that the ministry will ensure the applicant receives the minimum salary required as per the eligibility criteria and pays taxes.
- Submit the same through the Ministry of Manpower portal by paying the required non-refundable fee.
- After getting the in-principle approval from MOM, you will be allowed to enter Singapore to complete the necessary formalities unless you are already residing there with Enter Pass or any other permit.
Appointment as Director in your Company
Conduct a Board meeting to pass a board resolution for:
- Approval for removal of the existing director and
- Appointment of a new local director
Get all the formalities done as per the Companies Act, 1967, update the company’s statutory records, and file the change with ACRA.
For Foreigners Who do not wish to relocate to Singapore:
So, suppose you have managed to build up your business in Singapore but do not wish to reside there long-term or relocate there. In that case, you still need to get a resident appointed as a director in your company setup in Singapore to satisfy company incorporation requirements under the Companies Act, 1967.
However, you still have 2 options in this respect based on the fact that whether you wish to delegate all your duties and responsibilities or keep it to yourself:
a. Appointment of Nominee Director:
Appointing a nominee director Singapore on the board on your behalf will be a good option if you wish to keep control of the business in your hands. Yet, one must understand the risks associated with such an appointment. Remember that:
– The nominee director is bound to act in the company’s best interests and fulfil his responsibilities under Section 157 and other of the Companies Act, 1967, as any other director of the company. You can delegate his powers to represent you through a contract in return for a fee that one generally charges;
– Practically, he will have no say in business decisions and will act upon your directions or as per the said contract;
– With the introduction of recent regulations, the Singapore government aims to enhance transparency to mitigate financial crimes such as money laundering and terrorism funding, whereby:
- Now, the nominee director services Singapore can only be appointed through a registered Corporate Service Provider (CSP), who will check his compliance records and legal qualifications, conduct thorough due diligence by verifying client identities and records.,
- CSP will be required to file a Suspicious Transaction Report (STR) for possible risks;
- Companies will have to disclose the nominee status of directors, and the same will be made available to public information;
- There will be more stringent penalties for non-compliance by CSPs, companies, and directors.
b. Appointment of any other person / local staff as a local director:
You can also appoint any of your staff executives who are residents or an Employment Passholder as a local director in your company who, according to you, has the potential to handle all the duties and responsibilities of the company.
Conclusion
Since it is your business, you are best able to judge whether it needs your active involvement or can smoothly run without it. However, one must understand the legal obligations and then build the right directorship structure, which will leverage the business and the country’s growth. Fair compliance with the standing laws of the state will not only safeguard you from the penalties under them but will also build the credibility of the business, whether it’s a foreign company setup in Singapore or appointing a director for Singapore company.
