From our previous post, opening their second company overseas is also a method to diversify their operation risk due to regional political discord for Hong Kong business people. However, where should I settle in overseas? And what is the most suitable entity?
The most common “vehicle” of doing business in Hong Kong is the local private company limited by shares, commonly known as the Limited Company or “Ltd.” in shorthand. As it is a quick and straightforward to establish legal which can shield its owners from unlimitedly personal liability incurred from the business activities carrying on under their companies. In Singapore, where the city-state is a rival of Hong Kong in the market of global finance business, shows the exact trend. Singapore’s local private company limited by shares is the most popular business entity.
Both entities in these two cities have similarities in shareholding capability: 100% foreign shareholding is allowed; Maximum number of shareholders is 50; Corporate and individual shareholders are acceptable.
In contrast, the Singapore Government has firm control of locality in their business entities, so we are going to introduce how to set up a Singapore limited company for Hong Kong people.
Regulatory in Singapore
You must be familiar with the Accounting and Corporate Regulatory Authority (ACRA), which is the Singaporean authority to enact the regulation of business and public accountants registration in Singapore.
ACRA is responsible for administering the laws about running any business, here goes the Accounting and Corporate Regulatory Authority Act (Cap 2A), the Accountants Act (Cap 2), the Business Names Registration Act (Cap 32), the Companies Act (Cap 50), the Limited Liability Partnerships Act (Cap 163A) and the Limited Partnerships Act 2008 (Act 37 of 2008).
We’d recommend everyone to bookmark the ACRA website for reference: https://www.acra.gov.sg
Basic Requirement of Singapore Company’s Officers
Every company must include these two officers: a director and a company secretary.
Although the same person can take up these three positions of the company at the same time, a sole-director of any company cannot be appointed as the company secretary at any moment. Therefore, the minimum composition of a company is one natural person director and one company secretary who must be a natural person.
Apart from them, auditors are mandatory officers. In Singapore, only an ACRA-registered Public Accountant or an Accounting Entity may provide an audit opinion on financial statements.
Director is one of the mandatory officers in your company. Every company must not have its director left vacant by its incorporation date.
Director is the manager of the company because he is one of the employees of the company. He can decide to run the company and is responsible for any situation in the company. As directorship is a professional service, directors are eligible for remuneration.
At least one of the directors must be a residential director who must be a Singapore Citizen, Singapore Permanent Resident or EntrePass holder of 18-year-old or above, with full legal capacity, without any disqualification from being a director. Foreign individuals can also take up the director in a Singapore company unless one of the directors is a residential director.
However, corporate directors are not allowed. In contrast, 100% foreign ownership of a Singapore company is allowed.
Every company must have a secretary who must be a Singapore resident and individual. The company must appoint at least one secretary within six months from its incorporation date. And, the position of the secretary must not be empty for over six months at any moment.
Just like the secretary of a Hong Kong company, Singapore’s company secretary is responsible for maintaining all the statutory registers, resolutions, minute books of the company. It is common to pay a qualified person to provide the service for the company.
As a kind reminder, the sole director of a company and the company secretary cannot be the same person.
Unless the company fulfills the requirement of being either a “small company” (definition below) or “dormant company” and the relevant sub-regulation for audit exemption for a particular financial year, every company must recruit at least one auditor within three months of the company’s incorporation.
The company’s auditor provides professional service for remuneration, which details are open to other officers in the company’s general meeting.
Auditors must report on the company’s financial statements. For example, if the financial reporting standards are complied with “true and fair view” of the company’s financial position and performance is provided. In brief, the audited financial statements and auditor’s report are two pieces of work to be completed in every financial year.
Kindly be noted that, even if a company fulfills the exemption from the statutory audit, the Registrar may request the company to lodge the audited financial statement and auditor’s report on the ground of violation of company registration regulatory.
How to be entitled to a “small company”?
Exemption of auditing is a supportive measure for small businesses conducted in private companies. Qualified company is exempted from the requirement of audit in a particular financial year (FY).
To be qualified as a small company, a company in a financial year must meet at least 2 of 3 quantitative criteria on a consolidated basis for the immediate two consecutive FYs as follows:
- Total annual revenue is not more than SG$10m;
- Total assets are not more than SG$10m;
- No. of employees is not more than 50.
A company will fall into two scenarios below:
If a newly incorporated company stays within the boundary of qualification of a small company in its first FY, the company will be qualified for that in the following FY, no matter whatever changes in the company. It is because the company will not be disqualified unless it has been failed to meet the criteria in two previous FYs consecutively.
If an established company suffers from a sudden drop of business and falls within the qualification as a small company in an FY, it will be qualified to the exemption of audit of this FY and the following year, whether the company will stand up again next year.
Just be reminded again that any company is subject to the requirement of bookkeeping, tax filing, and accounting regulations even it is exempted from audit. So, don’t fire your accountants and throw away the accounting books when your company has earned the name of “small company”.
We will talk about about choosing the company name, and handling the maintenance in the upcoming posts.