Admin, Author at Provide

4 Easy Steps to Make Company Loans for Directors/Shareholders in Singapore

Sep 7, 2021Aug 24, 2021 by Admin

Why do companies make loans to directors?

Companies may lend money to directors as a gesture of goodwill. Directors can apply for company loans to obtain more favourable interest rates than what financial institutions, like banks, could offer them. Company loans, if approved, also will likely have less stringent underwriting requirements compared to banks. Directors may also need loans in case of personal emergencies, or require the money to meet expenses in order to carry out their directorial duties (e.g. transport expenses).

What is considered a company “loan”?

The definition of company loans do not just include standard loans – i.e. a sum of money handed over with a promise for repayment. Singapore law also defines company loans to include:

#1. Quasi loans:

This is a transaction where the company pays expenses incurred by the director, with the understanding that the director will reimburse the company later on.

#2. Credit transactions:

Examples of credit transactions include:

Renting out housing or land to directors (e.g. a bungalow for the director to live in), in exchange for payments
Providing goods and services to directors (e.g. chauffeur service, grocery hampers, laptops, etc.) in exchange for payments

Basically, this involves the company providing goods, services, or property/land use in return for payments from the director.

#3. Guarantees to directors:

These refer to the company providing a guarantee or security for a loan, quasi-loan, or credit transaction made for the benefit of a director. For instance, if the company agrees to act as a corporate guarantor for a personal loan that the director takes on, that would count as a guarantee to a director.

Can a company make loans to its directors?

It depends on whether the director is a shareholder, or not.

If the director is not a shareholder: Generally, no. Company loans are only allowed under 4 specific circumstances (outlined below). All other company loans that do not meet these 4 requirements are not allowed.

If the director is a shareholder: Yes, company loans are generally allowed, subject to some requirements.

Company loans to directors who are also shareholders

Companies may make loans to directors who are also shareholders. Some requirements that you must bear in mind are:

You must hold a Board meeting, and pass a Board resolution to approve the company loan to the director-shareholder. This means that a majority of the Board of Directors must agree to the loan. You must document that the company loan provided to the director-shareholder has been given because of their status as a shareholder.
Company loans cannot be made in order for the director-shareholder to reduce their tax liabilities (e.g. as opposed to paying the director-shareholder a director’s fee, director’s salary, etc.)
There must be an IOU or some other official document to record the company loan, with a repayment schedule. You must create a debtor-creditor relationship. You cannot just make a company loan knowing that the director-shareholder has no intention of paying back the money.
If the company has previously extended loans to other shareholders, then the loan terms (e.g. interest rate, any collateral, repayment schedule etc.) should be similar. Loan terms should not be biased in favour of director-shareholders just because the have a seat on the Board.

Restrictions on company loans to directors include the directors’ family members

Restrictions on company loans to directors include not only the directors, but also the director’s family members, who include the director’s spouse, children (including adopted children) and step-children.

Why are there strict restrictions on company loans to directors?

These safeguards exist because directors are supposed to represent the interests of the company, and shareholders. Company loans that are made to directors (particularly generous loans, at zero or very low interest rates) may adversely influence the objectivity of directors. Unscrupulous management teams may use company loans to buy favour from directors. It is therefore a matter of good corporate governance and public policy to ensure that company loans are only made to directors under a strict set of guidelines. This helps to protect shareholder interests, and minimises the possibility of directors being bought over by management.

What are the requirements to make company loans to directors?

Company loans made to directors who are not shareholders are only allowed under a narrow set of 4 reasons.

The 4 reasons where company loans to directors are allowed are:

Reason 1: Loan to pay director’s necessary expenses

The company loan is made to the director to pay expenses needed to fulfill the director’s duties. This loan must be approved in a shareholder’s meeting.

Reason 2: Loan to purchase housing for director

If the director is a full-time employee of the company or a related company, and the loan is specifically for the director to purchase a house to live in. This loan must be approved in a shareholder’s meeting.

Reason 3: Loan as part of employee benefits scheme

If the director is a full-time employee of the company or a related company, and the company loan is part of a company-wide employee benefits scheme. This means that company loans must also be made available to other employees, and not just the directors. Company loan benefit schemes must be approved in a shareholder’s meeting.

Reason 4: Loan as part of money lending business

If the company’s primary business involves money-lending, and the loan to the director is made by the company conducting its primary money-lending activities. Money lenders must have the relevant licenses from the authorities. This loan does not need to be approved in a shareholder’s meeting, since it is simply the company conducting its primary business.

How do I approve a company loan to directors?

Step 1: Arrange a shareholder meeting

Arrange a shareholder meeting at least 14 days in advance. If you receive at least 95% approval from shareholders, you can do away with this 14-day-advance-notice requirement, and you can hold the meeting earlier.

Step 2: Pass an ordinary resolution authorising the company loan to directors

An ordinary resolution is basically a shareholder vote. You must receive over 50% of shareholders’ votes in order to pass the ordinary resolution to make the company loan. During this meeting, you must disclose the purpose and amount of the loan.

Step 3: Disburse the company loan

Once shareholder approval has been granted, the loan can be disbursed to the directors.

Additional conditions for company loans

If shareholder approval has not been obtained for the company loan, then the loan must be repaid in full within 6 months of the next Annual General Meeting.

Also, if shareholder approval was not sought before the company loan was made, then the directors who receive the loan become personally liable for any losses the company suffers as a result of making the loan. For instance, if the loan amount was particularly large, and the company was unable to meet its expenses (e.g. payroll, marketing, R&D, etc.) and suffered a loss, the directors must repay the company for these losses.

What happens if directors do not adhere to these rules on company loans?

There are strong penalties in place to punish directors who make company loans illegally. It is a criminal offence for any director who authorises a company loan that does not meet the requirements explained above. According to the Companies Act, such directors can be jailed up to 2 years, or fined up to $20,000.

Interest rates on company loans to directors

There is no legal requirement for interest to be charged on company loans to directors. You can have 0% interest, or charge any other interest rate you wish.

Tax implications for company loans to directors

If the company loan is interest-free, or has an interest rate lower than the average prime-lending rate, then such company loans may be taxable. Whether or not such a loan is taxable depends on whether the director receiving the loan is a shareholder of the company.

Director receiving loan is NOT a shareholder:

For income tax purposes, company directors are considered as company employees, even if they don’t hold full-time employee positions. Therefore, any interest benefits that such directors receive from company loans are viewed as an employment benefit, and are therefore taxable.

The formula for calculating the value of the interest benefit:

Amount of loan outstanding (at end of each calendar year) * Average prime-lending rate of each calendar year

Director receiving loan is a shareholder:

If a company loan is made to a director-shareholder in their capacity as a shareholder, then they would not be deemed to be employees for income tax purposes. As such, no taxes need to be paid on interest benefits for company loans.

Making company loans to shareholders

There are no restrictions in Singapore law for companies making loans to their shareholders.

With that being said, company directors have a fiduciary duty to serve the best interests of the company. Directors must properly evaluate whether company loans to shareholders will serve the best interests of the firm.

Interest rates for company loans to shareholders

The company has discretion over what interest rate to charge shareholders. There is no legal requirement to charge interest. The company is free to provide interest-free loans, or to charge whatever rate they see fit.

Tax implications for company loans to shareholders

Shareholders receiving company loans do not need to pay tax on any interest benefits they receive.

Directors must act honestly and exercise due skill, care, and diligence when taking company loans

Directors also have a fiduciary duty to act with due skill, care, and diligence. This means that they must not take company loans if they can reasonably expect these loans to harm the best interests of the company. For instance, if a director knows that the company will need all the money it can muster for R&D in the next 12 months, then the director should wait till a later point in time before applying for a company loan.

Directors who breach this duty to act honestly and with due skill, care and diligence can be sued by their shareholders. Furthermore, directors can have criminal charges filed against them – punishments include being jailed for up to 12 months, and/or being fined up to $5,000.

Beware of shareholder lawsuits against directors for company loans

Shareholders may sue directors for improper loans. Loans don’t even have to actually be improperly disbursed for lawsuits to occur – shareholders can allege that improper loans were made, and initiate legal action against company directors. Defending such legal action is extremely expensive and stressful. It’s therefore important to carry Directors and Officers (D&O) Liability Insurance to protect directors against potential lawsuits. Directors & Officers Insurance would protect directors against such lawsuits. This type of insurance would pay for lawyer’s fees and damages/settlement amounts, which can easily add up to several hundred thousand (or even millions!) of dollars.

Protecting your company:

Provide is the easiest way for businesses to get insured in Singapore. Simply click the links below to purchase your cover online, in just 3 minutes!

Coverage	Explanation	Premium
Professional Indemnity Insurance	Covers business-related lawsuits	From $42/month
Directors and Officers (D&O) Liability Insurance	Covers lawsuits personally targeting directors and officers of the company.	From $49/month
Commercial Property Insurance	Covers property damage from fire, explosions, certain types of water damage, etc. Covers building structure, renovations, fixtures & fittings, equipment, & more.	From $12/month
Public Liability Insurance	Covers lawsuits related to injuries or property damage to third-parties (e.g. members of the public).	From $9/month
Work Injury Compensation Insurance (WICA Insurance)	Covers your employees from work-related injuries/sickness, including Covid-19. Pays up to $45,000 medical expenses per worker.	From $5/month, per worker

3 Easy Steps to Start an LLP in Singapore: Ultimate Guide

Aug 23, 2021Aug 23, 2021 by Admin

What is an LLP?

An LLP (Limited Liability Partnership) is a type of business that is owned by at least two partners. Partners can be private individuals, or corporate entities (e.g. a Private Limited company). Corporate entities can either be local companies or foreign companies.

Is an LLP a separate legal entity?

An LLP possesses its own separate legal entity from its partners. This is somewhat similar to Private Limited companies. This separation of legal entities means that partners in an LLP are generally protected from legal liability if the LLP is sued. Partners in an LLP are protected from liabilities incurred by other partners in the partnership. This is particularly important because you don’t want to be caught in a situation where one of your partners makes a mistake and gets sued and then drags you into the lawsuit. The major exception to this limitation of liability is for a partner’s own mistakes, negligence, omissions, and debts incurred, which we discuss in greater detail later on.

This limitation of liability is a critical factor in why many entrepreneurs who are thinking of incorporating a partnership will choose an LLP, instead of a plain-vanilla Partnership.

What types of businesses typically incorporate as an LLP?

Usually, only certain types of licensed & highly specialised professional services will incorporate as an LLP. These businesses include accounting/auditing firms, architectural firms, and legal practices. Most other services will incorporate as Private Limiteds.

In other countries like the US, it’s standard practice for investment funds, like Venture Capital funds, to incorporate as LLPs. This is because when dividends are distributed from profits that the fund makes, partners in an LLP are only taxed once (at their personal income tax rate). If the investment fund had been incorporated as a Private Limited entity, they would be double-taxed – taxed once at the corporate tax rate, then taxed another time at the personal income tax rate when paying out dividends. This is not a concern in Singapore, however, since dividends are not subject to personal income tax.

What are the pros and cons of LLPs?

Pro #1. Limitation of liability for other partners’ mistakes:

Partners in an LLP are not responsible for liabilities incurred by other partners. For instance, let’s say you are a partner in an Accountancy LLP. Two of your partners are working on a major client account, and they end up making major mistakes in an auditing project. The client sues the LLP for losses incurred due to these mistakes. You are not liable for the liabilities that your two other partners have incurred. If you had been part of a regular Partnership, then you would have become equally liable, and your personal assets (e.g. bank savings, house, car, etc.) would be fair game for litigants. However, in an LLP, you are protected from this liability, and your personal assets would remain safe in this example.

Pro #2. Perpetual existence:

An LLP, just like a Private Limited, will continue to exist forever, unless it is wound up, or becomes insolvent. This characteristic of perpetual existence makes it easier to pass the business on to other owners. For example, a family-owned LLP can pass ownership of the business on to the next generation. This is quite different from a partnership or a sole proprietorship, which ceases to exist when the owner(s) pass(es) away.

Pro #3. Relatively simple compliance requirements:

LLPs only need to lodge a Declaration of Solvency with ACRA each year. Also, LLPs will need to keep accurate accounts of all transactions made and their financial position, which any properly-functioning business would have anyway. These statements must be kept for at least 7 consecutive years, but they do not need to be filed yearly with ACRA.

Compliance requirements for an LLP are therefore simpler compared to a Private Limited entity. Compared to Private Limiteds, LLPs do not need to appoint company secretaries, hold AGMs, file annual returns with ACRA, have their accounts audited, etc. This saves the partners in an LLP both time and money when managing their business. Of course, given how simple requirements are for running a Private Limited, these cost and effort savings for compliance are not tremendously huge.

Con #1. Limitation of liability does not extend to mistakes made by you:

The limitation of liability only applies to liability incurred by other partners in the LLP. This limitation of liability does not include errors, omisssions, negligence, mistakes, or other liabilities incurred by you.

Con #2. No corporate tax benefits:

Partners in an LLC are taxed at their personal income tax rate. LLPs do not benefit from corporate tax rates which in Singapore 10 to be lower than personal income tax rates.

Con #3. Must always maintain at least 2 partners:

You must maintain a minimum of 2 partners in the LLP at all times. If you only have 2 partners, and you end up having a major disagreement with your sole partner and they threaten to leave, that could pose an existential problem unless you can find a replacement partner.

Con #4. Partners can enter into contracts without the consent of other partners:

Individual partners in an LLP can enter into contracts or other business agreements with others, without the need to first obtain consent from other partners in the LLP. This can be quite dangerous if the interests of the LLP partners are not aligned properly, and a partner potentially goes rogue.

Con #5. More difficult to transfer ownership or sell the company:

It is more difficult to transfer ownership in an LLP because any business assets, IP, licenses, permits, etc., must be transferred on an individual basis. The entire LLP, and all its assets, cannot simply be sold as one whole entity. This is quite different from a Private Limited, where the entire entity can simply be sold in one go, as long as sufficient shareholder consent is sought. If you want the flexibility to gain a nice exit from your company later on, incorporating an LLP may not be the most suitable option for you.

3 Steps to Register an LLP in Singapore

Step 1: Reserve your LLP name

In order to make sure that your name application is approved as quickly as possible you should bear the following points in mind:

Do not use vulgar, sexually suggestive, or rude names
Do not use reserved names, like “Temasek”
Do note use names that are the same or very similar to existing company names, or names that are already reserved
If you use certain words in your name (for example, “school” or “bank”), then your name application will be referred to the relevant Ministries for further approval. This will delay your name reservation

Once your name has been approved, it will be reserved for you for 120 days. You must then incorporate your LLP within this 120-day time frame. If you do not incorporate your LLP within this timeframe, your reserved name will be released. You will have to go through the whole reservation process again (and that includes paying the $15 fee once more).

