Multinational Company (MNC): How to Set Up One in Singapore

It is the dream of many business owners to one day have ownership of a company that is an internationally recognised and respected multinational company (or “MNC” in short).

Many budding entrepreneurs hope to create their own versions of Coca-Cola, Samsung or Meta – companies readily recognised for their legitimacy and credibility, with millions or even trillions of dollars in annual revenue. Business owners in Singapore are no different, and aspiring entrepreneurs may look to these companies for inspiration as they journey through their own path to success.

This article is targeted at business owners who are looking to set up an MNC in Singapore. It will aim to discuss the following:

• What is an MNC?
• Why should you set up an MNC in Singapore?
• How do you set up an MNC in Singapore?
• What are the steps to be taken after you have set up an MNC?

What Is an MNC?

An MNC is traditionally defined as a company that has facilities, assets and plant equipment in a country (or multiple countries) other than the home company in which it is incorporated. Thus, to be considered an MNC, the company needs to have business operations in two or more countries. Simply exporting goods abroad does not make a company an MNC.

Generally, a company is considered an MNC if it obtains at least 25% of its revenue from operations outside of its home country. MNCs are also identified through other names, such as a multinational enterprise, a transnational corporation or even a stateless corporation.

There are broadly 4 types of MNCs that are known to exist:

1. A decentralised MNC – a company that does not have a central headquarters but possesses a management structure within each country it operates. This allows the company to be versatile in adapting to the conditions of that particular country. While such companies do have foreign presence, they still maintain a strong presence within their home country.
2. A centralised MNC – the opposite of the decentralised MNC, the centralised MNC has a head office in its home country from which it directs its operations in overseas countries. Often, the chief executive officer and senior leaders reside in the home country. A common strategy is also for the MNC to outsource its production to developing countries to keep its costs as low as possible.
3. An international company – in this model, offshoot or subsidiary companies are set up in other countries. These companies then make use of the parent company’s research and development (R&D) to improve the quality of its products being distributed to these other countries. The work pertaining to the R&D of the product predominantly occurs in the company’s headquarters.
4. Transnational enterprise – this describes MNCs with internationally integrated production and/or service systems across different regions.

Why Should You Set Up an MNC in Singapore?

It is no secret that many MNCs have chosen to set up shop in Singapore. Businesses all over the world (MNC or otherwise) have regarded Singapore as an ideal location to establish a base, so they can use Singapore as a foothold to tap into other Asian markets and economies.

But why is this the case? Here are some of the reasons that entities have considered when setting up their MNC in Singapore, and why you should do the same:

Ease of starting a business

In many international surveys, Singapore has been recognised as one of the easiest places in the world to set up a business. Setting up a company can be done online with simply a few clicks of a mouse, and in a very expedient fashion.

This is in line with the Singapore government’s “pro-business”-oriented measures of removing unnecessary red tape and impediments to further encourage businesses to set up operations in Singapore.

Mix of cultures

Singapore is one of the rare few countries where there is a convergence of many different international cultures and values. In a unique “East meets West” model, Singapore is home to many European and American influences, which have integrated well with Asian values.

This in turn inspires both investors and MNCs all over the world to look to Singapore as an ideal launchpad in obtaining a diverse talent pool of dedicated employees willing to contribute to the company’s success.

For example, MNCs may take encouragement from the fact that the working culture in Singaporean-based companies priortises collaboration and teamwork over individual recognition.

At the same time, it has also been recognised that the younger generation of Singaporeans, like in Western cultures, are competitive hard workers. Such values will give you the opportunity to tap into the “best business practices of both worlds” when you think of starting an MNC in Singapore.

Stable political and legal system

Singapore benefits from having a very stable political environment. As a result, investors can be confident that a change in government would not result in an upheaval of policies and measures already put in place to support businesses.

This in turn encourages investors to place greater confidence and faith in Singapore’s systems, thereby resulting in larger investments flowing into the country.

Additionally, Singapore’s judiciary has been recognised for its efficient handling of cases while adhering to rule of law. This allows investors to be confident that their legal rights would be protected in the event of any dispute, thereby further strengthening investor confidence.

Financial incentives

On top of removing unnecessary red tape, the Singapore government also offers certain tax incentives to MNCs that may not be found elsewhere.

For example, even though corporations in Singapore pay a flat corporate tax of only 17%, the Economic Development Board offers many concessionary tax incentives, such as the Pioneer tax incentive and Internationalisation incentive, to qualifying corporations to further their growth.

Such tax breaks are hugely favourable to MNCs, which would be able to utilise them to either pass the savings on to their customers or invest in R&D to improve the quality of their products. Furthermore, MNCs can also repatriate dividends from their directly held foreign subsidiaries to Singapore without having tax levied on such dividends.

