Inward re-domiciliation: changes to the Singapore Companies Act allowing foreign firms to re-domicile to Singapore
In order to ensure that the regulatory regime of Singapore continues to be robust, relevant and in line with international norms, on the 30th of March 2017, the Companies (Amendment) Act 2017 of Singapore was gazetted. Among the number of amendments to the Companies Act, the provisions for the inward re-domiliation regime are arguably the most important in further boosting Singapore’s character as a business hub.
Simply said, based on its provisions taking effect as from the 11th of October 2017, Foreign Corporate Entities (FCE) are able to transfer their registration to Singapore where they will be able to incorporate while being subject to several conditions and requirements.This is ideal for any FCE that wishes to relocate their regional and worldwide headquarters to Singapore while retaining their corporate history and branding. Importantly, however, upon registration under the Accounting and Corporate Regulatory Authority (ACRA), the re-domiciled company will become a Singapore company that needs to comply with the Companies Act, like all the other Singaporean companies.
In the end, no new legal entity is created nor prejudice or effect is welcomed on the identity of the body corporate constituted by the foreign entity or its continuity as a body corporate. Also, the process discussed below does not affect the obligations, liabilities, property rights or proceedings of the foreign corporate entity; nor any legal proceedings by or against the FCE.
Generally speaking, the provisions of the inward re-domiciliation regime sets out the procedure of registration for transfer of an FCE to Singapore, which is similar to the setting up of a subsidiary in Singapore, under Companies Act. The initial step is to apply to reserve the name of the company, and comply with the registration requirements which include the submission of certain specified documents. Specifically, the applicant must have the following:
- A certified copy of the charter, statute, constitution or memorandum or articles or other instrument constituting or defining its constitution, in its place of incorporation;
- The constitution by which the foreign corporate entity proposes to be registered;
- Other documents prescribed; and
- The prescribed fee.
In addition to that, a very important aspect of the process includes the obligation of the FCE to submit evidence that it has been deregistered in its place of incorporation, within the prescribed time (60 days). Importantly, where the FCE needs more time to perform the above, it may apply to the Registrar for an extension of the timeline, in which case all the relevant circumstances will be considered and shape the decision on the matter.
Finally, in order to complete the registration process, the FCE must take the following steps:
- Any pre-existing charges on the entity must be registered within 30 days from the date of registration;
- Within 60 days from the date of registration, the FCE must complete and have ready for delivery, appropriate share certificates to all persons registered as holders of existing shares or debentures as at the date of registration.
Importantly, it must be mentioned that the Registrar has the power to refuse or revoke the registration of an FCE, where one of the above-mentioned requirements and/or process steps is not followed or met. The aggrieved person, however, may lodge an appeal to the MOF, within 30 days of the date of the decision.
The minimum requirements that the companies considering re-domiciliation must meet, can be grouped under size criteria and solvency criteria, together with other general requirements. Briefly, according to the provisions,
- the size criteria indicate that the FCE must:
- have a value of total assets exceeding S$10 million;
- have an annual revenue exceeding S$10 million;
- employ more than 50 employees.
- the solvency criteria discuss,
- that there should be no ground on which the FCE could be found to be unable to pay its debts;
- the ability of the FCE to pay its debts as they fall due, during the period of 12 months after the date of the application for transfer of registration;
- the ability of the FCE to pay its debts in full, within the period of 12 months, after the date of winding up, in situations where there is an intention to wind up, 12 months after applying for transfer of registration;
- that the value of the FCE, shall not be less than the value of its liabilities, including contingent liabilities.
In addition to the above, the following general requirements should be considered:
- the FCE is permitted to transfer its corporation by re-domiciliation, under the laws of its place of incorporation;
- the FCE has complied with the requirements of the laws of its place of incorporation, in relation to the transfer of its incorporation;
- the application for transfer of registration is
- not intended to defraud existing creditors of the FCE; and
- is made in good faith;
- the FCE is not under judicial management, in liquidation or wound-up;
- the FCE is able to adapt its legal structure, to a company limited by shares structure, in complying with the Companies Act;
- the FCE may register using the name used in its original jurisdiction, but must first reserve and apply for its intended name, applying the provisions of the Companies Act.
By definition, the process of re-domiciliation includes the transferring of a company’s registration from its home jurisdiction, to another jurisdiction, usually one with a more conducive business environment, giving leverage on the existing branding and identity of the corporation re-domiciliating. Usually, the chosen jurisdiction offers a promising, more conductive tax or regulatory environment, with available financial or fiscal incentives, improved access to financial and capital markets or simply be closer to their shareholders or operational base. Also, the company going down the road of re-domiciliation is very likely to look at the opportunity to maximise its operational disruptions, without losing its corporate identity, history, and branding.
Considering all the above, there is no doubt that the new inward re-domiciliation regime in Singapore, together with the stable political, business and legal infrastructure currently in place, and the English-speaking and highly skilled workforce; will make the Singaporean jurisdiction extremely very attractive for companies considering re-domiciliation. In reality, however, any FCE considering to re-domiciliate in Singapore, must have a defined goal to do so, because once it becomes a Singaporean company, it is not allowed for outward re-domiciliation to another jurisdiction. Finally, all the legal process and requirements, as well as tax and stamp duty implications, that is set within the inward re-domiciliation regime, should be given considerable attention by the FCE.