A note on naming of LLPs

All LLPs in Singapore must have either the words “Limited Liability Partnership” or “LLP” in their name.

Step 2: Register your LLP

Log on to BizFile+ to register your LLP. The registration fee is SGD $100.

You will require the documents discussed earlier (under the section “What documents are required for registering an LLP). To save you from scrolling up, here are the required documents:

Approved LLP name
Personal particulars of all the LLP’s partners (name, identification/passport number, residential address, phone number, email)
If the partner is another company, you must have the company name, company registration number, country of registration, and company address
Declaration of compliance
Registered business address for the LLP
Signed consent to act as manager and statement of non disqualification to act as manager

ACRA will take about 15 minutes to process your LLP incorporation.

Step 3: Download your business profile

Upon successful registration, ACRA will email the appointed contact person with a free copy of your ACRA business profile. You’ll need this business profile to set up a corporate bank account, amongst other things.

FAQs on LLPs

Is there a limit on the number of partners in LLP?

No. There is no limit to the number of partners you can have in an LLP.

How can a new partner join an LLP?

Admitting a new partner to an LLP requires the consent of 100% of all existing partners.

How are decisions made in an LLP?

Decisions are governed by the Limited Liability Partnership Agreement. Most Limited Liability Partnership Agreements will state that decisions are to be made via a first-past-the-post vote (i.e. majority votes). Some partnerships may set varying standards for decisions to be made, for instance requiring 2/3 votes for certain major decisions.

Can a partner leave an LLP?

Yes. Methods of leaving an LLP are generally governed by the Limited Liability Partnership Agreement, if there is one. If the partners did not sign such an agreement while operating the LLP, then a partner can give 30 days written notice to other partners informing them of their decision to leave.

Can foreigners register LLPs in Singapore?

Yes. However, foreigners who want to incorporate an LLP must appoint a locally resident LLP manager (e.g. Singapore citizen, PR, or EntrePass/Employment Pass holder) to do so. Also, foreigners must appoint a registered filing agent (such as a corporate secretarial company, or law firm), to complete the incorporation process for them.

Can foreigners be partners in an LLP?

Yes. There are no restrictions on foreigners joining Singapore LLPs as partners.

Must I renew my LLP registration?

No. Once you’ve incorporated your LLP you do not need to renew your incorporation. Your LLP will exist forever unless you choose to wind it up, or the LLP becomes insolvent.

Must an LLP file corporate income taxes?

No. LLP profits are not taxed at corporate rates, so there is no need to file an LLP annual tax return. Instead, each partner in an LLP will file their own personal income taxes for payments/profits they received from the LLP.

Can an LLP apply for a bank loan?

Yes. However, LLPs are generally not viewed as favourably as Private Limiteds. This may potentially affect the terms of any bank loans you apply for.

Can an LLP own property?

Yes. Just be aware that if you buy a property under an LLP, that property’s ownership now rests with the LLP. If you want to sell that property later on, you will have to get the consent of a majority of partners. Getting this consent may not be so easy if the partners have differing views on what to do with the property.

Does an LLP have shares?

No. An LLP does not have shares in the way a Private Limited company does. However, it is possible to have partners receive varying levels of profit. Let’s take a simple example. An LLP providing architectural services has 3 partners. Partner A invests $600,000, Partner B invests $300,000, and Partner C invests $100,000. Partner A would therefore be entitled to 60% of the LLP’s profits, Partner B would be entitled to 30% of the profits, and Partner C would be entitled to 10% of the profits. Such an arrangement for differentiated profit sharing must be set out clearly in a Limited Liability Partnership Agreement, to minimise disputes later on.

It’s also best to speak with a lawyer to draft out a good Partnership Agreement. This is because in the absence of a Partnership Agreement, Singapore law sets out a default list of rules governing profit-sharing and voting power in LLPs. This is found in the First Schedule of the Limited Liability Partnerships Act. The Act specifies that profits are to be equally split amongst partners. Also, each partner is entitled to one vote. Under these default rules, this equal splitting of profit and one-person-one-vote arrangement stands regardless of the quantity of initial investment. This means that if you invested more than your other partners, the default rules would not reward you. If you don’t want to have these default rules in place, have a Partnership Agreement in place before you start your business!

Can other partners vote to kick out a partner?

Yes, but only if such a power has been agreed upon in a Partnership Agreement. If you have a Partnership Agreement, and the Agreement states that a majority of partners can vote to expel a partner, then you can proceed to do so.

However, if no such power has been granted in the Partnership Agreement (or if there isn’t even a Partnership Agreement), then other partners cannot vote to remove a partner. This is true even if a majority of partners agree to such a removal. In such a scenario, you’re pretty much stuck. You can choose to either buy out the troublesome partner, or start a new partnership.

What are the compliance requirements for LLPs?

Filing annual Declaration of Solvency

You will have to file a Declaration of Solvency with ACRA within 12 months after you first incorporate your LLP. Thereafter, you must file a Declaration of Solvency at least once every 15 months.

Keeping accurate financial records

Financial records of all transactions must be kept for at least 7 consecutive years. You should hire a bookkeeper to ensure your accounts are all in order.

Partners must pay taxes on payments received from LLPs

The profits that each partner in an LLP receives are taxed at their personal income tax rate. There is no corporate tax for LLPs.

Appointing an LLP manager

All LLPs must appoint at least one partner to be a manager. Managers are responsible for ensuring that the LLP maintains compliance with all relevant laws in Singapore.

A manager must be:

At least 18 years old
A natural person (i.e. an individual, and not a company)
Ordinarily resident in Singapore

If there are any compliance breaches, LLP managers will face personal liability for these breaches. They must answer for these lapses to the relevant authorities.

Maintain official business address

All businesses in Singapore must maintain an official business address. Now, you don’t actually need to rent an office just to meet this requirement. There are plenty of virtual offices that you can use who will provide you with an address. These companies also usually offer additional business services such as mail forwarding, mail scanning, etc. Some of these virtual offices will even have meeting rooms for you to book so you can host clients or business meetings.

Clearly state company name and UEN on all business communication

As with all businesses in Singapore, LLPs must state their official business name and UEN on all business communications. This includes letters, invoices, quotes, and other correspondences.

Alert ACRA promptly if any changes are made to the LLP

If there are any changes to the LLP (e.g. change in partners’ details, change in business address, etc.), these changes must be reported to ACRA within 14 days from the date of change.

How do I close/wind up an LLP?

You can go on to BizFile+ and complete an application to wind up the LLP.

Protecting your LLP in Singapore:

Provide is the easiest way for businesses to get insured in Singapore. Simply click the links below to purchase your cover online, in just 3 minutes!

Coverage	Explanation	Premium
Professional Indemnity Insurance	Covers business-related lawsuits	From $42/month
Commercial Property Insurance	Covers property damage from fire, explosions, certain types of water damage, etc. Covers building structure, renovations, fixtures & fittings, equipment, & more.	From $12/month
Public Liability Insurance	Covers lawsuits related to injuries or property damage to third-parties (e.g. members of the public).	From $9/month
Work Injury Compensation Insurance (WICA Insurance)	Covers your employees from work-related injuries/sickness, including Covid-19. Pays up to $45,000 medical expenses per worker.	From $5/month, per worker

Ultimate Guide to GST Registration Singapore

Aug 20, 2021 by Admin

What is the Goods and Services Tax (GST)?

The Goods and Services Tax (GST) is a consumption tax that must be paid on nearly all kinds of goods and services in Singapore. GST is payable on consumer goods, industrial goods, personal and business services, imported goods, and more.

GST is alternately known as VAT (Value-Added Tax) in places like the EU, or Sales Tax in places like the US.

How much is GST?

The current GST rate is 7%. GST is set to rise to 9% by 2025.

When does a business need to register for GST?

There are two situations where you have to register for GST.

Situation 1: Annual sales > $1 million in last 12 months

You have to register your business for GST if your annual turnover was more than SGD $1 million in the last 12 months.

Situation 2: Annual sales expected > $1 million in next 12 months

You will also have to register for GST if you are certain that your annual turnover will exceed SGD $1 million dollars in the next 12 months.

This expectation of annual sales exceeding $1 million should be supported by the following documents/financials:

Signed contracts/invoices/quotations with customers
Financial statements that show annual sales of close to $1 million, and annual sales likely to exceed $1 million in next 12 months

If you’re only forecasting annual sales of more than $1 million without the above documents (e.g. forecast based solely off a business plan), then you don’t have to register for GST.

When can I be exempted from GST registration?

You can apply to the Comptroller of GST to be exempted from GST registration if you provide international services or export goods that do not carry GST, and these services or export of goods form over 90% of your total annual revenue. The practical effect of this is that businesses which are based in Singapore, but who primarily serve clients overseas, will not need to charge GST to their clients.

Also, you don’t need to register for GST if you made over $1 million annual revenue in the last 12 months (Situation 1), but you expect to make less than $1 million in sales in the next 12 months (Situation 2). Such situations are common if, for instance, you are downsizing your business, or if your business is generally not doing well. You will need to keep detailed forecasts and documentation to prove that you expect to make less than $1 million in revenue. For instance, you should be able to show a significant drop in signed contracts, invoices, etc.

Voluntary GST registration

You can voluntarily register for GST.

To do so, you have to pass two eLearning courses.

You do not have to pass these two courses if:

You have previously managed other businesses which were GST-registered, OR
The individual preparing your GST returns has completed the e-learning courses, and this person is an accredited tax advisor

What is the deadline for GST registration?

You must register for GST within 30 days from the date when you become liable to register. For instance, if you have strong evidence that your sales will exceed $1 million, you must register within 30 days from the date you make that forecast.

What happens if I’m late in registering for GST?

Your total GST liability starts from the date you become legally required to register for GST. For instance, if your sales crossed $1 million in January of last year, but you only registered for GST 12 months later, you have to pay back the 12 months of GST that you didn’t pay.

You will need to pay GST on all sales starting from the date of liability, even if you had not started collecting GST from your customers then. Depending on the amount of sales that you generated this can make out to be quite a significant amount. It’s therefore important to keep on top of when you need to register for GST!

Businesses who register late for GST may be fined up to $10,000. Also, they may face a penalty of up to 10% of the GST amount that was due.

What happens if I’m late in paying GST?

You have to pay GST within 1 month from the end of your accounting period. Businesses that don’t pay GST by the due date will have a 5% penalty levied on the amount of unpaid GST.

If you go past 60 days from the due date, you’ll incur an extra 2% penalty charge for every month your GST remains outstanding. The maximum penalty is 50%.

Example: A successful restaurant chain has $1,000,000 in GST liabilities. The restaurant chain fails to pay their GST liability for 6 months after their GST payment due date. The total penalty they will incur is 5%, plus 8% (2%/month times 4 months). This is a total penalty is 13%, or $130,000. The final GST owed will be $1,130,000. Lesson of the day – pay your GST on time.

What are the responsibilities of a GST registered business?

File your GST returns

GST registered businesses must file returns on the GST that they’ve charged for the goods and services. These annual GST returns must be submitted online on IRAs’ myTax portal, within one month from the end of the business’ accounting period.

You will need to submit both your output GST (this is the GST collected from your clients, end the input GST (this is the GST pay to suppliers). If your output GST is higher than your input GST, you must pay the difference between the two amounts to IRAS. On the other hand, if your input go see is higher than your output you see, IRAS will refund the difference between the two amounts to you.

Pay GST in a timely fashion

You have to pay GST within 1 month from the end of your accounting period. For instance, if your accounting period ends on 31st December of each year, you have to pay your GST to IRAS by 30th January.

Clearly display GST charges to customers

Any prices, product brochures, invoices, etc. that are shared with the public or with customers must display GST. You cannot hide GST charges. Businesses that do not display their GST charges can be fined up to $5,000.

The only exception to this rule are for F&B companies, or hotel businesses. F&B and hotel businesses can display prices that are exclusive of GST. However, they must clearly state that all listed prices are subject to GST and service charge. This explains why you’ll see such statements frequently when dining out at restaurants, cafes, and the like.

When must I cancel my GST registration?

You must cancel your GST registration if you:

Stop producing goods or services which are subject to GST, OR
Shut down your business, OR
Transfer your business to another person, OR
Change the type of business you run (e.g. converting your business from a Pte Ltd into some other entity)

You have to cancel your GST registration within 30 days of any of the above happening. You can cancel your GST registration online, by going to IRAS’ myTax Portal.

If you convert a sole proprietorship into a partnership (or vice versa), IRAS will automatically cancel your GST registration. upon learning from ACRA that. You will not need to apply for cancellation in these circumstances. However, the new entity will need to decide whether or not to apply for GST registration.

Cancelling GST registration if you volunteered to be GST-registered

If you voluntarily registered for GST, and you do not meet the criteria for compulsory GST registration (i.e. annual sales < $1 million), then you must remain GST-registered for 2 years before you can cancel your GST registration.

You can cancel your GST registration IRAS’ myTax Portal.

Example: ABC Company voluntarily registers for GST on 1 Jan 2022. ABC Company can only cancel their GST registration from 1 Jan 2024 onwards.

No charging of GST after cancelling GST registration

When you cancel your GST registration, IRAS will inform you of the effective date of cancellation.

After you have cancelled your GST registration, you must adhere to the following:

You cannot charge your customers GST. Doing so is a criminal offence.
You cannot issue tax invoices.
You must continue to pay GST to the Singapore Customs for importing goods.

What are the benefits of being GST registered?

The main benefit is that you can claim back GST on your business purchases. For instance, whenever your business procures services or products from vendors (e.g. IT services, consulting services, etc.) that charge GST, you can claim back the GST on these expenses. Also, if you purchase commercial properties through your business, you can claim back the GST on the property purchase. That can result in some really significant savings. Being able to claim back GST basically saves you 7% on your expenses, whenever you buy from GST-registered vendors.

The second benefit is that your customers who are GST-registered themselves can also claim back GST on their purchases made from you. Some businesses may therefore raise their own prices when selling to GST-registered customers, since clients can claim back the GST you are charging.

Remember to protect your business:

While you’re going through the process of registering for GST, don’t forget to protect your business! It’s crucial that you protect your business from the many risks that could cost you serious sums of money. A business lawsuit could cost you hundreds of thousands to millions of dollars. A fire at your business premises could wipe out hundreds of thousands of dollars in investment. A slip and fall by a customer while in your business premises could result in expensive personal injury claims. You should also protect your company directors and officers – any lawsuit targeting them would immediately expose their personal assets (a real nightmare scenario!)

Provide is the easiest way for businesses to get insured in Singapore. Simply click the links below to purchase your cover online, in just 3 minutes!