Having business-friendly infrastructure

Many reports, such as the World Economic Forum’s Global Competitiveness Report and the CMS Infrastructure Index, have recognised Singapore’s world-class capabilities and infrastructure in terms of providing support to businesses.

For example, this includes Singapore building global R&D labs for leading Fortune 500 companies, and developing business parks and innovation centres to allow businesses to connect with each other as seamlessly as possible.

How to Set Up an MNC in Singapore

Although you might think that there might be special rules involved in setting up an MNC in Singapore, there actually are not. Starting your MNC empire begins with taking the first step of incorporating a local company first, before expanding your operations abroad.

The steps for setting up a local company in Singapore are as follows:

Reserve a company name

You will be asked to reserve a name for your company. To ensure that your chosen name does not get red-flagged in the vetting process, you will have to choose a name that:

• Is not identical to that of any existing registered business in Singapore;
• Is not obscene or rude; or
• Does not infringe upon existing trademarks.

You may also be asked to choose a different company name if another entity has already reserved your preferred name.

Fulfil the requirements for company registration

On top of reserving a company name, you will need to prepare the following details, which will be filed with the Accounting and Corporate Regulatory Authority (ACRA):

• Shareholder details – there must at least be 1 shareholder (who can also be the director of the company). You can have a maximum of 50 shareholders. It is also possible for foreigners to have 100% ownership of the Singapore MNC.
• Director – there must be at least 1 locally resident company director. However, if you plan to run your MNC from overseas, you can appoint a nominee director to satisfy this requirement.
• Company secretary – you need to appoint a local company secretary within 6 months from the date of incorporation.
• Paid-up share capital – you will need to have a minimum paid-up capital of at least S$1 in order to set up a company in Singapore. This amount can also be increased in the future once your company has been incorporated.
• A registered local address – all private limited companies incorporated in Singapore are required to have a physical address, which will be used for purposes such as receiving official letters, documentation and other related mail.
• Special licences and permits – you may also be required to obtain special licences from certain governmental or regulatory bodies to conduct various types of business in Singapore. For example, if you plan to run hotels, spas or restaurants, then you need to obtain the relevant permits for these business activities before you can conduct them.

Take note that if you are a foreigner who wishes to incorporate a company in Singapore, you can apply for an Entrepreneur Pass (EntrePass) before incorporating the company with ACRA, if you are eligible.

An EntrePass would allow you to register the company with ACRA on your own, among other benefits. If you do not have an EntrePass, you can register the company through a third-party provider (such as a corporate services, accounting or law firm).

The fee for reserving a name is S$15, and the fee for registering a company with ACRA is S$300. Once you have incorporated your company, you can open a corporate bank account and start commencing your business operations.

You may also refer to our article on company registration in Singapore for more information.

Steps to Take After Setting Up Your Company

You are free to organise the structure of your MNC as you deem fit. For example, you may want the headquarters of your company to be based in Singapore, but have subsidiaries placed in other countries (where the MNC has its operations).

Briefly put, a subsidiary is a company that is majority-owned by the parent company or has the composition of its board of directors (i.e. who makes up the board of directors) controlled by the same parent company.

There might be certain advantages to incorporating a subsidiary company alongside your parent MNC. For one, the subsidiary company is considered to be a separate legal entity from the parent-company, which means the parent company will not be directly liable for the subsidiary’s debts. Thus, if you run the business as a subsidiary and the subsidiary goes bust, a creditor cannot go after the parent company to recover the subsidiary’s debts.

It is your choice as to whether you would want a subsidiary company to be incorporated in Singapore or abroad. In this regard, setting up the subsidiary in Singapore may allow you to enjoy the incentives and tax benefits that Singapore can offer (as discussed above).

On the other hand, if you plan to set up your subsidiary overseas, find out more about the measures and schemes available in your target country so you can decide whether it is worthwhile to set up your subsidiary there.

You can find out more about setting up a subsidiary in Singapore in our other article.

Take note that like any other company, a subsidiary company (if set up in Singapore) is also required by Singapore law to meet certain compliance requirements. These can include keeping up-to-date company registers and records, filing annual returns with ACRA and filing annual tax returns.

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The decision to set up an MNC (be it in Singapore or elsewhere) is not to be made lightly. Yet, there is also no denying the fact that running an MNC would bring about far better business benefits and privileges than what is normally associated with running a domestic business.

Setting up an MNC would allow you to tap into international markets and expose your goods to a wider target audience, while simultaneously enjoying economies of scale that you might not normally obtain if running a solely domestic business. It may also be hugely beneficial for you to take the opportunity of Singapore’s business-friendly environment to set up your MNC here.

If the abovementioned steps appear to be daunting to you, do not worry – feel free to engage a corporate service provider here to assist you with the process of setting up an MNC in Singapore.

Essentially, a corporate service provider can act as a one-stop solution for your business needs, by taking the necessary steps to assist with the incorporation of your MNC and ensure that your MNC meets the statutory compliance requirements.