Over the years, Singapore has proven itself to be a popular destination for multi-national companies to set up regional and global headquarters. In 2019, Dyson, a British technology company famous for its high-tech household appliances such as vacuum cleaners and hairdryers, announced that it would be moving its global headquarter from the UK to Singapore to be closer to customers and manufacturing centres and to reflect the increasing importance of Asia to Dyson’s business.
Singapore is an attractive destination for businesses around the world because of its stable political and business environment, competitive corporate tax regime, extensive network of tax treaties, highly skilled workforce and strategic geographical location. Well-known for being the gateway to Asia and beyond, Singapore is an ideal jurisdiction for companies that want to expand their business operations and customer base in Asia. Foreign companies looking to redomicile to Singapore can benefit from these favourable conditions.
Singapore’s business-friendly policies make it easier for companies to set up their headquarters here. Singapore-incorporated companies can be 100% foreign-owned and there are no restrictions on the movement of foreign currency into or out of the country. In fact, the Singapore government actively encourages foreign companies to set up their headquarters in Singapore through a range of incentives. In particular, companies that carry out global or regional headquarter activities of managing, coordinating and controlling business activities for a group of companies may be able to enjoy concessionary tax rates on their qualifying income.
As more multi-national companies are now looking to set up their headquarters in Singapore, this article seeks to provide an overview of how foreign companies can relocate their headquarters or holding company to Singapore and outlines the accompanying key legal considerations.
2. Singapore’s Inward Redomiciliation Regime
Since 2017, foreign corporate entities (“FCE”) can transfer their places of registration to Singapore with minimal disruptions to their existing business operations and without losing their corporate history and identity by availing themselves to Singapore’s redomiciliation regime implemented through the Companies (Amendment) Act 2017 and the Companies (Transfer of Registration) Regulations 2017 (the “Redomiciliation Regime”).
FCEs that are looking to move to Singapore may apply to transfer their places of registration under the Redomiciliation Regime to enjoy a seamless transfer process.
To be able to avail itself to the Redomiciliation Regime, the FCE must meet certain prescribed minimum requirements on size of the company and solvency criteria. The FCE must be a body corporate that can adapt its legal structure to the companies limited by shares structure under the Companies Act of Singapore (the “Companies Act”). An FCE that redomiciles to Singapore will become a Singapore company limited by shares and will be required to comply with the regulatory requirements in the Companies Act going forward (see Section 3.2.7 Ongoing Compliance in Singapore below).
Changing the place of registration under the Redomiciliation Regime does not create a new legal entity or affect identity of the FCE or its continuity as a body corporate. The obligations, liabilities, properties or rights of the FCE and the legal proceedings it is involved in also remain unaffected. This minimises the disruption to operations of the FCE and retains the FCE’s corporate identity and branding in the process. The FCE may be required to notify its contractual counterparties of the change of place of registration. Bank accounts may remain in place, but banks are likely to require the relevant documents pertaining to the redomiciliation.
To make an Application for Transfer of Registration under the Redomiciliation Regime, the Accounting and Corporate Regulating Authority of Singapore has indicated that the processing time may take up to two months from the date of submission of all required documents. This includes the time required for referral to another government agency for approval or review. Once approved, the redomiciled FCE must de-register in its place of incorporation within 60 days of the date of registration in Singapore and register all pre-existing charges in accordance with the registration regime under the Companies Act (i.e., within 30 days of redomiciliation).
When redomiciling, the tax implications for the FCE in the outgoing jurisdiction as well as in Singapore must be taken into consideration. The outgoing jurisdiction may levy capital gains tax, exit tax or stamp duty tax on the outgoing FCE. Singapore tax laws provide for tax credit for companies successful in their redomiciliation to Singapore subject to conditions and the approval by the Minister for Finance. There are also special tax treatment of certain items of expenses incurred or assets acquired by a redomiciled company that has never carried out any trade or business in Singapore before the transfer.