Coverage	Explanation	Premium
Professional Indemnity Insurance	Covers business-related lawsuits	From $42/month
Commercial Property Insurance	Covers property damage from fire, explosions, certain types of water damage, etc. Covers building structure, renovations, fixtures & fittings, equipment, & more.	From $12/month
Directors & Officers Liability Insurance	Covers lawsuits targeting Directors & Officers of the company (such lawsuits happen frequently when the company itself is also being sued).	From $42/month
Public Liability Insurance	Covers lawsuits related to injuries or property damage to third-parties (e.g. members of the public).	From $9/month
Work Injury Compensation Insurance (WICA Insurance)	Covers your employees from work-related injuries/sickness, including Covid-19. Pays up to $45,000 medical expenses per worker.	From $5/month, per worker

Best Guide to Dividend Payments for Singapore Entrepreneurs

Aug 13, 2021 by Admin

If you run a business in Singapore you have probably thought about paying yourself dividends. The process can be a little confusing, so we’ve put together a step-by-step guide on how to pay yourself and other shareholders corporate dividends. There are also some important rules that you need to follow when paying dividends in Singapore. If you breach these rules, you can incur serious legal liability and even imprisonment.

We’ll explain:

When can I pay dividends?
What types of dividends are there?
How do I declare dividends?
What are the implications of declaring a dividend?
Important facts about declaring dividends
How are dividends taxed in Singapore?
Do dividends create a corporate tax shield?

When can I pay dividends?

You can only pay dividends if your company makes a profit.

You cannot pay dividends if your company has made a loss. Doing so is a crime, which can create both criminal and civil liabilities!

Criminal liability for illegal dividend payments:

Under Section 403(2) of the Companies Act, the illegal payment of dividends is punishable by up to 1 year in prison, and/or a fine of up to $5,000.

Civil liability for illegal dividend payments:

On top of criminal punishments, directors who approve dividend payouts when there are no profits can also be liable to their company’s creditors for any debts owed. Directors can be held personally liable for these debts, meaning that creditors can claim the directors’ personal assets (e.g. house, car, bank savings, etc.) to repay money that’s owed.

Also, shareholders can also sue directors who approve illegal dividend payments. These lawsuits can allege breach of fiduciary duty or negligence. If the director(s) being sued lose their case, their personal assets can be claimed by shareholders to repay damages that are awarded by the Courts.

These riminal and civil liabilities can follow directors even after directors leave their positions. Unless you want to pay huge sums of money from your own pocket, don’t declare dividends illegally!

What types of dividends are there?

The two types of dividends in Singapore.

Final dividends:

These are dividends declared during the company’s AGM, after the company’s financial statements have been shared, and annual profits have been confirmed for the year. Once a final dividend has been declared, it cannot be canceled or modified in any way.

Interim dividends:

These are dividends declared before a company’s AGM is held, which also means that animal financial statements have not been confirmed for the year. Interim dividends can be declared any time between two AGMs.

How do I declare dividends?

Step 1: Have the board of directors declare a dividend payment

The Board of Directors should declare that dividends should be paid in this particular year, and state exactly how much in dividends should be paid.

Step 2: Pass an ordinary resolution to approve the dividend payment

Prepared a written resolution stating how much dividends are to be paid out. Organise a shareholders meeting at least 14 days in advance. If you receive at least 95% shareholder approval you may hold the meeting at a date earlier than 14 days in advance.

At the meeting, put the resolution to pay dividends to a vote. Since this is an ordinary resolution, you must receive at least 50% of all shareholders’ votes. If you receive at least 50% of the votes the ordinary resolution has passed. You may now proceed to pay out the declared dividends.

Step 3: Prepare the dividend voucher, and pay the dividend

A definite voucher is basically a dividend receipt. It helps shareholders and the company keep documentary evidence that dividends were paid and received. Dividend vouchers should state:

Name of shareholder receiving dividend
Address of shareholder receiving dividend paragraph name of company issuing dividend
Address of company issuing giving you paragraph date of dividend paid
Never shares held by shareholder receiving do you paragraph dividend payment cash a
Total dividend paid
Signature of official company officer usually a bold director

Send the dividend voucher to each shareholder who is receiving a dividend when you make the payment.

What are the implications of declaring a dividend?

The implications differ, depending on whether you’re declaring a final dividend, or interim dividend.

Declaring a final dividend creates a legal obligation to pay shareholders. A final dividend is a debt. Therefore, if you’ve declared a final dividend, you cannot simply renege on your declaration. You also cannot reduce the final declared dividend.

Only final dividends create a legal debt. Interim dividends do not create debts so interim dividend can be Revolt canceled all modified without the same degree of legal entanglement. of course changing declared and trim dividends can leave shareholders quite upset so it is best to stick to declared interim dividend amounts.

Additional facts about declaring dividends:

Shareholders and their right to receive dividends:

Shareholders do not have the right to demand dividends. Unless the company’s Constitution allows shareholders to demand dividends (which would be a very strange exception), shareholders cannot force a company to pay them dividends. For instance if a shareholder has a 10% ownership stake, that shareholder cannot simply demand 10% of the company’s profits simply because he owns a portion of the company. The Board must first declare dividends, and then a majority of shareholders must agree to pay out dividends, as outlined in the steps above.

Availability of profits:

Profits only need to be available on the date that the dividends were declared. Profits do not need to be available at the time that dividends are paid.

Dividends and liquidation:

If the company is insolvent and is being liquidated, dividends cannot be paid. Paying out dividends would prejudice the rights of debt holders while favoring Equity holders.

How are dividends taxed in Singapore?

Dividends are generally exempt from tax in Singapore. This makes running a business in Singapore particularly attractive.

Do dividends create a corporate tax shield?

No. Dividends are paid out of net income after tax. Dividends are not an expense line item, so they do not reduce your Earnings Before Interest and Taxes (EBIT). Therefore, dividends do not reduce your corporate tax burden.

Remember to protect your business and directors:

It is vital that you protect your company from the myriad of business risks that exist. A business lawsuit could cost you hundreds of thousands to millions of dollars. A fire at your business premises could wipe out hundreds of thousands of dollars in investment. A slip and fall by a customer while in your business premises could result in expensive personal injury claims. You should also protect your company directors and officers – any lawsuit targeting them would immediately expose their personal assets (a real nightmare scenario!)

Provide is the easiest way for businesses to get insured in Singapore. Simply click the links below to purchase your cover online, in just 3 minutes!

Coverage	Explanation	Premium
Professional Indemnity Insurance	Covers business-related lawsuits	From $42/month
Commercial Property Insurance	Covers property damage from fire, explosions, certain types of water damage, etc. Covers building structure, renovations, fixtures & fittings, equipment, & more.	From $12/month
Directors & Officers Liability Insurance	Covers lawsuits targeting Directors & Officers of the company (such lawsuits happen frequently when the company itself is also being sued).	From $42/month
Public Liability Insurance	Covers lawsuits related to injuries or property damage to third-parties (e.g. members of the public).	From $9/month
Work Injury Compensation Insurance (WICA Insurance)	Covers your employees from work-related injuries/sickness, including Covid-19. Pays up to $45,000 medical expenses per worker.	From $5/month, per worker

Best Guide to Start a Private Limited Company in Singapore

Aug 11, 2021Aug 11, 2021 by Admin

Singapore is an excellent place to start a business, and private limited companies are one of the most popular types of companies that entrepreneurs will start here. Are you thinking of starting your own private limited company in Singapore? We’ve written this guide to walk you through the entire process from start to finish.

What is a private limited company?

A private limited company is a separate legal entity from its shareholders. It is a company “limited by shares”, meaning that, in most cases, the liability of shareholders is limited to the value of their shares (i.e. the amount of money they’ve invested in the company).

This limitation of liability is a crucial point because it protects shareholders from legal liability incurred by the company. The personal assets of a private limited company’s owner are kept separate from the company’s. This is one of the key reasons why most entrepreneurs choose to start a private limited company, compared to other forms of companies like sole proprietorships or partnerships.

In other countries like the US, private limited companies are alternately known as corporations, incorporated entities (“Inc.”), or limited liability companies (LLCs).

What are the pros and cons of a private limited company?

Pros of private limited companies:

Limited liability:

This is the most important advantage of starting a private limited company. The personal assets of shareholders are generally protected from lawsuits that target the company. This is quite different from other types of businesses like sole proprietorships, where the company’s assets and the owner’s personal assets are fully exposed to any legal claims. However, these limitations of liability have their own restrictions, which we discuss shortly in the next section on the “cons” of private limited companies.

Easy to set up:

You can set up a private limited company with just 1 shareholder. This is much easier than the 7 shareholders required for public limited companies.

Easy to transfer shares:

You can easily transfer shares from one shareholder to another. This ease of ownership transfer also makes it easier to raise funds from investors, and provides greater liquidity for shareholders.

Perpetual existence:

A private limited company is Will exist forever unless it is shut down it is therefore relatively easy to pass on ownership of the company EG to your family members if you no longer wish to run it or if you pass on

Cons of private limited companies:

Limited liability protections are not absolute:

It’s worthwhile to note that the limitation of liability is not absolute. Limited liability protections can be cast aside by the Courts (called “piercing the corporate veil”, in legal terms) in cases that involve dishonesty. This includes actions by shareholders such as fraud, running the company while insolvent, taking on debts with no intention of repayment, and more.

Limited liability protections do not extend to lawsuits filed directly against directors & officers:

Limited liability protections only cover the company. They do not cover directors and officers against lawsuits filed personally against them. That’s why Directors & Officers Liability Insurance is so important.

What are the key requirements to start a private limited company in Singapore?

At least one shareholder (either a private individual or a corporate entity)
At least one company director ( ordinarily resident in Singapore)
One company secretary
Paid up capital of the least SGD $1
A business address in Singapore

What are the steps to register a private limited company in Singapore?

Step 1: Reserve your company name

You will need to reserve a name with ACRA. Choose a name that will help to build a great and memorable brand with your clients. The reservation of a name with ACRA will cost you SGD $15.

ACRA will take some time to review your chosen name. If it clears their compliance department, your name will be reserved for you for the next 120 days.

Here are some helpful tips to ensure your chosen name gets approved quickly, and on the first try:

Do not include vulgarities, innuendo, or rude words
Do not use restricted words like “Temasek”
Do not use a name that is the same or very similar to existing company names, or names that are already reserved
If you use special words like “bank” or “school”, your name approval process will take longer. This is because ACRA will refer your chosen company name to the relevant government ministries for further approval.

You must complete the incorporation of your private limited company (i.e. reach step 10 of this guide) within this 120 day timeframe. If you don’t incorporate your company by this deadline, your reserved name will be released to the public. You’ll then have to go through the whole name reservation process again, and pay the $15 name reservation fee once more.

Step 2: Confirm your business activity

You will need to select a business activity code from the Singapore Standard Industrial Classification Code (SSIC). The SSIC is a list of over 500+ different codes representing all kinds of business activities in Singapore, ranging from F&B to engineering to manufacturing to consulting services. For instance, the SSIC code 56112 is the code for the operation of cafes.

You may supplement your chosen SSIC code with a brief write-up of your specific business activities.

Step 3: Issue company shares

When you start a private limited company, you must issue one or more subscriber shares to your initial company shareholders. You can increase the number of shares later on, but at the point of starting the company, you must issue at least one share. You can start a private limited company in Singapore with a minimum paid-up capital of just SGD $1 (equivalent to about $0.33 USD).

You can choose to issue varying types of shares, such as Ordinary Voting Shares, Preference Shares, Super-Voting Shares, Non-Voting Shares, etc.

Step 4: Confirm the shareholders agreement

It is critical to have a well-drafted shareholders agreement to avoid disputes between company shareholders. A shareholder agreement sets out the relationship between shareholders, dispute resolution mechanisms that shareholders have access to, and the duties and rights of all shareholders, amongst other things. It is advisable to engage a lawyer to draft a shareholder agreement before the company’s members each sign it.

Step 5: Confirm details of shareholders

Private limited companies in Singapore must have at at least one shareholder.

A shareholder can be either a:

Private individual (e.g. yourself)
Company (e.g. another Private Limited that you operate)

You will need to collect the following information from each shareholder:

Full name
Identification number (e.g. NRIC, passport no., etc.)
Phone number
Email address
Residential address

The above information will need to be submitted when you incorporate your private limited company.

Are foreign shareholders allowed in Singapore?

Yes. Singapore allows 100% foreign ownership of companies. This makes it easy for foreigners to set up companies and invest in the country.

There are no special processes or permits required to have 100% foreign ownership (or in fact any level of foreign ownership) of a private limited company.

Step 6: Appoint company director(s)

Your private limited company must have at least one company director who is ordinarily resident in Singapore. Other directors can be based outside of Singapore. However, at least one director must live in the country.

An ordinarily resident person can be a:

Singapore citizen living in Singapore
Singapore permanent resident living in Singapore
A foreigner who holds an Employment Pass or EntrePass or Dependents Pass, living in Singapore

Note that Employment Pass holders must first get consent from the Ministry of Manpower before they can become directors of a company here.

Some additional criteria for being a company director are:

At least 18 years old
Not be disqualified from being a company director (e.g. not be an undischarged bankrupt, no criminal record of fraud/dishonesty, etc.)

Can a shareholder be the sole director of the company?

Yes, that’s perfectly fine. You just need to have at least one director in private limited companies. If you only have one shareholder, that shareholder can also be the sole director of the company.

Step 7: Confirm the registered business address

You must have a registered business address when incorporating a private limited company. This address must be an actual physical address. It cannot be a P.O. Box.

You don’t need to go out to rent an office just to get a business address. There are plenty of virtual offices in Singapore that will provide you with business addresses that you can use for starting and running your company. Check out our article on the 5 cheapest virtual offices in Singapore for more information.

You are allowed to use your own residential address as your business address under the following schemes:

HDB Home Office Scheme: Apply for permission from HDB if you live in a flat, and you wish to use your flat as your registered business address.

URA Home Office Scheme: Apply for permission from URA if you live in a private property, and you wish to use your private property as your registered business address.

Using your house address as your business address may be convenient, but do remember that your business address is public information. Anyone can simply look up your business profile on ACRA’s website and they will know where you live. Consider using a virtual office if privacy is important to you, or if you plan on borrowing heavily from loan sharks.

Stop 8: Confirm your Company Constitution

Your Company’s Constitution is a document that lays out how your company will be operated, the various rules that regulate your company, and the rights and responsibilities of each shareholder. It is similar to a corporate version of a country’s constitution. You must have a Company Constitution when you submit your application for incorporation.

Before 2014, it used to be that you would have to submit 2 documents, called the Memorandum of and Articles of Association. After 2014, ACRA streamlined these two documents into one document, which we now know as the Company Constitution.

