On March 10, 2017, the amendment to the Companies Act of Singapore (Chapter 50 of the 2006 Revised Edition) was passed. One of the key amendments introduced in the Companies Amendment Act of 2017 (CAA 2017) is the Inward Redomicilation regime.
Redomiciliation enables foreign corporate entities (FCEs) to transfer registration from one jurisdiction (country) to a new host jurisdiction, while maintaining its corporate history and brand identity. To illustrate, a foreign corporate entity intending to relocate its regional or worldwide headquarter may undergo redomiciliation and transfer its registration to Singapore, without any operational disruptions. Corporations seek redomiciliation in Singapore for strategic reasons, among these are: access to capital markets, conducive regulatory environment, attractive tax scheme, pro-business policies and stable political infrastructure.
Redomiciled Company: How is it Different from a Branch or a Subsidiary?
Redomiciliation is not the equivalent of incorporating a subsidiary or setting up a branch overseas. Here are some of their notable differences:
- Branch Set up
A branch office is the same legal entity as its parent company. It is merely regarded as the extension of the latter, the same overseas entity doing business in Singapore. A foreign company remains to be governed by the statutes of its home country. A branch office is not treated as a resident entity in Singapore, thus ineligible to claim tax exemptions granted to resident companies.
- Incorporated Subsidiary
A subsidiary has a separate legal entity from that of its parent company. The overseas parent company enjoys limited liability and is not deemed responsible for the acts and omissions of its subsidiary. The subsidiary is governed by Singapore law while the overseas parent company follows the laws of its home country.
- Redomiciled company
As opposed to other entry options for foreign companies, redomiciliation converts a foreign company into a Singapore-registered company. There is only one entity throughout the process, the consequence only is that the rights and obligations of the foreign corporate entity are thereafter transferred to the Singapore-registered company. Perhaps the huge advantage of redomiciliating a foreign corporate entity over a branch or subsidiary is that it allows for the total continuity of business. Because the branding, track records, credit ratings and good will are intact, a redomiciled company can seek credit from local banks or procure licenses with untarnished reputation.
Eligibility for Redomiciliation: Pre-registration Compliances
A foreign corporate entity which intends to undergo redomiciliation must comply with the following requirements:
- Adapt the legal structure to ‘companies limited by shares structure’, pursuant to the Companies Act
- A foreign corporate entity can use its overseas name in Singapore, subject to the condition that it must follow the rules on names reservation and have its proposed name reserved accordingly
- The transfer of registration will be permitted only if the foreign corporate entity is authorised under its original jurisdiction to transfer registration. Conversely, once redomiciliation is completed in Singapore, it can no longer be undone (the Companies Act does not provide for redomiciliation back to the original place of incorporation).
- The application for transfer of registration must be made in good faith and not for purposes of defrauding creditors
- Submit certified copy of the instrument (Charter, constitution, statute, memorandum) constituting the foreign entity as a corporate body
- Copy of the constitution by which it seeks to be registered in Singapore
- Other pertinent documents prescribed by ACRA
- Payment of prescribed fees
Additionally, size and solvency requirements for redomiciliation are as follows:
- Total assets at the end of financial year are valued in excess of S$10 million
- Annual revenues exceed S$10 million
- Foreign corporate entity has more than 50 employees at the end of financial year
If the applicant is a subsidiary, the size requirement is applied to a single entity (either subsidiary or parent only) but if the parent company applies, the size requirement will be done on a consolidated basis (subsidiary + parent company).
An applicant for redomiciliation is required to submit a solvency statement to prove that it has sufficient assets in excess of its liabilities even if contingent, it is not unable to pay its debts or is able to pay debts as they fall due (even during the 12 months period after the application for redomiciliation).
After transfer of registration, the newly redomiciled company will have to comply with the following:
- The corporate entity should register pre-existing charges within 30 days from the date of registration
- It must also present to the Registrar within 60 days from registration any pertinent proof of deregistration in the original place of incorporation
- Prepare the appropriate certificates and have them delivered to holders of debentures or shares within 60 days from registration
Effects of Redomiciliation
What exactly happens to a company when it undergoes redomiciliation? Here are some effects of transferring registration to Singapore:
- Governed by Singapore law
Once a foreign company completes the redomicilation process, the Registrar will issue a notice of transfer of registration. Beginning the registration date as indicated in the notice, the provisions of the Companies Act pertaining to the redomiciled company shall apply. This means that the foreign corporate entity has effectively become a Singapore company.
- One and the same entity
The foreign corporation can continue its operations under the laws of Singapore as no winding up or liquidation is necessary in redomiciliation. The foreign corporate entity remains to be the same entity as it was prior to the transfer of registration, since in redomicilation, there is no prejudicial effect on the identity of the body corporate as the foreign corporate entity. It is worth noting that the foreign corporate entity’s rights and obligations under the law, including its proprietarial rights, as well as legal proceedings initiated by it or against it, will not be affected
- Lower Tax Liability
The Income Tax Act was likewise amended to include provisions for the tax treatment of re-domiciled companies.
In redomiciliation, a foreign corporate entity ceases to be registered overseas, thereby possibly subjecting it to lower tax rates than that of its original place of incorporation. There is reduced risk of being taxed twice (double taxation) by two different jurisdictions. Shifting registration to Singapore also enables the redomiciled corporation to avail of favorable tax treatments under various Free Trade Agreements of which Singapore is a party.
The introduction of the inward redomiciliation regime mirrors Singapore’s desire to remain as one of the world’s highly inclusive, business-friendly hubs, operating as a springboard of growth for key players in the global market.
If you want your foreign company to undergo redomiciliation in Singapore, contact our company incorporation specialists today. Our team can expedite the redomiciliation procedure with ease while ensuring strict compliance with prescribed statutory requirements under the Companies Amendment Act of 2017.