More importantly, FCEs will only be able to redomicile to Singapore if the original jurisdictions in which they are registered have an outward redomiciliation regime, or at least authorise the outward redomiciliation of companies registered in such jurisdiction. In particular, places such as the United Kingdom and Hong Kong do not currently authorise the transfer of the place of registration of its domestic companies to other countries. Jurisdictions that allow for outward redomiciliation include Australia, Canada and New Zealand.
3. Setting Up a New Company in Singapore
3.1 Relocation Other Than by Way of the Redomiciliation Regime
If Singapore’s Redomiciliation Regime is not an available option to the FCE because of the lack of legal framework in its current country of registration (the “Exiting Jurisdiction”), the usual way for the foreign company to move out of the Exiting Jurisdiction to Singapore will be to set up a new corporate entity in Singapore and transfer its operations, assets and liabilities to the new Singapore company.
Generally, there are two methods in which the shareholder(s) of the FCE may carry out the relocation process described in the preceding paragraph. Regardless of the method chosen, consent and agreement of the shareholders of the FCE should be obtained prior to the internal restructuring process.
Our discussion of the two methods below will take into account the two main types of FCE which we typically see:
(i) the FCE is an investment holding company which owns shares of operating companies in jurisdictions other than the Exiting Jurisdiction (the “Foreign Op Cos”) . The intention is typically for such Foreign Op Cos to retain their operations in their respective home jurisdictions while the FCE relocates to Singapore; or
(ii) the FCE is an operating company with its own business operations in the Exiting Jurisdiction. The intention is for the business of the FCE to be operated out of Singapore following the relocation exercise.
3.1.1 Method One: Direct Transfer
The shareholder(s) of the FCE will incorporate a new company in Singapore (the “New SG Co”).
Where the FCE to be relocated is an operating company, the business (including operating assets) may be transferred from the FCE directly to the New SG Co via an asset purchase agreement entered into between them.
Where the FCE to be relocated is an investment holding company that owns shares in Foreign Op Cos, the shares of these Foreign Op Cos may be transferred from the FCE to the New SG Co via a share purchase agreement.
3.1.2 Method Two: Initial Share Swap Followed by Direct Transfer
For this second method, an additional step of share swap is performed before a direct transfer.
The shareholder(s) of the FCE will first have to incorporate the New SG Co. Shareholder(s) of the FCE will enter into a share swap with the New SG Co, whereby the shareholder(s) will transfer all of its/their shares in the FCE to the New SG Co and in exchange, the New SG Co will issue new shares to the shareholder(s). After the share swap, the FCE will become a wholly owned subsidiary of the New SG Co.
Depending on the type of FCE (i.e., whether it is an investment holding company or an operating company), the Direct Transfer method is carried out between the FCE and the New SG Co.
After all the business of the FCE or the shares of Foreign Op Cos have been transferred and remaining liabilities addressed, the FCE may be struck off or otherwise dissolved according to the laws of the Exiting Jurisdiction.
As to which method is more suitable for the relocation of a FCE, it will depend on the specific circumstances of such FCE as well as tax considerations. The shareholder(s) of the FCE may also wish to consider setting up a holding company corporate structure in Singapore (see Section 3.3 Benefits of Having a Singapore Holding Company below). It is advisable to seek the appropriate legal and tax advice before deciding on the most appropriate relocation method.
3.2 Legal Considerations for Relocation of a Company
When relocating a FCE to Singapore (particularly in situations where the Redomiciliation Regime is not applicable), there are numerous considerations that the FCE has to take note of. We set out below some of the more pertinent ones that any FCE considering to relocate to Singapore should be aware of. The extent of the applicability of the key considerations below depends on how much of the FCE’s business activities are planned to be moved to Singapore pursuant to the relocation.
The list of considerations is not meant to be exhaustive in nature and we reiterate that professional advisors (including tax and legal advisors) should be engaged in Singapore and the Exiting Jurisdiction prior to undertaking the relocation exercise.
3.2.1 Transfer of Contracts
The FCE will need to review its existing contracts and decide on the ones that need to be transferred to the New SG Co. Such transfer by way of an assignment or novation must be done in accordance with the terms of the contracts to be transferred and the governing law of the contracts.