In Singapore, it is most common to use the Model Constitution. The Model Constitution makes it easy for first-time entrepreneurs to quickly have this requirement fulfilled without putting too much thought into the Company Constitution. You can download the Model Constitution here.

Step 9: Confirm your financial year-end (FYE)

You must decide on a date on which your financial year will end. Your FYE is when your corporate filings are due to the relevant authorities. Commonly chosen FYE dates include the last day of March, the last day of June, the last day of September, or the last day of December.

You must also confirm whether your accounting period will be over 12 months or 52 weeks. A 12-month accounting period is more popular.

Step 10: Submit your application via BizFile+

Go to BizFile+ to submit all the information from steps 1 to steps 11. You must have the transaction number of your approved company name in order to file a successful application.

Emails will be sent to the appointed company offices all of the company’s directors shareholders and your company secretary must provide their consent online via the link contained in the email this will redirect them to bits while plus they must provide their consent within 60 days of receiving the email.

The BizFile+ application will cost you SGD $300 (approx. USD $100). Accepted payment modes include: debit/credit card (Mastercard, Visa, Amex), PayPal, Google Pay, and Apple Pay.

Once you’ve completed Step 10, it’s time to pop open a nice bottle of champagne. You’ve just incorporated your private limited in Singapore! Congratulations!

Step 11: Open a company bank account

Once you’ve incorporated your company, you should open a corporate bank account in Singapore so that you can start sending and receiving payments.

Have at least one company director be physically present in the bank in order to sign the required paperwork. If you are unable to be present in Singapore, some banks may accept signed documents at the bank branch in your country, or document verified by a notary public.

What should I take note of after I’ve incorporated my company?

Hold an AGM every year

All private limited companies in Singapore must hold an AGM every calendar year.

File annual returns

All companies must file their annual returns with ACRA within one month of their FYE.

File corporate taxes

All companies must file their corporate income tax returns with IRAS by 30th November every year.

Appoint your company secretary

All private limited companies must appoint a company secretary within 6 months of their incorporation. In Singapore, it is very common to use corporate secretarial companies instead of hiring an individual person to serve as a company secretary. Many incorporation companies will offer corporate secretarial services at relatively affordable rates (e.g. between SGD $300 to $600/year). The corporate secretary is responsible for managing the company’s corporate filings, ensuring that the company complies with relevant regulations, and other general compliance requirements.

Appoint a company auditor, unless exempted

The audit exemption criteria in Singapore is crafted to ensure that most companies do not have to appoint an auditor. Only medium-sized enterprises and larger will need to appoint auditors to certify their accounts.

The audit exemption requirements are:

Total number of employees under 50
Annual revenue under SGD $10 million
Total assets under SGD $10 million

If you meet all 3 of the above criteria, then you do not need to appoint a company auditor. As you can see, the criteria are all quite generous. If, however, you have the good fortune of exceeding these criteria (e.g. you have annual sales of SGD $15 million) then you would have to appoint a company auditor.

Obtain licenses and permits if necessary

Some businesses in Singapore are required to apply for specific licenses and permits. For example, if you wish to run a massage parlour, you’ll have to apply for a Massage Parlour license from the Singapore Police Force. If you wish to run a restaurant, you must obtain a Food License from the Singapore Food Authority.

Make sure you familiarise yourself with the various permits required for your type of business.

Maintain a minimum number of registered office hours

Your office at your registered business address must be open to the public for a minimum of three hours a day, during normal working days. If you use a corporate secretary with a virtual office, they will be able to fulfill this requirement for you.

Display your UEN correctly

Your UEN must be displayed clearly on all your letterheads, invoices, and other official company documents/communications.

Customs registration:

If your business is involved in the import and export of goods, then you will need to register your company with the Singapore Customs. The Singapore Customs will issue you a Customer Registration Number for use during your import/export activities.

Goods and services tax (GST) registration

If your annual turnover is more than SGD $1 million, then you must register for the Goods and Services Tax (GST). GST is currently 7%, and is set to increase to 9% by 2023. GST is charged on the services and products that you provide to your customers.

You can choose to voluntarily register for GST. Being a GST-registered business does have some advantages. The key benefit is that you can claim back the GST which you pay on your company’s expenses.

For instance, if you are a GST-registered business and you purchase a commercial warehouse oh, and the purchase price included 7% GST you can actually claim back the 7% of the purchase price.

Register for Central Provident fund (CPF) contributions

CPF is a national savings fund. Employers are required to contribute between 7.5% to 17% of the employee’s monthly salary into the CPF accounts. CPF is mandatory for all employees in Singapore who are Singapore Citizens or Permanent Residents, as long as they earn over $50 a month.

CPF contributions are not required for foreign employees.

Apply for government grants for newly incorporated companies

The Singapore government is highly vested in promoting entrepreneurship. If you are a newly incorporated business, one popular grant that you can apply for is the Startup SG Founder scheme. The Startup SG Founder scheme allows business owners to receive matching investments of up to $30,000 from SPRING Singapore. SRING Singapore will match $3 for every $1 raised by the founder, as long as the investment is raised from an Accredited Mentor Partner (AMP). There are currently 48 AMPs approved by SPRING Singapore.

Qualifying criteria for Startup SG Founder scheme:

Singapore-registered company
Company must not have been incorporated for more than 6 months
Applicant must be a key decision-maker in company
Applicant must be Singapore citizen or permanent resident
Applicant must hold at least 30% of shares in company
At least 51% shareholding owned by locals (Singapore citizens or permanent residents)

Remember to protect your new private limited business:

Provide is the easiest way for businesses to get insured in Singapore. Simply click the links below to purchase your cover online, in just 3 minutes!

Coverage	Explanation	Premium
Professional Indemnity Insurance	Covers business-related lawsuits	From $42/month
Commercial Property Insurance	Covers property damage from fire, explosions, certain types of water damage, etc. Covers building structure, renovations, fixtures & fittings, equipment, & more.	From $12/month
Public Liability Insurance	Covers lawsuits related to injuries or property damage to third-parties (e.g. members of the public).	From $9/month
Work Injury Compensation Insurance (WICA Insurance)	Covers your employees from work-related injuries/sickness, including Covid-19. Pays up to $45,000 medical expenses per worker.	From $5/month, per worker

Best Guide for Buying Commercial Properties Singapore: 8 Must Knows

Aug 6, 2021Aug 6, 2021 by Admin

Commercial properties are a hot area for real estate investors in Singapore. Commercial properties are exempt from the ABSD (Additional Buyer’s Stamp Duty), which can significantly impact returns for residential real estate investments. There are some intricacies to this process, so it’s important you familarise yourself with the process first before sinking a large sum of money into a commercial property. We’ve written this comprehensive guide to purchasing commercial properties in Singapore.

We’ll explain:

What is a commercial property?
What are the different types of commercial properties available?
Can foreigners buy commercial properties in Singapore?
Should I buy a commercial property as an individual, or via a company?
What taxes do I have to pay when buying commercial properties?
What are the key factors to consider before purchasing commercial properties in Singapore?
What are the most frequently asked questions on commercial properties?
How should I protect my commercial property from damage?

1. What is a commercial property?

A commercial property is a building designed for business purposes. It is not meant for residential use. Commercial properties are purchased to earn returns through both rental income and/or capital gains.

2. What are the different types of commercial properties available in Singapore?

There are 4 main types of commercial properties here:

Retail Commercial Property:

Examples include shopping malls, stores (e.g. clothing stores, convenience stores, electronic stores, etc.), F&B premises, salons, spas, gyms, shophouses, etc.

Industrial and Commercial Properties:

Examples include offices, warehouses, and factories.

These properties are classed into two sub-categories:

B1 Commercial Property: Offices, warehouses
B2 Commercial Property: Factories

Hotel Commercial Properties:

Examples include hotels and hostels of all types. These could be 2-star budget hostels all the way up to 5-star hotels.

Take note that hotels require specific permits to run. For starters, you will need a valid hotel licence from the Hotels Licensing Board (HLB) to operate a hotel. You will also need various permits from the Fire Safety Bureau, National Environment Agency (NEA), and Building ad Construction Authority (BCA).

Depending on how many services you offer in your hotel, you may need to apply for a fair number of permits. If your hotel has F&B outlets within the hotel that are run by you, you will also need Food and Beverage licenses for each eating establishment. If you have a bar, you will need a Public Entertainment License. If you offer massage services, you’ll need a Massage Parlour License.

Parking Lots:

You can purchase car park lots. Singapore does not have strata-titled parking lots. This means you can’t just buy a few individual lots for investment. Rather, you have to buy the entire parking lot. This means you should set aside at least a few million dollars if you’re considering investing in a lot, given high land prices in Singapore.

3. Can foreigners buy commercial properties in Singapore?

Yes, foreigners can certainly purchase commercial properties here.

In Singapore, there are some restrictions for foreigners who wish to purchase residential properties. For example, foreigners can generally only buy non-landed private homes (i.e. condominiums). Foreigners can only buy landed residential properties subject to governmental approval. However, there are no such restrictions for commercial properties. Foreigners can buy landed commercial properties without having to apply for government approval.

Under the Residential Property Act, foreigners can buy the following commercial properties:

Shophouses
Industrial and commercial properties (e.g. retail spaces, factories, warehouses, etc.)
Hotels

Can a Permanent Resident (PR) buy commercial property in Singapore?

Yes. See above – there are no restrictions for PRs investing in commercial properties here.

Can a foreign company buy commercial property in Singapore?

Yes. If you have a company that’s registered outside of Singapore (e.g. a US-based LLC, a British Virgin Islands, company, etc.), you can use this company to purchase commercial property here. There are no restrictions. You can buy retail shops, shophouses, factories, warehouses, hotels, etc.

4. Should I buy a commercial property as an individual, or through a company?

It can be advantageous to consider purchasing commercial properties through a corporate entity, rather than buying it as a private individual.

Here are some key benefits of buying commercial properties via a company:

i. Limitation of liability

If you rent your commercial space out, tenants can hold you liable for negligence in maintaining your property. For instance, if you neglect to properly maintain fire suppression systems, and a fire breaks out and destroys your tenant’s business and causes injuries, you can be sued for negligence. If you get sued as a private individual, almost all your personal property can be exposed to legal claims. This includes your house, your savings in your bank account, your car, your jewellery and clothes, and almost all other belongings.

However, if you were to purchase a commercial property via a company, then the limitation of liability would be capped at the assets that your company holds. Your personal assets would be kept separate from the company’s assets, which protects your private belongings from being claimed by aggressive litigants.

ii. Lower taxes

Depending on your income bracket, corporate taxes can be lower than personal taxes in Singapore. Buying a commercial property through a local Singapore company can therefore reduce your tax burden.

When operating a commercial property via a company, you can also reduce your taxable rental income via valid claims for business-related expenses, such as property upkeep costs.

If your company is GST-registered (you can voluntarily register for GST!) you can claim back the 7% GST that you pay on commercial properties, subject to certain relatively straightforward conditions laid out by IRAS (Inland Revenue Authority of Singapore). You cannot claim back GST if you buy a commercial property as an individual. If you buy a $2 million commercial property with GST included, that means you can claim back a whopping $140,000!

iii. Ease of ownership transfer

It is easier for companies to transfer asset ownership compared to individuals.

iv. Potential exemption from Total Debt Servicing Ratio (TDSR) limitations

If you buy a commercial property as an individual, you will be subject to the Total Debt Servicing Ratio (TDSR). The TSDR in Singapore is 60%. This means that you can only take on a loan that results in annual mortgage payments that are 60% or less of your yearly income.

For example, if your annual income is $100,000, you can only take on a loan with a mortgage of up to $60,000/year. This basically limits the type and size of commercial properties that you can invest in, unless you have a particularly high income.

However, corporate buyers who can demonstrate strong financials (e.g. positive cash flow, clean balance sheet, good operating history, etc.) can be exempted from the TDSR. This allows you to purchase more expensive commercial properties that can potentially get you higher returns.

5. What taxes do I have to pay when buying commercial properties?

Annual property tax: 10%/year

Commercial property owners pay a flat rate of 10% of the annual value (AV). The AV is calculated based on the gross annual rent if your property were to be rented out.

Property taxes for commercial properties purchased for investment tend to be lower than residential properties whose owners don’t live in them. For such residential properties, the tax rates can be as high as 20% if you don’t live in the unit and rent it out. This is another plus point for investing in commercial properties.

Capital gains tax: 0%

Singapore does not have a capital gains tax. That means when you sell your commercial property, you do not need to pay any capital gains taxes. This is in stark contrast to other countries like the US, which depending on the specific state, can levy capital gains taxes of up to 37% on real estate sales.

This helps real estate investors maximise their gains when buying and selling commercial real estate in Singapore.

6. Key factors to consider when buying a commercial property in Singapore:

Factor 1: What type of commercial property should I buy?

This is the first question that most investors will ask themselves. Should I buy a retail commercial property in a CBD-area shopping mall? How about an HDB shophouse in a heartland district? Or perhaps I should invest in an industrial warehouse? Different types of commercial properties will have varying expected rates of return, different price points, and their own unique strengths and risk factors.

For instance, let’s take a look at purchasing heritage shophouses. These shophouses are quite limited in supply. They command a premium over other shophouses, and over other commercial properties in general, because they are officially conserved by the government. Many of these shophouses are also located in the Central Business District (CBD), which makes them popular choices to rent amongst small companies and trendy startups. Areas like Chinatown and Telok Ayer are lined with these conserved heritage shophouses, many of which are rented out for princely sums to eateries, yoga studios, startups, and other businesses.

Since these shophouses are in high demand, you can usually expect to earn relatively good rental yields. With their conserved status, limited supply, and popularity amongst investors, such shophouses also hold their value well. Depending on your entry price point, investors typically can also typically expect to earn attractive capital gains.

However, the quantum (total purchase price) for such heritage shophouses are high. For instance, a 5,000 square foot heritage shophouse in an area like Chinatown can easily fetch $10 million or more. In 2020, The Business Times reported on a trio of shophouses, sporting about 10,000 square feet of built-up space, that went up for sale for $30 million.

Also, depending on the specific shophouse you intend to purchase, there may be restrictions on their usage according to urban zoning plans. Some shophouses are designated for commercial use only, while others can be both residential and commercial.

It’s important to properly evaluate the pros and cons of each type of commercial property. It’s a good idea to do up a comparison table of prices for different types of commercial properties, and see what the historical and projected returns are for each type of commercial property. If you already know which type of commercial property you want to buy, make sure to do comparisons of prices-per-square foot for a few properties in the areas you’re interested in. This helps you establish a market price, which will allow you to analyse whether the property you’re intending to purchase is trading for below or above market value. Don’t jump into a purchase before you’ve done lots of homework!

