Redomiciliation: Why and How to Convert Your Foreign Company into a Singapore-Registered Company
If you are the owner of a foreign company looking to take advantage of Singapore’s stable political environment, pro-business tax regime and economic links to Asia and beyond, you may want to consider redomiciling your company to Singapore. This can potentially be more beneficial than other methods of setting up in Singapore, such as registering a Singapore branch of your foreign company, or incorporating a Singapore subsidiary.
Table of Contents
- What is Redomiciliation?
- Why Redomicile?
- Is Your Company Eligible for Redomiciliation to Singapore?
- How Do You Redomicile Your Company to Singapore?
- What Happens after Redomiciliation?
- Other Considerations
- Contact Us
What is Redomiciliation?
Redomiciliation is a process where a company transfers its registration from one jurisdiction (country) to another jurisdiction. This is different from the company setting up an overseas branch, or incorporating a subsidiary in the foreign country.
For example, when a foreign company sets up a branch in Singapore, it is still the same overseas company carrying on business in Singapore. The foreign company is therefore primarily regulated by the laws of its home country.
When a foreign company incorporates a subsidiary in Singapore, there are effectively 2 companies: the overseas parent company and the Singapore subsidiary. The Singapore subsidiary has a separate legal existence from the overseas parent company and can enter into contracts on its own. This corporate group would then be regulated by both the law of its home country (for the parent company) and Singapore law (for the subsidiary).
In contrast, when you redomicile your foreign company, you are converting the foreign company into a Singapore-registered company. This means all rights and liabilities of the foreign company transfer over to the Singapore entity, and there is only one entity throughout. The redomiciled Singapore company would then primarily be regulated by Singapore law.
Since 11 October 2017, Singapore has permitted companies incorporated overseas to re-register as Singapore companies under Part XA of the Companies Act (CA). The requirements to redomicile as a Singapore company are set out further in the Companies (Transfer of Registration) Regulations 2017. Both are discussed below.
Companies redomicile for multiple reasons – whether commercial, practical or legal.
Redomiciliation allows for continuity of the business
Redomiciling may make sense from a commercial perspective. As mentioned, when a company changes its domicile to Singapore, the company is still the same entity, only that its place of incorporation changes from an overseas country to Singapore.
This allows for total continuity of the business, meaning that goodwill, credit ratings and track records remain intact. This is helpful when the re-registered Singapore company seeks credit from banks in Singapore or needs to demonstrate its track record in its area of expertise so as to get a licence where necessary.
To some extent, these would not be insurmountable obstacles since an overseas parent company can guarantee the loans taken by its Singapore subsidiary or undertake to share expertise and direct the operations of its new subsidiary. Nevertheless, this represents an advantage of redomiciling.
Redomiciling to Singapore has tax advantages
In terms of tax advantages, Singapore taxes corporations at a lower rate than many other developed countries. While foreign companies could take advantage of this by shifting some of their operations to a Singapore subsidiary, it may become harder to do this in the future.
This is because many countries have started tightening their rules on the taxation of cross-border corporate groups so as to reduce base erosion and profit shifting. These are measures where a company seeks to make it appear as if the profits earned by that company are in fact profits earned by its related company, so as to have those profits taxed at the (lower) rate of the second country.
For example, Australia has recently introduced a Diverted Profits Tax (DPT) of 40% for Significant Global Entities (SGEs). An SGE is generally a corporate group with some Australian operations with a global annual income over A$1 billion. Under the DPT legislation, if the Australian Taxation Office believe that profits earned in Australia have been sent out of the jurisdiction to a foreign related company as part of an aggressive tax avoidance arrangement, it is possible for the profits of the Australian entity to become liable for taxation twice (in the country where the profits were diverted to, as well as in Australia).
In redomiciliation, as your company will cease to be registered overseas, it will be primarily subject to Singapore law, including for taxation purposes, rather than that of its original place of incorporation. Your company will therefore avoid the risk of being liable for taxation twice under such tightened taxation rules.
If your company’s original place of incorporation imposes some onerous or unsuitable regulatory requirements on your company, such as a relatively high corporate tax rate, then redomiciling to Singapore could help avoid having to comply with those requirements.
Redomiciling to Singapore will allow you to leverage on Singapore’s Free Trade Agreement memberships
Practically, redomiciling and substantially shifting operations to Singapore would go hand-in-hand, making it easier for your company to take advantage of the various Free Trade Agreements which Singapore is a party to.
Redomiciling to Singapore signals your commitment to do business in this region
Further, taking the irrevocable step to redomicile in Singapore (since there are no provisions for Singapore-incorporated companies to redomicile overseas), may send an important signal to key clients and to the market that your company is serious about focusing on its Singapore (or Asian) operations.
Redomiciling causes all legal rights and liabilities to be transferred to the Singapore entity – no assignment needed
From a legal angle, redomiciling may be more straightforward than incorporating a Singapore subsidiary too. Key contracts will often have non-assignment clauses. While getting permission to assign contracts within the same corporate group is often straightforward, redomiciliation streamlines this process as all rights and liabilities transfer over to the Singapore entity, which is the same legal person as the originally overseas-incorporated company.
Is Your Company Eligible for Redomiciliation to Singapore?
However, before applying to redomicile your company to Singapore, you should check if your company’s name will be accepted for registration in Singapore. While you would likely want to use the same name as your company used overseas, this may not be possible if, for example, there is already a Singapore company with a similar name.
More importantly, you should also check if your company is eligible for redomiciliation to Singapore in the first place. The 3 main requirements relate to size, solvency and legality.