Where both the rights and obligations under a contract are to be transferred, the FCE will need to discuss with the relevant counterparty and then obtain its consent. In particular, there may be non-assignment or non-novation clauses under these contracts which may prohibit the FCE from assigning its benefits and/or transferring its liabilities under the contracts without the consent of the counterparty.
Some of the commercial contracts may have to be terminated in light of the relocation. For instance, lease agreements may have to be terminated if it is intended that the office space in the original place of domicile will no longer be in use. Such contracts will need to be terminated in accordance with their terms and damages may be payable where a contract does not provide for unilateral termination by the FCE before expiry of the term.
3.2.2 Transfer of Shares
Where shares of Foreign Op Cos held by the FCE are being transferred to the New SG Co, the FCE will need to review (i) the contracts of such Foreign Op Cos (for example, commercial contracts, facility agreements, tenancy agreements, etc.) and (ii) the conditions of any business licenses of such Foreign Op Cos to ascertain if there are change of control restrictions.
If there are any such change of control restrictions, prior to any transfer, the relevant notifications or consent will need to be obtained from the counterparties. This is essential to minimise any disruptions on the business of the Foreign Op Cos. The relevant consent is unlikely to be withheld given that the proposed transfer is part of an internal restructuring exercise.
The FCE will have to consider which employees are to be dismissed and which employment contracts are to be transferred to the New SG Co. It further has to decide, amongst the employees whose employment contracts are to be transferred to the New SG Co, which employees have to physically relocate to Singapore to work for the New SG Co. There is a limit under Singapore employment laws as to the maximum number of foreign employees which a Singapore employer is allowed to employ.
Foreign employees can only work in Singapore if they have obtained a relevant work permit issued by the Ministry of Manpower in Singapore. There is a specific quota for each Singapore employer for each type of work permit. This must be taken into account as the New SG Co will have to apply for these work permits for foreign employees in order for them to work in Singapore.
If any employees of the FCE are to be dismissed pursuant to the restructuring, they have to be dismissed in accordance with (i) the notice provisions in their employment contracts and (ii) the relevant labour laws in the Exiting Jurisdiction on dismissal/retrenchment of employees. There will be special considerations if they are part of any labour unions. Retrenchment benefits may also have to be paid.
3.2.4 Bank Accounts and Bank Facilities
The New SG Co will need to open bank accounts in Singapore under its name. If the banks that the FCE has existing bank accounts with have branches in Singapore, it will have to speak with its bank manager on whether these bank accounts (and any related loan facilities) can be transferred to the name of the New SG Co.
Where the FCE’s banks do not have Singapore branches, the FCE may want to close those bank accounts and open new ones with Singapore banks. Any loans taken up by the FCE with its banks in the Exiting Jurisdiction may then be refinanced with new loans taken up by the New SG Co with the Singapore banks, assuming that the Singapore banks are satisfied with the financial condition of the New SG Co.
3.2.5 Business Licences
Depending on the type of business activities the New SG Co will undertake, there may be licences that the New SG Co has to apply for in order to commence operations in Singapore. These licences will have to be applied for in advance.
3.2.6 Transfer of Movable Assets
Any proposal to relocate to Singapore should take into consideration the cost of disposal or transfer of any movable assets to Singapore.
3.2.7 Ongoing Compliance in Singapore
There are various ongoing requirements that a company incorporated in Singapore must comply with. For instance, all Singapore companies must have one resident director. Singapore companies have to file annual returns with the relevant authority and keep compulsory statutory records on its controllers.
3.2.8 Government Grants
As mentioned in Section 1 Introduction above, the Singapore government encourages foreign companies to set up their regional and global headquarters in Singapore and as such, there may be certain government grants that the FCE can avail itself to if it decides to relocate its headquarter to Singapore.
At the same time, if the FCE is receiving any grant in its current place of registration, it will lose that grant pursuant to the relocation and may have to repay the benefits received under the terms of the grant.
3.3 Benefits of Having a Singapore Holding Company
When an FCE is planning to relocate its business to Singapore, it should also consider whether it wants to adopt a holding company corporate structure in Singapore. A holding company is a parent business entity that owns shares in other companies but does not have any real operations or business activities. The operations are carried out by the subsidiary companies whose shares are held by the holding company.