Factor 2: Location, location, location. Where is your property located?

Location will have a vital role in determining the returns you make from your commercial property. It will also influence the kinds of leaseholds that your commercial properties will have.

Here are some key factors you’ll want to bear in mind when evaluating the location of a commercial property:

Transportation: How easy is it to access the MRT? Is it within walking distance? If not, , are there nearby bus stops, and how far is the nearest stop? Does the property have on-site parking? If not, how far is the closest car park, and is it easy to get parking spaces?
Corner units: Commercial properties situated at corners of intersections (whether these are road intersections, or intersections in shopping malls) tend to be more valuable because more people will pass by the shop.
Traffic: How many people will walk by the property on an average day? Is the property situated right by a busy street or road? Do lots of vehicles pass by the property every day? If so, you can command higher rentals because such properties have higher visibility.
Surrounding developments: Is the property situated in a well-developed neighbourhood? Are there shopping malls, or office spaces, or lots of attractions nearby that will draw a natural amount of regular foot traffic? For instance, Paya Lebar Quarter is an integrated working-living-lifestyle hub that has offices, malls, eateries, and residences packed into one location, which draws large numbers of people there. Rental yields in such a location will therefore be high since commercial shops are in high demand. For example, if there’s an en bloc sale or if the government decides to redevelop the land, it could potentially affect human traffic and therefore also your business.

Factor 3: Can you change your commercial property’s intended use?

Commercial properties are zoned according to their intended use. Zoning rules are implemented by the URA (Urban Redevelopment Authority). If you purchase a commercial property and wish to change its intended use to something different from its original use, you may need to apply for planning permission from the URA first.

For example, let’s say you purchased a nice commercial retail shop unit. Instead of running it as a shop, you decide you want to convert the place into a commercial music school. You’ll need to first check with the URA whether the guidelines allow for this change in use. If not, you’ll need to apply for permission from the URA before you embark on your conversion project.

Factor 4: What’s the leasehold period?

Leaseholds for commercial properties typically range from 30 to 60 years. This is much shorter than that of residential properties, which range from 99 year leases to freehold properties.

New commercial property launches are usually 30 year leaseholds. This is in line with the government’s announcement of more commercial property sites with shorter tenures (and smaller lot sizes) being released for purchase. This helps make industrial sites more affordable for business owners in Singapore. It also gives flexibility for the government in terms of redevelopment of land

Factor 5: Can I get sufficient financing to purchase my commercial property?

Most buyers will apply for bank loans when buying their commercial property. The loan amount you can take out will be limited by your Total Debt Servicing Ratio (TDSR).

If you’re buying as an individual, the TSDR is capped at 60% of your monthly income. For instance, if your income is $10,000/month, then your maximum mortgage is $6,000/month.

If you’re buying through a company, your bank will evaluate your TDSR based on your company’s annual net operating income. Banks will also consider your company’s debt, if any.

Factor 6: Ensure you have sufficient cash to pay GST (Goods and Services Tax) on commercial properties

You have to pay GST (currently 7%) on the sale and lease of commercial properties in Singapore. Only sales/leases of residential properties are exempt from GST.

If you purchase a commercial property via a company that is GST-registered, you can claim the GST portion on the purchase. You can voluntarily register your company for GST if you wish to claim the GST back on commercial property purchases.

7. Frequently asked questions on purchasing commercial properties

i. Do I need to pay ABSD when buying commercial properties?

No. You do NOT have to pay ABSD when buying a commercial property. This applies even if you already own a residential property. This means you’ll save between 12% to 20% on ABSD, which is a huge amount for property purchases.

ii. Do I need to pay Seller’s Stamp Duty (SSD)?

No. You do NOT have to pay SSD for commercial properties, except when buying industrial properties. Industrial properties include factories and warehouses (basically buildings intended for industrial activity like manufacturing, storage, chemical refining, etc.). The SSD amount you have to pay depends on the number of years that you’ve owned the property before selling it (a.k.a. the “holding period”).

Here’s a breakdown of SSD rates:

Sellers’ Stamp Duty for Commercial Properties in Singapore
Number of years you’ve owned the property before selling it (holding period)	SSD rate (based on sale price)
1 year	15%
1-2 years	10%
2-3 years	5%
Over 3 years	No SSD payable

SSD encourages buyers to hold onto their properties for the longer-term, and discourages short-term flipping or rapid-fire speculative purchases.

iii. How much can I borrow to buy commercial properties?

You can take a bank loan of up to 80% of the loan-to-value (LTV). This is higher than residential properties, where loans are capped at 75% of the loan-to-value ratio.

You’ll need to fork out at least 20% of the down-payment in cash. Remember, you can’t touch your CPF money to pay for commercial properties.

LTVs can be lower than 80% if you are buying a commercial property strictly for investment purposes, without living in the property. For instance, if you purchase a warehouse, or a commercial shophouse (and you declare to the bank you won’t be living there), the bank may cap your LTV amount at less than 80%.

Also, interest rates on loans for commercial properties tend to be higher than loans for residential properties. This reflects the relatively higher risk that comes with purchasing commercial properties.

iv. Must I pay GST on commercial properties?

Yes. You have to pay 7% GST. You can’t use your bank loan to pay for the GST. It has to come from your own pocket.

This means that your minimum cash outlay will be around 27% (20% down-payment + 7% GST) of the property’s purchase price, if you buy a commercial property that has GST attached to it.

You may wish to consider purchasing a commercial property through a company. If you make a purchase made through companies that are GST-registered, you can claim back the GST portion of the purchase.

v. Can I use my CPF to finance the purchase of commercial properties?

No. You cannot use your CPF savings in your CPF account to pay for commercial properties.

CPF savings can only be used for residential properties.

vi. Where can I find data on commercial properties?

URA’s website has a list of useful data on commercial properties. You can view:

Supply of commercial properties
Major commercial projects to be launched
Recent commercial projects launched each quarter
Median rental prices
Available office and retail space for rent

vii. How do I find upcoming commercial property land sites for sale?

Twice a year, the URA will announce Government Land Sales (GLS) sites that are up for sale. These GLS’ will contain a mix of both residential and commercial sites. The land will be sold via an open tender process.

viii. How long are the leaseholds for commercial properties?

Commercial properties usually have leases between 30 to 60 years. This is much shorter than residential properties, which have leases from 99 years all the way to freehold.

ix. Are there freehold commercial properties?

Yes. There does exist a small quantity of freehold and 999-year leasehold commercial properties in Singapore. However, many of such freehold commercial properties are usually not located within prime areas, which can affect your capital gain potential, and make it harder to find tenants to earn rent. The freehold commercial properties that are located within the CBD also command a significant premium relative to non-freehold commercial properties in the same area.

x. Can I buy a commercial property for residential use?

If your goal is to live in a commercial property, then your best choice is to purchase a commercial shophouse. This will have a retail space on the first floor that you can rent out for monthly income. It will also have a home on the second floor for you to live in.

Unfortunately, you cannot live in other types of commercial properties. For instance, you can’t buy a warehouse and then convert it into a massive loft residence. As much as that would exude massive amounts of hipster cool, that would violate zoning regulations. If you want a home, you’ll have to either invest in a shophouse, or purchase a residential unit.

xi. Do commercial properties have higher rental yields than residential properties?

On average, commercial properties in Singapore earn a rental yield of around 5%/year. This is higher compared to residential properties, which usually earn around 2% to 3%/year.

8. How should I protect my commercial property against fire, water damage, and other physical damage?

Commercial properties in Singapore don’t come cheap. Many investors rely on their commercial properties to provide a steady source of income to grow their wealth, or to tide them over through retirement. Since you’ve invested so much of your hard-earned money into your property, you need to make sure that your investment doesn’t go up in smoke – literally.

Commercial property insurance protects your property against an extremely wide variety of damage, including but not limited to:

Fire
Explosions
Certain types of water damage
Lightning
Sudden structural collapse
…and much more

Get Commercial Property Insurance from $12/mth now. Buy online in 3 mins!

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10 Powerful Shareholder Rights in Singapore Private Companies

Aug 25, 2021Jul 16, 2021 by Admin

Are you a shareholder in a Singapore company? As a shareholder, you’re an owner of the company. You have rights that you can enforce legally. Learn about the 10 key rights of shareholders here.

No.	Shareholder Right
1	Right to vote
2	Right to dividends
3	Right to protection of personal assets from company liability
4	Right to not be treated oppressively
5	Right to access company information
6	Right to call for and attend company meetings
7	Right to ensure company is in compliance with regulations
8	Right to pre-emptive share purchases
9	Right to sue company, or to sue another entity on behalf of the company
10	Right to wind company up and to company’s assets after winding up

Shareholder Right 1: Right to vote

Shareholders who own voting shares are entitled to vote on company decisions.

Shareholders who own ordinary shares are entitled to vote on company matters. For instance, shareholders can vote on company decisions like appointing and removing directors, appointing and removing company secretaries, or changing the company address.

Do all shareholders have voting rights?

No. Only shareholders who own ordinary shares (or shares with voting rights, whatever these shares may be called by the company), have voting rights.

A company may have different types of shares. For example, a company could have Class A, Class B, and Class C shares. The company could structure the share classes such that Class C shares do not have voting rights. Therefore, if you own Class C shares only, you would not have the right to vote on company decisions. It is quite common for startups to have multiple share classes, with different voting rights per share class.

Companies may also have super-voting shares, which provide the owners with multiple votes per share. Facebook is a good example of this. Facebook’s Class A shares get 1 vote per share. However, Facebook’s Class B shares have 10 votes per share. Mark Zuckerberg, Facebook’s CEO, controls the majority of Class B shares, giving him about 58% of the voting rights in the company.

Shareholder Right 2: Right to dividends

Shareholders have a right to receive dividends.

For a company to declare dividends, at least 50% of shareholders must vote for and approve a resolution to pay dividends. For instance, if you own 10% of a company’s shares, you cannot simply demand 10% of the company’s profits. You must get at least another 40% of the shareholders to agree with you before dividends can be paid out.

Companies usually declare final dividends after the financial year has been concluded. Once a final dividend has been declared and approved by shareholders, it must be paid out. A company cannot suddenly renege on its promise to pay dividends once it declares final dividends.

Shareholder Right 3: Right to protection of personal assets from company liability

Shareholders in a Private Limited company generally enjoy the right of limited liability. This means that each shareholder’s personal assets, like their house, car, and bank savings, are in most cases protected if the company owes money to others, or if the company is sued. For instance, if the company goes bankrupt, other people or companies cannot seize shareholders’ personal assets to pay off the company’s debts. Limited liability protections mean that the most a shareholder will lose is the amount they spent purchasing company shares, and the amount they loaned to the company (if the company has not paid back the shareholder loan).

There are important exceptions to this rule of limited liability, though.

If a shareholder is also a director of the company, they can be held personally liable in some situations. For instance, if the shareholder-director continues running the business knowing that the company is already insolvent, or if they defraud others using the company, their personal assets can be exposed to legal claims. Read more about personal shareholder-director liability here.

Shareholder Right 4: Right to not be treated oppressively

This is most applicable for minority shareholders. Majority shareholders cannot take actions that would prejudice the rights of minority shareholders. An example would be majority shareholders paying themselves obscenely high salaries, so as to transfer company income from the minority shareholders to majority shareholders. In such cases, minority shareholders can exercise their rights to be treated fairly by suing the majority shareholders for shareholder oppression.

Shareholder Right 5: Right to access company information

Shareholders have the right to request access to:

Company financial statements (income statements, balance sheets, cash flow statements, etc.)
Conduct audit on financial statements
Directors’ compensation information
Auditors’ compensation information
List of all shareholders of the company (% owned does not need to be declared, but shareholders have a right to know who is a shareholder)
Minutes of shareholder meetings (shareholders generally do not need to be provided access to minutes of board meetings)

If an AGM is not held, then shareholders have the right to receive financial statements and related documents within 5 months after the end of the financial year.

Right to request for company to audit its financial statements

Most companies in Singapore are exempt from having audited accounts. However, if shareholders who own at least 5% of the company make a request, the company must audit its accounts and present it to shareholders.

Right to request for information on director’s compensation

Shareholders have the right to request for information on directors’ compensation. At least 10% of all shareholders, or shareholders who own at least 5% of the company’s shares, must make this request. The company must disclose this information within 14 days of the request being made.

This is to provide checks and balances on directors potentially being paid excessive amounts of compensation, which might sway their objectivity in representing shareholder interests. If shareholders feel directors are being too much or are not performing their job well, they can vote to remove the directors.

Right to request for information on auditors’ compensation

Shareholders have the right to request for information on auditors’ compensation. At least 5% of all shareholders, or shareholders who own at least 5% of the company’s shares, must make this request. The company must disclose this information immediately after the request is made, with some time allowed for preparation of the necessary information.

This is to provide checks and balances on auditors potentially being paid excessive amounts of compensation, which might sway their ability to properly audit the company’s finances. If shareholders are not happy with the auditor’s performance, and/or if they feel the auditor is being paid too much, they can vote to remove the company’s auditor.

Shareholder Right 6: Right to call for, and attend company meetings

Calling for an Annual General Meeting (AGM)

Shareholders have the right to call for an AGM. Even if companies have held a shareholder vote to dispense with holding AGMs, shareholders still can call for AGMs. As long as a shareholder calls for an AGM within 6 months after a company’s financial year ends, the company must hold an AGM. The shareholder must send written notice calling for the AGM, at least 14 days before this 6-month deadline.

Calling for an Extraordinary General Meeting (EGM)

Any shareholder(s) with at least 10% of the company’s shares can call for an EGM. Once the right to call the EGM is exercised, the company must hold the EGM within 2 months of the request being made.

Attending shareholder meetings

Shareholders have the right to attend all the company’s shareholder meetings. They can voice their opinions on any issues that are scheduled for discussion during the meeting.

Shareholder Right 7: Right to ensure company is in compliance with regulations

Right to ensure compliance with Company Constitution

All shareholders have the right to ensure that the company, along with all other shareholders, follow the clauses, roles, and responsibilities set out in the company’s constitution.

The company’s constitution will govern important functions of the firm, like share transfer procedures, directorship appointment procedures, and various rules on how to run the company and resolve potential disputes. If the company is flouting the procedures or rules in its constitution, shareholders have a right to demand that the company stop its errors and comply with the constitution’s wordings.

Right to ensure compliance with Companies Act

All shareholders have the right to ensure that the company, along with all other shareholders, follow the laws set out in the Companies Act. Any shareholder who believes the company or other shareholders are breaching the Companies Act can apply to the Courts to stop such illegal actions.