Your company would first have to meet the size criterion. This means your company should meet at least 2 of the 3 following criteria:
- Total assets worth over S$10 million
- Annual revenue over S$10 million
- At least 50 employees
If you want to redomicile your entire corporate group (e.g. you have a parent company and 2 subsidiaries, all incorporated overseas), then it is the group as a whole that has to meet the size criterion.
The next criterion is the solvency requirement. Your company must be able to pay its debts as they fall due over the next 12 months from the date of applying for redomiciliation. Your company must also not be in liquidation, receivership or any other equivalent winding up process.
Finally, your assets must exceed liabilities, meaning your net asset value cannot be negative.
The third main criterion is legality. This means you have complied with all relevant company law rules in your company’s original place of incorporation, and are not seeking to redomicile to Singapore for some improper purpose such as to defraud creditors.
Most crucially, your place of incorporation must have legal provisions in place for companies to redomicile overseas. A number of countries permit 2-way redomiciliation (i.e. for foreign companies to re-register as local companies, and for local companies to re-register as foreign companies). These countries include Australia, Canada, New Zealand and the British Virgin Islands.
Conversely, other jurisdictions like Singapore, Hong Kong and the United Kingdom, only allow for inward redomiciliation. In other words, foreign companies may re-register as local companies, but local companies may not re-register as foreign companies.
Incidentally, if your company is moving from one common law jurisdiction to another, then the basic structure of company law will likely be the same. It is therefore likely that concepts you have become familiar with, such as directors’ duties, would continue to apply in some shape or form when your company has redomiciled as a Singapore company.
How Do You Redomicile Your Company to Singapore?
To redomicile your overseas company to Singapore, you will have to fill in and submit an Application for Transfer of Registration form to the Accounting and Corporate Regulatory Authority (ACRA), which regulates business entities in Singapore. Under the CA, your application has to be accompanied by:
(1) A certified true copy of your Memorandum of Association, Articles of Association or equivalent constitutional documents (which you submitted when originally incorporating your company).
(2) A copy of the constitution which your company will use if successfully redomiciled as a Singapore company.
While you may be able to adopt your company’s existing constitutional documents almost entirely if your company was incorporated in another common law jurisdiction, there will be certain aspects of Singapore law that may mean additional clauses will need to be inserted.
For example, Singapore requires all companies to have an “objects clause” in their constitution. This clause lays out the purpose of the company, that is to say all its proper areas of business. In contrast, the existing constitutional documents of overseas companies may not have an objects clause as some jurisdictions adopt the default rule that companies have unrestricted purposes.
(3) The following relevant prescribed documents:
- Certified copy of your foreign certificate of incorporation or equivalent
- A signed written declaration by all the current company directors that the company meets the solvency requirements (as discussed above)
- From each of the proposed directors individually:
- A declaration of their consent to act as director upon redomicilliation
- A declaration that they are neither disqualified or debarred from acting as a director in Singapore. (This primarily relates to having been found to have failed in their duties as director of another Singapore company previously)
- (If they intend to take shares in the company) A declaration of their intent to take a number of shares in the company upon redomiciliation, if they do not already have shares in the company
- A written declaration from each of the proposed secretaries stating:
- They consent to act as the company’s secretary.
- They have not been debarred from acting as a secretary in the past
- (If the company is proposing to redomicile as a public company) They have the relevant professional or academic qualifications to be the secretary of a public company (typically a qualified lawyer, accountant, or a member of the Singapore Association of the Institute of Chartered Secretaries and Administrators)
- (Where the redomiciliation is being handled by a lawyer or a filing agent) A confirmation statement from the lawyer or filing agent that each proposed director has consented to act as a director and has not been disqualified, and that each proposed secretary has consented to act as a secretary.
(4) The prescribed fee.
What Happens after Redomiciliation?
If your company is eligible for redomiciliation to Singapore, and you have submitted your duly-completed application, then the next stage is acceptance or rejection by ACRA.
While this should be relatively straightforward if you meet the eligibility criteria, ACRA has a reserve power to reject applications for redomiciliation on public policy grounds. If that happens however, your company has a right of appeal to ACRA and then to the Minister of Finance.
However, in the more likely scenario of your application being accepted, your company will now be a Singapore-registered company. It will be subject to Singapore company law like any company which had originally been incorporated in Singapore. You will then have a duty to de-register your company in its original place of incorporation within 60 days, and submit evidence of this to ACRA. It is possible to get ACRA’s permission for a deadline extension, but it is of course better to resolve this matter quickly.
Aside from that, you will also have a duty to ensure that pre-existing charges are registered within 30 days of redomiciliation. For example, if a bank has a floating charge over your company’s assets, this charge would have to be duly registered. The directors of your company may be liable for sanctions such as fines if this is not complied with.
Ultimately, redomiciling to Singapore is a permanent decision as there is currently no provision for Singapore companies to redomicile overseas. However, as more countries introduce redomiciliation regimes, companies are likely to have more choice over which jurisdiction will best suit their needs in terms of tax and other regulatory treatment.
Redomiciliation is still a relatively new process as well, so foreign companies considering changing their domicile to Singapore should think carefully before doing so. This would involve getting advice from corporate lawyers and tax specialists in your original place of incorporation, in case you become liable for stamp duty if the transaction is deemed a share sale in local law, among other things. You would also need to get advice from Singapore corporate lawyers and tax specialists.
Nevertheless, given the attractive business and regulatory environment in Singapore, redomiciling to Singapore is something that many foreign companies with significant Singapore or Asian operations could plausibly consider.
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