The holding company structure will be particularly useful where the shareholder(s) owns (directly or indirectly) multiple FCEs and, as part of relocation plans, all of such FCEs are to be collectively relocated to Singapore.
In such situation, the shareholder(s) should first incorporate a Singapore company to act as the holding company (“SG Hold Co”). Each FCE may subsequently be relocated as follows:
- If the FCE to be relocated is an operating company, the SG Hold Co will incorporate a Singapore operating company (as a wholly owned subsidiary) (a “SG Op Co”) and transfer the business of such FCE to the SG Op Co using the one of the two methods described in Section 3.1 Relocation Other Than by Way of the Redomiciliation Regime above.
- Where the FCE is an investment holding company which owns shares of Foreign Op Cos, the shares of such Foreign Op Cos may be transferred to the SG Hold Co by way of a share purchase agreement executed between the FCE and the SG Hold Co.
At the end of the relocation exercise, the contemplated corporate structure in Singapore will be as such: the SG Hold Co will own shares in the SG Op Cos and other Foreign Op Cos.
In addition to the above, given Singapore’s regulatory framework, there are numerous benefits of having a Singapore-based holding company with one or more operating companies as its subsidiaries.
3.3.1 Ring Fencing of Assets and Liabilities
As each company is a separate legal entity, the liabilities of one will not affect another. In a holding company structure, lines of business that have unique risk profiles can be segregated into separate subsidiaries. Important business assets such as trademarks and intellectual property rights can be segregated and owned by the holding company or separate subsidiaries in order to protect them from claims of the creditors of another subsidiary. Singapore's legal and tax regulatory framework supports the use of holding company structure for loss insulation and asset protection.
3.3.2 Diversification of Business and Risk Reduction
Having a Singapore holding company structure in place can facilitate future business diversification. As each operating company is a separate entity, there is less risk in establishing new operating companies under the holding company to undertake businesses or investments that are of higher risk in nature, as those investments are separated from the core and profitable businesses run by the other operating subsidiaries. If the risky investments or new business activities fail, the respective operating subsidiaries can be wound up without adversely affecting the performance of the core business of the group.
3.3.3 Tax Planning
A holding company structure is sometimes designed for tax planning purposes to reduce the overall tax liability of the holding company by using strategies that take advantage of the tax regime in the jurisdictions where the holding company and subsidiaries are each located. Singapore’s favourable tax regime makes it an ideal location for both the holding company and the subsidiaries. Specialised tax advice will be required in this respect.
It is likely that with the re-opening of the economy after the easing of Singapore’s COVID-19 Circuit Breaker restrictions, foreign companies will start to explore the option of moving to Singapore again. While each company is unique in terms of its own business model, business operations and legal structure, the information outlined above is generally applicable to foreign companies that are looking to move part of their business or headquarters to Singapore. However, each company should carefully review and consider its special circumstances and goals before undertaking a relocation exercise.
Foreign companies that are considering relocating to Singapore should obtain professional advice from corporate lawyers and tax specialists in their current country of registration as well as in Singapore.
 The FCE must meet any two of the below:
- the value of the foreign corporate entity’s total assets exceeds S$10 million;
- the annual revenue of the foreign corporate entity exceeds S$10 million; and/or
- the foreign corporate entity has more than 50 employees.
 (i) There is no ground on which the FCE could be found to be unable to pay its debts; (ii) the FCE is able to pay its debts as they fall due during the period of 12 months after the date of the application for transfer of registration; (iii) the FCE is able to pay its debts in full within the period of 12 months after the date of winding up (if it intends to wind up within 12 months after applying for transfer of registration); (iv) the value of the FCE’s assets is not less than the value of its liabilities (including contingent liabilities).
 Where the FCE is an investment holding company which owns shares of operating companies in the same Exiting Jurisdiction and assuming the intention of the shareholder(s) is to relocate the business of each of the operating companies to Singapore, please see Section 3.3 Benefits of Having a Singapore Holding Company below for the discussion on how a holding company structure may be replicated in Singapore.