Shareholder Right 8: Right to pre-emptive purchase of shares

Most company constitutions/shareholder agreements will grant shareholders the right to be offered shares for purchase, before the shares are sold to any outsider. This is known as having “pre-emptive rights”. Pre-emptive rights are not a legal requirement, but most companies will offer them to shareholders.

It’s in the best interests of shareholders to agree to pre-emptive rights. You want to have the first say on purchasing shares from other shareholders, or from the company itself if new shares are issued. For rapidly growing companies, having first dibs on shares could dramatically increase your wealth if the value of your shares goes up. Also, you don’t want other shareholders selling ownership of your company to random outsiders willy-nilly. Outsiders may have less friendly motivations in acquiring shares of your company, so the ability to purchase shares first is important to limit the chance of introducing a Trojan horse into your company.

Shareholder Right 9: Right to sue company, or to sue someone else on behalf of the company

Right to sue the company

A shareholder can sue their own company. Usually, this is done in cases of shareholder oppression. If the company is unfairly impinging on a shareholder’s rights, they can sue the company to stop them from oppressing the shareholder’s rights. Also, shareholders can sue the company (and the company’s directors and officers) if it is not acting in the shareholders’ best interests. For instance, some directors may engage in conflicts of interests (e.g. using company money to fund their own outside business ventures). In such cases, shareholders can sue the firm to claim damages, and to stop the company from violating shareholder interests.

Right to sue someone else on behalf of the company

Shareholders have the right to sue another person or entity on behalf of the company. To do so, the shareholder must apply to the Singapore Courts for permission to begin the lawsuit. Suing someone else on behalf of the company is known as a “derivative lawsuit” or “derivative action”. Usually, derivative lawsuits are initiated against company insiders, such as directors who have breached their duties. Shareholders can then sue these directors on behalf of the company, so that the company can claim compensation for the director’s breach of duties.

Shareholder Right 10: Right to wind company up, and right to own company assets after winding up

Shareholders have the right to apply to the Courts to wind up the company. Usually, a voluntary winding up is done in exceptional cases where relationships between shareholders have broken down completely, or the company is heavily indebted and cannot continue operations. The legal term for such voluntary shut downs are called “winding ups on just and equitable grounds”.

Some examples of this are:

50:50 shareholders are at a deadlock. Shareholder Agreement does not contain a buy-out clause to resolve this deadlock. Either shareholder (or both) can apply to have the company wound up.
The company no longer wishes to, or is capable of, carrying out its business.
The company is insolvent/bankrupt.

Shareholders have a right to the company’s assets once the firm has been wound up. A shareholder’s claim on company assets is last in line. All creditors must be paid off first before shareholders can be paid. Also, amongst shareholders, preference share owners must be paid before ordinary share owners.

What happens if someone else holds my shares for me?

These 10 rights above normally only apply if your name is in the company’s list of shareholders. If your shares are being held for you via a nominee, then your nominee will have to exercise your rights for you.

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2 Easy Ways to Reduce Share Capital for Companies in Singapore

Jul 27, 2021Jul 15, 2021 by Admin

Increasing share capital is easy – just invest more money and your company’s equity will increase. Reducing a company’s share capital, on the other hand, takes a little more work. We explain how to reduce your share capital in Singapore.

Types of company share capital that can be reduced

There are 2 types of share capital that can be reduced:

Paid-up share capital
Unpaid share capital

Paid-up share capital:

This refers to shares that have been fully paid for by the shareholder.

Unpaid share capital:

This refers to shares which has been partially paid for, not paid for at all. The shareholder is going to pay for the shares in the future.

Why would a company reduce its share capital?

A company may simply wish to return surplus capital to shareholders which it no longer requires.

A company which does not have distributable profits may be keen to reduce its capital if it cannot afford to pay any future dividends.

A company may also conduct a capital reduction in order to reorganise, simplify and improve its capital structure. Changing a company’s capital structure may allow a company to engage in greater debt financing, which in turn increases leverage and potentially the company’s growth rate.

Reducing share capital helps ensure the sufficiency of distributable funds to maintain sustainable dividend payments. This is because where there are less shares, less dividends are expected to be declared.

How do you reduce your company’s share capital?

There are 2 methods you can use to reduce share capital:

Method 1: Court-approved share reduction
Method 2: Non-court-approved share reduction

Under both methods, the Accounting and Corporate Regulatory Authority (ACRA) does not require any fees to be paid for the entire process.

Method 1: Court-approved share reduction

The first method involves passing a special resolution on reducing your share capital, and then sending it for approval by a judge. A special resolution is basically a shareholder vote where at least 75% of shareholders must agree.

Here’s the steps required:

Step 1:

Prepare a written special resolution outlining your intent to reduce your company’s share capital. Call for a shareholder’s meeting. The date for the shareholder’s meeting must be set at least 21 days in advance, since this is a special resolution. However, if at least 95% of shareholders agree, you don’t need to set the meeting 21 days in advance and you can hold the meeting earlier.

Step 2:

At the shareholder meeting, hold a vote. At least 75% of shareholders must agree with the special resolution for it to be passed.

Step 3:

Send ACRA a notice stating that the special resolution has been passed.

Step 4:

If your company has creditors (i.e. people or organisations that it owes money to), you must prepare evidence to show the Court that you’ve protected creditors’ interests. You can contact your creditors to give you their consent to reducing your share capital. Alternatively, you can take measures to secure creditors’ debts, like show the Court that you have sufficient assets to repay creditors even if the company was liquidated.

Step 5:

Send the special resolution and evidence of creditor security for confirmation by the Court.

Step 6:

Send ACRA the Court approval. Also, send ACRA the information on the share reduction within 90 days of the Court’s approval.

Method 2: Reducing capital without the approval of the Court

Step 1:

Have the Board of Directors prepare a solvency statement. The solvency statement is a declaration that the company is able to repay its debts in the next 12 months, even if it is liquidated. It is also a declaration that the company’s assets are not worth less than the company’s liabilities/debts. The solvency statement must be made at least 20 days before the date of the special resolution.

Also, prepare a written special resolution outlining your intent to reduce your company’s share capital.

The special resolution and the solvency statement must be uploaded to ACRA, so that it is disclosed to the public. Yes – the general public, not just shareholders.

The following documents must be filed with ACRA:

Copy of the written special resolution for reducing share capital
Date on which the special resolution was held
Details about the share reduction (e.g. amount of reduction)

Step 2:

Call for a shareholder’s meeting. The date for the shareholder’s meeting must be set at least 21 days in advance, since this is a special resolution. However, if at least 95% of shareholders agree, you don’t need to set the meeting 21 days in advance and you can hold the meeting earlier.

Step 3:

At the shareholder meeting, hold a vote. At least 75% of shareholders must agree with the special resolution for it to be passed.

Step 4:

Send ACRA a notice stating that the special resolution has been passed.

Things to note when preparing a solvency statement:

The Board Directors must be very diligent when preparing solvency statements. They should engage professional accountants and financial professionals (if they do not have the requisite skill set) to thoroughly evaluate the company’s financial position. Under Section 7(A) of the Companies Act, it is a criminal offence for a Board Director to issue a solvency statement without proper financial justification. Directors who flout this rule can be imprisoned up to 3 years, and/or fined up to $100,000. Those are might heavy penalties, so tread carefully!

Can creditors block a reduction of share capital?

Yes. If your company owes money to other parties, they can object to your reduction of capital. Creditors can apply to the Singapore Courts to challenge the company’s application for a non-court approved capital reduction. Creditors are allowed to do this within 6 weeks of the company passing the share reduction resolution.

The Court will step in to stop your share reduction if:

You owe money to another party and haven’t paid them in full, or you haven’t come to an agreement to a repayment plan, and
There is a reasonable case to secure the money that you owe as a company’s assets will decrease after a share capital reduction

What must I do if creditors object to my reduction of share capital?

If creditors raise objections to share reduction, companies must notify ACRA of the objections ASAP.

You must also apply to the Courts to dismiss the creditor’s objections. If the Court grants a dismissal, then you must file:

Solvency statement
Statement from the directors that all creditor objections have been dismissed
Court order dismissing the objection
Public notice containing the reduction information

You must do the above within 15 days of the Court dismissing the creditor’s objections.

Is the court-approved or non-court-approved method better?

If your company has no creditors, is small and has few shareholders, then you can consider going the non-court-approved route. It’s cheaper and faster. This is usually done for one or two-man companies or small family businesses, with 0 debt.

However, generally speaking, most companies will choose the court-approved method for reducing their shares. This is because the Court’s judgement gives more legal assurance to the share reduction. A Court approval makes it more difficult for creditors to challenge a share reduction.

Also, since the Directors do not need to prepare a solvency statement, there is less risk of legal liability. With the preparation of a solvency statement, Directors may open themselves up to litigation from creditors, shareholders, or other parties. If you’re going the route of non-court-approved, strongly consider Directors & Officers Liability (D&O) Insurance. This will cover your company’s directors against lawsuits and the cost of damages/settlements if they get into legal trouble.

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Public Liability Insurance	Covers lawsuits related to injuries or property damage to third-parties (e.g. members of the public).	From $9/month
Work Injury Compensation Insurance (WICA Insurance)	Covers your employees from work-related injuries/sickness, including Covid-19. Pays up to $45,000 medical expenses per worker.	From $5/month, per worker

Home Office Scheme in Singapore: How to Apply?

Jul 11, 2021Jul 11, 2021 by Admin

The Home Office Scheme allows business owners to operate small businesses from the comfort of their home. If you want to run your own business from your house, this is an excellent scheme to consider. You don’t have to spend money renting an office, and you can easily make money without leaving your home.

Conditions for Home Office Scheme:

HDB flats and private residences are designed primarily for living in, and not for conducting industrial activity. Any business activities conducted should not impact your neighbour’s living conditions. The scheme was set up to allow admin-based businesses to be run from home (e.g. tech startups, consulting businesses, internet-based businesses). It’s not supposed to be used for labour-intensive businesses, or large-scale businesses, or any other business that will draw large amounts of foot traffic.

Here are the conditions for the Home Office Scheme:

You cannot hire more than 2 non-resident employees. This means that you can hire as many resident employees as you want (i.e. people in your household), but you can only hire up to 2 people who are not members of your household.
You cannot display any business signs or advertisements outside your house.
Your business activities should not make noise, smoke, odour, waste matter or dust.
Your business should not cause elevated levels of traffic into the neighbourhood.
Your business cannot consume high amounts of electricity that exceed standard residential use. That means no Bitcoin mining.
Your business cannot use dangerous chemicals or other hazardous substances/materials. You can’t run a real-life Breaking Bad lab, unfortunately.
Your business activities cannot be in the prohibited list of activities (see list below).

The rules above are meant to protect the residential nature of the neighbourhood. For instance, imaging if your neighbour ran a popular clothing shop from out of their home, and had customers coming in and out 12 hours a day, 7 days a week. That would be quite disruptive to the people living around them.

What types of businesses cannot be run under the Home Office Scheme?

Beauty, hair dressing or massage
Construction/renovation contractors
Car trading/sales
Card reading/palm reading, tarot reading, or fortune telling of all kinds
Catering/restaurants
Commercial schools (eg. Tuition centres, music centres, dance centres, yoga classes, language classes, etc.)
Courier services
Classes involving dress-making, sewing, embroidery
Employment agencies
Embalming, funeral chapels/homes
Maid agencies
Mausoleums
Manufacturing of any kind
Medical services (eg. dental, medical, veterinary)
Money lending
Opticians
Repair activities (eg. household appliances, electrical products, footwear, etc)
Any business that involves conducting in-person seminars for large numbers of people
Shops/Retail businesses – essentially the sale of any kind of goods it not allowed

What types of businesses are allowed under the Home Office Scheme?

Accounting and book-keeping businesses
Architecture/interior design business
Asset management business (e.g. hedge funds)
Consulting business (e.g. management consulting, engineering consulting, IT consulting, education consulting, HR consulting, financial consulting, etc.)
Graphic design, marketing, advertising business
Insurance and financial planning business
Real estate agencies
IT businesses (e.g. tech startups) Trading business

Essentially, admin-based businesses are suitable for the Home Office Scheme.

How to apply for the Home Office Scheme?

The application process differs depending on whether you live in an HDB or a private property.

If you live in an HDB:

Apply for the HDB Home Office Scheme.

If you live in a private residence (e.g. condo, landed property):

Apply for the URA Home Office Scheme.

You must be at least 18 years old to apply for the Home Office Scheme. If you’re the tenant of the unit, you have to seek permission from the owner first before you can get approval for the scheme.

How much does the application for the Home Office Scheme cost?

It costs a one-time fee of $20.

How long is the Home Office Scheme license valid for? Do I have to renew my Home Office license?

It’s valid for as long as you wish to run your business. It doesn’t expire. You only need to apply once and that’s it – no renewals are needed.

However, take note that your Home Office license can be revoked if you breach the conditions of the license. For instance, if your neighbours complain and it’s discovered that you’re actually running a prohibited business (e.g. massage parlour), your license can be taken away.

What’s the difference between the Home Office Scheme vs Home-Based Small Business Scheme?

Home Office Scheme vs Home-Based Small Business Scheme in Singapore
Difference	Home Office Scheme	Home-Based Small Business Scheme
Application required?	Yes	No
Cost	$20 one-time application fee	Free
Maximum number of employees who are members of household	No limit	No limit
Maximum number of employees who are NOT members of household	2	Not allowed
Able to register HDB flat/private residential as business address with ACRA?	Yes	No

There are two schemes available for entrepreneurs who want to use their home to run their business. Sometimes people get confused between the two schemes. There are 2 main differences between the Home Office Scheme versus the Home Based Small Business Scheme.

The first primary difference is the number of employees that you can hire from outside your household. Applying for the Home Office Scheme allows you to hire 2 employees who aren’t members of your household. This can be useful if you need to have employees come over to have meetings and do work in a conducive environment. It saves you the hassle and cost of having to rent an office. With the Home Based Small Business Scheme, you can only hire people within your household (i.e. the people living with you). You can’t hire people who don’t live together with you.

The second difference is the ability to use your residential address as your registered business address with ACRA. Under the Home Based Small Business Scheme, you cannot use your residential address for your business. However, under the Home Office Scheme, you can do so. This provides you with an additional level of convenience. You don’t have to engage a corporate secretary to get you a virtual address to register with ACRA.

How should I protect my home-based company from business risks?

Provide is the easiest and quickest way for business owners to protect their companies. It’s important to cover your home-based business against liability. You could face a severe business lawsuit which might cost you hundreds of thousands to defend. Or, one of your employees might get injured, leaving you liable under the law to compensate them for their injuries. Make sure you carry at least basic business insurance, so you don’t leave yourself exposed to such dangerous financial risks.

Click the links below to get your insurance online, in just 3 mins. Our premiums are amongst the lowest nationwide.

Coverage	Explanation	Premium
Professional Indemnity Insurance	Covers business-related lawsuits	From $42/month
Commercial Property Insurance	Covers property damage from fire, explosions, certain types of water damage, etc. Covers building structure, renovations, fixtures & fittings, equipment, & more.	From $12/month
Public Liability Insurance	Covers lawsuits related to injuries or property damage to third-parties (e.g. members of the public).	From $9/month
Work Injury Compensation Insurance (WICA Insurance)	Covers your employees from work-related injuries/sickness, including Covid-19. Pays up to $45,000 medical expenses per worker.	From $5/month, per worker

Employee Death in Singapore: 7 Things Employers MUST Do

Aug 18, 2021Jul 9, 2021 by Admin

Suffering an employee death is one of the hardest things that an employer (to say nothing of the deceased’s family) will have to handle. If the employee passes on due to work-related causes, employers will face significant liability under Singapore law.

The 7 things businesses MUST do if faced with an employee death:

Notify MOM
File a Work Injury Compensation Claim (if you have Work Injury Compensation Insurance)
Pay deceased employee’s family any salary owed
If deceased employee is a foreigner, cancel Work Pass and repatriate body
If death was work-related, pay mandatory compensation
Return employee’s belongings to family
How to protect your business against liability for work-related death

Step 1. Identify whether the employee’s death occurred due to work OR occurred at a workplace:

The responsibilities of the employer will vary depending on how OR where the employee died. Employers must act immediately to identify which the 2 scenarios below apply:

Scenario 1: The employee’s death was not related to work OR occurred outside the workplace.
Scenario 2: The employee’s death occurred due to work OR at the workplace

Scenario 1: Employee’s death occurred due to non-work-related causes OR outside the workplace

If an employee dies due to non-work-related causes, or dies outside the workplace, then employers don’t need to report the incident to MOM. Employers are not liable under the Work Injury Compensation Act for such deaths.

Examples:

Employee slipped and fell outside the office, after knocking off work. Employers are not liable under the Work Injury Compensation Act for injuries while travelling to and from work, from home. Since the employee death occurred outside the workplace, and was not work-related, the employer does not need to report the incident.
Employee was killed in a road accident while on public transportation, on the way to work. Same rationale and outcome as point (1). Employer does not need to report the incident.
Employee has been battling stomach cancer for past 6 months. The cancer was not related to work. The employee eventually succumbs to the disease while hospitalised in ICU. Employer does not need to report the death to MOM. The employee death was not related to work, and the death occurred at the hospital which is outside the workplace.

Scenario 2: The employee’s death occurred due to work OR at the workplace

Employee’s death due to work:

If an employee dies from work-related causes, employers must notify MOM of the passing immediately. Examples of work-related causes would be falls at construction sites, being electrocuted while working on wires, or getting hit by vehicles while on the way to lunch.

Employee’s death at the workplace:

If an employee dies at the workplace, employers must notify MOM immediately. Workplaces would be any area where the employee is assigned to work. It could be the company office, a third-party project site the employee needs to visit, a client’s office, etc.

If there is doubt over whether the death was related to work or happened at the workplace, then employers should err on the side of caution and report the incident to MOM ASAP.

Step 2: Notify MOM/Commissioner for Workplace Safety and Health ASAP

You must notify the Commissioner for Workplace Safety and Health ASAP. To do this, employers can send an email to [email protected]

In the email to the Commissioner, employers should state the following:

Date and time of employee’s death
Place of death
Name and identification number of deceased employee
Your company name
Name of workplace occupier. This refers to the person or organisation who controls the premises the employee works in. For instance, if the deceased employee had died while working in a retail shop, the workplace occupier could be the shop owner or landlord. If the workplace occupier is a factory that is registered with MOM, the workplace occupier is the individual whose name is on the factory’s certificate of registration.
Description of accident that caused the death
Name and contact details of individual who sends the email to the Commissioner

Step 3: File a Work Injury Compensation Insurance claim ASAP

For employers who have a Work Injury Compensation Insurance policy, notify your insurance broker or insurance company immediately after you notify the Commissioner for Workplace Safety and Health. Do not delay notifying your broker or insurer, or your claim may not be accepted.

If MOM finds that the employee’s death really was due to a work-related cause, Work Injury Compensation Insurance will cover the mandatory compensation that you’ll need to pay to the deceased’s family. This can go up to $225,000 or more – more on that later in this article.

Step 4: Submit an incident report to MOM, within 10 days of the employee’s work-related death

To file the incident report, employers may use the WSH incident reporting online tool.

Employers who fail to make the necessary reports can be jailed up to 6 months, and or fined up to $10,000.

Employers must include the following in the incident report:

Description of accident/disease that caused employee death
Personal details of employer
Company details
Employee personal details
Details of Work Injury Compensation Insurance

Employers are required to keep all incident reports for at least 3 years, so it’s a good idea to save the report, and/or print it out and store it in a secure location.

Once employers submit the incident report, MOM will begin its investigation process.

Must employers report worker deaths while travelling?

It depends.

Employee death while travelling between work and home does not need to be reported.

Employee death while travelling from work to other work sites needs to be reported.

Must employers report deaths for workers who died on their lunch breaks?

Yes. Lunch breaks are counted as part of work and such deaths must be reported.

Travelling to and from lunch breaks is counted as part of work, and such deaths must also be reported.

Example: Tim is an employee of Company ABC (names fictitious). Tim was driving from his company’s office to a client’s office when he got into a road accident. Tim passed away. This was a work-related incident, so Company ABC must report the death to MOM.

Step 5: Pay any outstanding salary owed to deceased employee

A deceased employee may have salary, bonuses, overtime payment, and other sums that were owed to them before they passed on. These accrued sums belong to the employee’s personal representative, which is the person the employee legally nominated to manage their affairs upon death. Most often, the personal representative will be a member of the employee’s family, such as their spouse.

Before making any payments to the employee, it’s best to contact the employee’s next-of-kin, to determine who is managing the deceased’s affairs. Most employers will collect an “emergency contact” from their employees – this will work also. Employers should contact the employee’s emergency contact first, because the deceased employee’s bank account will usually be frozen when the bank is informed of their death. Contacting the next-of-kin first allows employers to arrange the logistics of which bank account to pay the sums owed.

The amount that employers must release to deceased employees will depend on how salary is calculated in the worker’s employment contract. For instance, employees who receive monthly payments should have their salary pro-rated to reflect the number of days worked before they passed away. For daily-wage workers, the daily wage should be pro-rated to reflect the number of hours worked before the worker passed away.

Payment of maternity leave pay, if employee dies while on maternity leave, before childbirth

If an employee dies while on maternity leave, but before childbirth, the employer must pay her remaining maternity leave pay in full. This is compulsory under Section 79 of the Employment Act.

Some key facts to note about paying maternity leave benefits for expecting employees who pass on:

Maternity leave pay is the employee’s gross pay. (Gross pay = basic pay + allowances + overtime/bonuses/commissions/etc. Exclude CPF).
Paid maternity leave varies from 12 to 16 weeks.

Employers must pay the remaining maternity leave pay to the person nominated by the worker to receive such payments. Often, it will be the deceased employee’s spouse. If no one has been nominated, the employer should pay the employee’s personal representative.

Step 6: Pay mandatory compensation for work-related deaths

By law, employers must pay compensation to the family of employees who die from work-related causes. This is mandated under the Work Injury Compensation Act (WICA).

Minimum amount employer must pay, for each work-related death: $76,000

Maximum amount employer must pay, for each work-related death: $225,000

The above amounts can be adjusted higher depending on the age of the employee. The families of younger employees will have to be paid more compensation for work-related deaths. The amount will be determined by MOM after they have conducted their investigation into the employee’s demise. MOM will issue employers a Notice of Assessment (NOA), which will inform employers of how much compensation they must pay.

Not paying required compensation under the Work Injury Compensation Act is punishable by jail and/or fine.

WICA covers all employees in Singapore, regardless of nationality. This means even if the worker is a foreigner worker, employers must pay the foreign worker’s family in their home country. Also, WICA operates on a no-fault basis. This means that even if the worker who died at (or from) work due to their own carelessness, the employer must compensate the worker’s family. Even if the employer had no responsibility for the employee’s death, it is irrelevant.

Death compensation is a lump sum compensation. Given the size of the required compensation, companies that don’t have WICA Insurance may go bankrupt.

Exceptions for WICA compensation:

Employers are not liable to pay compensation under WICA if:

Employee commits suicide or deliberately injure themselves
Employee dies or gets injured while under the influence of alcohol or drugs
Employee’s death was not work-related

Step 7: Returning belongings

Employers should arrange for the employee’s personal belongings at the workplace to be packed and delivered to the family, depending on how the family wishes for their loved one’s belongings to be handled.

Protect your business from liability from employee deaths:

As established earlier, businesses in Singapore are liable for $76,000 to $225,000 (or more) for an employee passing away due to work-related causes. This is a massive amount of money, and could easily send most SMEs into serious financial trouble, or even bankruptcy. Work Injury Compensation Insurance will pay this amount for you. It also covers medical expenses for work-related injuries/sickness, including Covid-19 (up to $45,000), and also covers compensation for temporary/permanent disability.

Buy Work Injury Compensation Insurance from $5/month online

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12 Best SME Credit Cards for Businesses in Singapore

Jul 21, 2021Jul 9, 2021 by Admin

Are you still paying your business expenses using cheques or bank transfers? If your answer is yes – stop! If you’re an SME owner in Singapore, then you should really make use of corporate credit cards for your business. These corporate credit cards help you rack up points that you can redeem for exclusive rewards. Some of these cards also come with cashback terms designed specifically for business expenses. Of course, there’s a ton of SME credit cards in the market to choose from. Most people get dizzy even thinking about comparing the different benefits each card offers. Don’t worry – with this article, we’ve done all the heavy lifting for you. Read on to find out which SME credit card is best for your needs!

The 12 best SME credit cards for businesses in Singapore, in no particular order:

Aspire Corporate Credit Card
Standard Chartered Unlimited Cashback Card
OCBC Business Debit Card
Citi Corporate Credit Card
HSBC World Corporate Credit Card
DBS World Business
American Express SIA Business Card
American Express Corporate Platinum Card
UOB Regal Business Metal Card
Maybank Platinum Card
OCBC Debit Business Card
Diners Club Business Card

Summary of popular SME credit cards, based on benefit/function:

Best For	Key Benefits	SME Credit Card
Startups E-Commerce IT companies Frequent FX transactions	1% cashback on marketing spend and SaaS software Low fees (0.4%) on FX transactions	Aspire Corporate Card
Quick & affordable working capital Business owners who will provide employees with credit cards	Access up to $100,000 interest-free loan for 55 days Up to $1.65 million protection against employee card misuse	Citi Business Card
Highest cashback – good for business owners with moderate to high business spend	1.5% cashback on all spend, no cashback cap 5% cashback for all spend in first 3 months	Standard Chartered Unlimited Cashback
Business travelers	Up to 8.5 HighFlyer miles per $1 spent with SIA (1 HighFlyer mile is approx. 1.5 to 3 cents depending on flight booked. 8.5 miles would = approx. 12.75 to 25.5 cents) 1.8 HighFlyer Miles per $1 spent on all other local and overseas spend	American Express SIA Business Card
High-rollers Business owners who frequently entertain clients and partners	2% cashback on overseas spend 1.5% cashback on retail and dining spend Free golf green access at 35 courses worldwide Free hotel stays, free room upgrades at selected venues, early check-in, late check-out, free welcome amenities, available at more than 30,000 hotels worldwide	UOB Regal Business Metal Card

#1. Aspire Corporate Card

Click here to apply.

Aspire’s card is actually a debit card, but its benefits are fairly useful so it does deserve a mention amongst other SME credit cards.

Aspire is a digital FinTech startup that’s created a brand new virtual corporate card, designed specifically for business owners in Singapore. The company was founded in 2016 by Andrea Baronchelli. They were frustrated with how few good credit cards that were catered to business owners, so they built their statup to cater to the SME community. Aspire has raised over $30 million in venture capital funding, being part of the new wave of neo-bank startups disrupting the finance industry.

An Aspire corporate card comes with benefits that are very useful for businesses:

1% cashback on marketing spend and SaaS software
7% fees on foreign exchange
$0 minimum deposit
Rapid approval, with virtual credit card issued immediately once your account has been cleared by Aspire

Best for: Startups, E-Commerce businesses, Technology companies, companies that frequently transact foreign currencies

Annual fees: None

Payment processor: Visa

Eligibility: Sign up via Aspire to go through their proprietary checks

#2. Standard Chartered Unlimited Cashback Card

Click here to apply.

Even though the Standard Chartered Unlimited Cashback Card is not branded as a business card per se (it’s actually marketed as a personal card), there’s no stopping you from using it to fund your business activities. Especially with its high and unlimited cashback, the card is just too good to ignore if you’re going to be using credit cards for your business.

Standard Chartered’s Unlimited Cashback Card comes with the following benefits:

1.5% cashback on all spend, with no caps
5% cashback on all spend in first 3 months of signing up
Cash on demand (0% interest, one-time processing fee as % of loan from as low as 6%)

Best for: SME owners who have moderate to high business spend, and who need access to quick working capital

Annual fees: $192.60 (incl. GST), waived for first 3 years

Payment processor: Visa

Eligibility: Singaporeans/PRs: $30,000 minimum annual income

Foreigners: $60,000 minimum annual income

#3. OCBC Debit Business Card

Click here to apply.

OCBC’s debit business card comes with a range of useful feature for SME owners:

0.5% rebate on all foreign currency spend
0.2% rebate on all local currency spend
No minimum spend, no rebate cap
Lifetime waiver of card annual fees
Mobile payments via Apple Pay, Samsung Pay, Google pay, and more
Personalise your debit card, free of charge
Comfortdelgro fare discounts
Up to 10% off car rentals from Hertz
Discounts on STClassifieds
Up to 10% off Business and Economy class flights from Singapore with Emirates
Free premium membership for 2 years, and up to 30% shipping discounts at MyUS.com (shipping service)
2% off non-promotional items at FairPrice online
25% off annual insurance plans from Explorer Travel Insurance

Best for: Frequent business travelers

Annual fees: None

Payment processor: Mastercard

Eligibility: OCBC SGD Business Account holder

#4. Citi Business Card

Click here to apply.

OCBC’s debit business card comes with a range of useful feature for SME owners:

Access up to $100,000 credit line
Up to 55 days interest-free credit
Free fraud insurance of up to $1.65 million per company against misuse of corporate credit card by employees
Free travel insurance of up to $1 million per cardholder
Double rewards points via Citi Rewards, spend at participating merchants like Amazon, Harvey Norman, etc. ($1 spent = 2 Citi points)

Best for: SME owners who need access to quick and affordable working capital

Annual fees: $160.50 (incl. GST), 1 year fee waiver

Payment processor: Visa

Eligibility: Contact Citi for more information

#5. HSBC World Corporate Card

Click here to apply.

HSBC World Corporate Card key features:

Up to 3.33% cash rebate on all local and overseas spend (min. spend of $300 per quarter)
Up to 54 days of interest-free credit
Earn reward points across multiple cards and employees, consolidated into a single company-level account
Free travel insurance of up to $500,000 per cardholder
Up to 3% p.a. interest on the first $50,000 in your Maybank Save Up account

Best for: SME owners looking for good retail and dining rebates

Annual fees: $30 per quarter, waived for first 3 years

Payment processor: Amex

Eligibility: Singaporeans/PRs: $30,000 minimum annual income

Malaysians: $45,000 minimum annual income

Foreigners: $60,000 minimum annual income

#6. DBS World Business Card

Click here to apply.

DBS World Business Card’s key features:

2% cash rebate on overseas spend
1% cash rebate on local spend: dining, entertainment, and travel
3% on other eligible transactions
Up to 14% discount on petrol at Esso, 15% discount on petrol at SPC
Free fraud insurance of up to $1.65 million per company against misuse of corporate credit card by employees
Free travel insurance of up to $1 million per cardholder
Up to 10 complimentary visits each year to >1,000 airport lounges worldwide

Best for: SME owners looking for good petrol savings and cashback schemes, frequent business travelers

Annual fees: $406.60, 1-year fee waiver

Payment processor: Mastercard

Eligibility: Minimum $80,000 annual income

#7. American Express SIA Business Card

Click here to apply.

Amex SIA Business Card’s key features:

Up to 8.5 HighFlyer miles per $1 spent with Singapore Airport Group (8.5 HighFlyer miles = approx. 12.75 to 25.5 cents, depending on the flight booked.)
1.8 HighFlyer miles on all other local and overseas spend (1.8 HighFlyer miles = approx. 2.7 to 5.4 cents, depending on the flight booked)
One free night at a hotel per year at Accor hotels, plus up to 50% off dining at Accor hotels throughout Asia
Up to $1 million complimentary travel insurance
5,000 HighFlyer bonus points when you spend $500 with Singapore Airport Group in the first 12 months
15,000 HighFlyer bonus points when you spend $10,000 with Singapore Airport Group annually

Best for: Frequent business travelers who enjoy flying SIA

Annual fees: $306

Payment processor: Amex

Eligibility: $60,000 minimum annual income

#8. American Express Platinum Card

Click here to apply.

Amex Platinum Card’s key features:

25,000 Amex points when you sign up (worth est. $500)
Receive 75,000 bonus Amex points (worth est. $1,500) upon spending $20,000 in first 6 months
Free Omnidesk Pro (worth $840) when you sign up
$800 travel credits annually ($400 for air fare, $400 for hotels)
Complimentary access to over 1,200 airport lounges worldwide
Special rates at luxury hotels worldwide
Complimentary access to 67 Pall Mall (London) and Tower Club (Singapore)
Complimentary green fees at premium clubs in Singapore and multiple countries in SEA
Free all-day weekend parking at Great World City (Friday to Sunday)
Up to 50% off restaurant bills at selected restaurants in Singapore, including restaurants at 5-star hotels
Platinum concierge desk available 24/7, 365 days a year. Call for almost all kinds of requests – restaurant reservations, hotel bookings, travel emergency assistance, home assistance, roadside assistance, etc.

Best for: Business owners looking for a high level of luxury benefits, and will spend enough on dining, travel, and entertainment to make the annual fees worth it

Annual fees: $1,712 (GST inclusive) per year

First 2 supplementary cards are free forever

Payment processor: Amex

Eligibility: Minimum $200,000 annual income

#9. UOB Regal Business Metal Card

Click here to apply.

UOB Regal’s key features:

2% cash rebate on overseas spend
2% cash rebate on all local dining spend
5% cash rebate on all local retail spend
Up to 50% off weekday lunches at Grand Hyatt Singapore
4x complimentary green fees (worth $2,200) across 35 golf courses worldwide
Unlimited access to over 1,000 airport lounges worldwide
Complimentary Imperial Treasure Club membership (worth $491)
Complimentary Wyndham Hotels & Resorts Diamond tier membership, providing you access to over 30,000 hotels and vacation rentals worldwide. Comes with suite upgrade benefits and welcome amenities upon check in.
Complimentary Fraser World Diamond membership. Free hotel stays at selected venues. 25% birthday discount. Free suite upgrades, with early check-in and late check-out.
Free $500,000 travel insurance for cardholder and family members. Luggage protection of $3,000.

Best for: SME owners looking for solid retail and dining rebates, and attractive hotel discounts. UOB’s SME credit card is also excellent for business owners who travel overseas, whether for work or pleasure.

Annual fees: $680 (GST inclusive)

Payment processor: Mastercard

Eligibility: By invitation only, but you can register your interest.

#10. Maybank Business Platinum Visa Card

Click here to apply.

Maybank key features:

Complimentary business logo printing
Access to global concierge services
Earn Maybank points to redeem rewards
Worldwide cash withdrawal
Up to 51 days of interest-free credit
Credit limits based on company financials, unaffected by personal card limits
Free travel insurance, up to $1 million coverage. Up to $1,000 luggage loss cover, up to $400 luggage delay cover, up to $400 flight delay cover.
Free travel insurance of up to $500,000 per cardholder
Up to 3% p.a. interest on the first $50,000 in your Maybank Save Up account

Best for: SME owners who already have a relationship with Maybank

Annual fees: $180, waived for first 2 years

Payment processor: Visa

Eligibility: Company must be registered with ACRA, with at least one local director. Director must be between 21 and 60 years old. Company must have 2 years of operations, with minimum annual sales of $200,000.

#11. DBS Platinum Business Card

Click here to apply.

DBS Platinum Business Card’s key features:

Earn 1 DBS point for every $5 spent, and redeem attractive rewards
Up to 55 days of interest-free credit
Consolidate all supplier payments into a single company-level account
Free travel insurance of up to $1 million per cardholder when full airfare is charged to the card
Free annual coverage against employee misuse of credit card. Up to $25,000 per cardholder, and $1.65 million per company.

Best for: Business owners looking for an SME credit card to distribute to employees, that comes with built-in protection against employee theft/fraud

Annual fees: $192.60 (inclusive of GST), waived for first 1 year

Payment processor: Visa

Eligibility: Minimum income of $30,000 and above per year

#12. Diners Club Corporate Card

Click here to apply.

Diners Club key features:

Free access to selected members-only airport lounges
Up to 58 days of interest-free credit
Overseas cash withdrawal
Free travel insurance up to selected amount

Best for: SME owners looking for the longest duration of interest-free credit

Annual fees: Contact Diners Club for more information

Payment processor: Visa

Eligibility: Singaporeans/PRs: $30,000 minimum annual income

Provide past 2 years of audited company financial reports

Don’t forget to protect your business

Once you’ve got your credit card all set up, you can use it to purchase business insurance to protect your company. Make sure to protect your business comprehensively against major risks like business lawsuits, employee injuries, fire damage, and more.

Click the links below to get your insurance online, in just 3 mins. Our premiums are amongst the lowest nationwide.

Coverage	Explanation	Premium
Professional Indemnity Insurance	Covers business-related lawsuits	From $42/month
Commercial Property Insurance	Covers property damage from fire, explosions, certain types of water damage, etc. Covers building structure, renovations, fixtures & fittings, equipment, & more.	From $12/month
Public Liability Insurance	Covers lawsuits related to injuries or property damage to third-parties (e.g. members of the public).	From $9/month
Work Injury Compensation Insurance (WICA Insurance)	Covers your employees from work-related injuries/sickness, including Covid-19. Pays up to $45,000 medical expenses per worker.	From $5/month, per worker

Issuing Company Shares in Singapore: 3 Easy Steps

Jul 8, 2021Jul 8, 2021 by Admin

Issuing company shares to investors is the primary way for companies to grow. Startups will often raise multiple rounds of equity funding from venture capitalists. Traditional SMEs often raise capital from private investors to expand their business. Providing a share option plan to your employees is also a great way to encourage an “owner’s” mindset by aligning incentives throughout the company.

The 3 steps to issue shares for your Singapore company are:

Deciding on the type of share to issue
Passing an Ordinary Resolution
Filing a Return of Allotment with ACRA

We’ll also discuss:

What is the maximum number of shareholders I can have?
Do I need to prepare a prospectus?
What are the legal risks when issuing shares?

Step 1. Decide on the type of share to issue:

There are multiple types of shares that you can issue in Singapore. These different classes of shares provide different rights and privileges to their owners.

Usually, most companies will only issue i) ordinary shares, and ii) preference shares.

Here are the various share classes you can have in Singapore:

Ordinary shares:

When you incorporate the company, you must issue at least one ordinary share. Usually, one ordinary share equals one vote. Ordinary shares give their owner the power to vote at general shareholder meetings, the right to claim dividends, and the right to claim assets when the company is voluntarily wound up.

Founders and management typically hold ordinary shares, and/or super-voting shares (discussed below).

Preference shares:

Preference shares are usually issued to Venture Capital investors, or other institutional investors. They provide special rights over ordinary shareholders when it comes to dividend payments. Companies with preference shareholders will pay dividends first to preference shareholders, with the remaining dividends going to ordinary shareholders. Also, preference shareholders will have a higher priority in claiming company assets if the firm is voluntarily wound up. Preference shares may also come with a “liquidation preference”, which can provide preferred shareholders with additional payments in the event the company is sold.

Typically, preference shares do not give their owner any ability to vote at shareholder meetings.

Super-voting/Management shares:

Super-voting shares are often given to the founders. For instance, one super-voting share could provide 5x, 10x or 20x the number of votes of ordinary shares. The amount of additional votes is up to the company to decide. Super-voting shares ensure founders remain in firm control of their companies.

Non-voting shares:

Non-voting shares are similar to ordinary shares, except they don’t provide voting power. Non-voting shares give their owner to right to claim dividends, and the right to claim assets when the company is voluntarily wound up. However, they do not give the shareholder any ability to vote at shareholder meetings. Usually, non-voting shares are issued to employees, or to the family members of large shareholders.

Alphabet shares:

You can create different classes of shares (e.g. Class A, Class B, Class C) with each offering varying levels of privileges.

Redeemable shares:

These are shares that come with a “buy back option” by the company. The company will either have the obligation (must buy) or option (may buy) to purchase the shares at a future date. This can be useful for shareholders who want to have liquidity in their private shares.

Deferred shares:

No dividend is paid to deferred shares until a minimum dividend has been paid to all other shareholders. classes of shares such as ordinary shares, alphabet shares, management shares and even preference shares.

Step 2. Pass an ordinary resolution:

Usually, the Board of Directors will be the one proposing to issue new shares. Issuing shares is also known as an “allotment of shares”. In order for you to go ahead with the share issue, you must pass an Ordinary Resolution. This is the law under Section 161 of the Companies Act.

An Ordinary Resolution is basically a shareholder vote.

Here are the steps to pass an Ordinary Resolution:

Prepare a written resolution (this is usually done by the Board of Directors) proposing to issue new company shares
Set up a date for a shareholder’s meeting. The date must be at least 14 days in advance. If at least 95% of shareholders agree, the meeting can be held earlier.
Hold the vote. The resolution to issue new shares must receive at least 50% of votes to pass.
If sufficient votes are received, the Ordinary Resolution is passed. You can now issue the shares.

Share certificates:

Don’t forget to send share certificates to your shareholders, after the new shares are issued. The company must send share certificates to the new shareholders within 60 days of the share issuance.

After you have passed the Ordinary Resolution, give yourself a congratulatory pat on the back. Proceed to step 3 and you’ll be all done.

Step 3: File a Return of Allotment

Once the shares have been issued, you’ll have to file a “Return of Allotment” with ACRA. This is basically updating ACRA with the latest information on how many shares were issued, who they were issued to, etc. You have to file the Return of Allotment with ACRA within 14 days of issuing the shares.

The Return of Allotment must state the following:

Number of the shares issued in the allotment
Amount paid for each share
Amount unpaid on each share (if applicable – e.g. employees typically don’t pay for stock awards)
Type of shares issued (e.g. ordinary shares, preference shares, etc.)
Name, NRIC/FIN/Passport number, nationality, and home address of each shareholder (for shareholders who are individuals)
Company name or UEN, and business address of each shareholder (for shareholders who are companies)
The number and class of shares owned by each shareholder

You can do this easily via BizFile+. Go to BizFile+ (log in using SingPass) > Return of Allotment of Shares > Change in particulars of shareholders.

Do you need a prospectus?

Most private companies will not require a prospectus. Section 272B of the Securities and Futures Act (SFA) allows companies to skip the step of preparing a prospectus, if certain conditions are met.

You don’t need to have a prospectus when issuing shares if you meet the conditions below:

You are making the share issue offer to 50 people or fewer within a 12-month period
You are not making public advertisements for this share issue offer

If you don’t meet the criteria above, then you’ll have to prepare a prospectus. This is governed under Section 240 of the Securities and Futures Act (SFA). A prospectus will cost a fair amount of time and money to prepare and takes a lot of time.

What is the maximum number of shareholders I can have?

For Private Limited companies:

For Private Limited entities, you can have a maximum of 50 shareholders. If you currently run a Private Limited company but want to have more than 50 shareholders, you will need to convert your company from a Private Limited into a Public Limited.

For Public Limited Companies:

For Public Limited entities, there is no limit to the number of shareholders.

Shareholders for both Private and Public Limited entities can either be private individuals or corporate entities. Shareholders can be 100% foreign.

What are the legal risks when issuing shares?

Share issuances can result in lawsuits against the company. For instance, shareholders can sue directors and officers of the company for approving new share issuances, which may prejudice the rights of existing shareholders. Minority shareholders can also sue for minority oppression, e.g. claiming that the issuance unfairly dilutes their shares. Such lawsuits are common.

Case examples:

You should strongly consider Directors and Officers Liability Insurance to protect you from lawsuits related to share issuances, amongst other risks.

This type of insurance protects company directors and officers from many types of lawsuits, such as:

Minority oppression and other shareholder lawsuits
Unfair dismissal lawsuits
Employee harassment lawsuits
Negligence lawsuits
Defamation lawsuits
…and more

Directors and Officers Liability Insurance pays for your lawyer’s fees (which can be hundreds of thousands), plus court damages/settlements. Having a Directors & Officers Liability policy could save you huge sums of money – millions, even.