A sole proprietorship is a business that can be owned and controlled by an individual, a company or a limited liability partnership. There are no partners in the business.

It is the simplest form of business organisation. The assets and profits that the business generates are owned by the proprietor who is personally liable to pay whatever tax payable in respect of these assets and profits. Should the proprietor dies, the business will cease to exist.

There are no registration or compliance requirements specific to sole proprietorships where the proprietor does business under his own name as an individual. However, if the person wishes to carry on business in Singapore as a sole proprietor using a business name, he or she must first apply to register the business name with ACRA and comply with the requirements of the Business Names Registration Act (2014).

The legal status of a sole proprietorship can be defined as follows:

• It is not a separate legal entity from the business owner
• The business owner has unlimited liability (i.e. the business owner is personally liable for all the debts and losses of the sole proprietorship)
• It can sue or be sued in the owner’s name

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Foreigners who are residing overseas and want to register a sole proprietorship one locally resident authorised representative, e.g. a Singapore citizen or Permanent resident, must be appointed. Foreigners must also engage a registered filing agent e.g. a corporate secretarial firm, to submit the application on their behalf.

Foreigners who wish to be present in Singapore to manage the operations of a sole proprietorship must seek approval from the Ministry of Manpower after registering the sole proprietorship or partnership.

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A Partnership is where two or more persons carry on a business in common with a view to making profit. The partners can either be individuals or bodies corporate. Generally, the maximum number of partners allowed in a partnership is 20, beyond which they will have to do so through a Company.

Partnership is not treated as a separate legal entity from its partners. The partners collectively own the assets and are each individually liable for the full amount of debt owing by the partnership without any limit, unless agree amongst themselves as to their respective share of liability for the Partnership’s debts. Partners are taxed individually on their share of the partnership’s profits.

The rights and obligations of partners amongst themselves may be governed by a partnership agreement. The rules on partnership is governed by the Partnership Act 1890. There is no registration or compliance requirements specific to partnerships unless the partners wish to conduct the business under a business name. As long as there is a relationship between two or more persons carry on business together with a view to making profit, the law will recognise the existence of a partnership.

Unless otherwise stated in a Partnership agreement, a partnership will automatically be dissolved should any partner dies or depart the business.

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A Limited Partnership (LP) is a vehicle for doing business in Singapore. It is a partnership consisting of a minimum of two partners, with one or more "General Partners" and one or more "Limited Partners".

An LP does not have a separate legal entity from the partners, i.e. it cannot sue or be sued in its own name.

An individual or a company may be a General Partner or a Limited Partner of the LP. Appointing a local manager is not mandatory unless all the General Partners are residing outside Singapore.

A General Partner is personally liable for all the debts incurred, obligations and liabilities of the LP. Where there are two or more General Partners, they are jointly and severally liable for all debts, obligations and liabilities incurred. A Limited Partner is liable only to the extent of his or her agreed capital contribution, provided he or she does not take part in the management of the LP stipulated in the First Schedule of the Limited Partnership Act 2008. The Limited Partner is thus said to enjoy 'limited liability' status. Registered LPs are governed by Limited Partnerships Act 2008, not Business Names Registration Act.

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A foreigner, who wants to register an LP in Singapore, is required to appoint a locally resident manager e.g. Singapore citizen or Permanent resident. The foreigner can continue to reside outside Singapore.

Foreigners who wish to be present in Singapore to manage the operations of an LP must seek approval from the Ministry of Manpower after registering the LP.

The foreigner must engage the services of a registered filing agent e.g. corporate secretarial firm to submit the application on his or her behalf.

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An LP will not be liable to tax at the entity level. Each partner will be taxed on his or its share of the income from the LP. Where the partner is an individual, his share of income from the LP will be taxed based on his personal income tax rate. Where a partner is a company, its share of income from the LLP will be taxed at the tax rate for companies.

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A Limited Liability Partnership (LLP) is a vehicle set up under the Limited Liability Partnerships Act (Cap 163A) for doing business in Singapore. An LLP gives owners the flexibility of operating as a partnership while having a separate legal identity like a private limited company.

This means that the LLP is seen as a body corporate and has a legal personality separate from its partners. The LLP has perpetual succession, which means any change in the partners of an LLP will not affect its existence, rights or liabilities.

An LLP is capable of:

• Suing and being sued in its name;
• Acquiring and holding property in its name;
• Having a common seal in its name and
• Doing such other acts and things in its name, as bodies corporate may lawfully do and suffer.

Every partner of the LLP is regarded as an agent of the LLP. The LLP is not bound by the acts of a partner which are not authorised. A partner may be held personally liable for claims from losses resulting from his own wrongful act or omission, but will not be held personally liable for such wrongful acts or omissions of any other partner of the LLP.

LLPs on incorporation must comply with the provisions of the Limited Liability Partnerships Act and any Rules made under the Act. This includes:

• annual filing of a declaration of solvency or insolvency;
• keeping of proper accounts to be made available for inspection by the authorities when required;
• having a registered office to which all communications and notices may be addressed; and
• publication of its business name, registration number and limited liability status on it invoices and official correspondences. If the LLP is not carrying on business under its registered name, it must also comply with the provisions of the Business Names Registration Act.

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A foreigner, who wants to register an LLP in Singapore, is required to appoint a locally resident manager e.g. Singapore citizens, Permanent residents as an authorized representative. The foreigner can continue to reside outside Singapore.

Foreigners who wish to be present in Singapore to manage the operations of an LLP must seek approval from the Ministry of Manpower (MOM) after registering the LLP.

The foreigner must engage the services of a registered filing agent e.g. corporate secretarial firm to submit the application on his or her behalf.

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Company Formation

A company comes into existence upon registration under the Companies Act (Cap 50). It can have a minimum of 1 member. It has a separate legal personality from its shareholders and executives who manage the company. They are recognised as taxable entities in their own right.

There are 7 types of companies which can be incorporated in Singapore. The available options are:

1. Exempt private company

2. Private company limited by shares

3. Public company limited by shares

4. Public company limited by guarantee

5. Unlimited private company

6. Unlimited exempt private company

7. Unlimited public company

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Constitution

The constitution is a legal document which spells out the rules and regulations on how the company should be governed.

It states the rights and responsibilities of the directors, shareholders and company secretary.

The constitution must contain the following information:

• Company’s name and registered office address
• Business activities and how its operations will be carried out
• Liabilities of the members of the company
• Total amount of share capital and number of issued shares
• Rules and regulations on governance

For example, transfer of shares, manner of calling for Annual General meetings or Extraordinary General Meetings, appointment and resignation of directors, secretary

A copy of the constitution signed by the shareholders at point of incorporation must be kept at the company’s registered office address.

If there is any alteration to the constitution, the company is required to pass a special resolution in a general meeting, submit a copy of the special resolution and a copy of the altered constitution to ACRA within 14 days.

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Registered Office Addresses

All companies must ensure that their registered office is open and accessible to the public for at least three hours during ordinary business hours on each business day. A business day is any day excluding Saturday, Sunday and public holidays.

The purpose of this requirement is to allow members of the public to reach out to the office if necessary and to facilitate the delivery of any legal documents. Companies and directors that fail to comply with this requirement may be fined.

The registered office must be an address in Singapore, but it need not be the place of operation.

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Share Capital

Share capital refers to the amount of money that shareholders have committed to the company. Share capital can be issued with or without full payment from shareholders. The minimum issued share capital is $1 when you incorporate a company. “Paid up capital” refers to the amount shareholders have paid to the company for their shares.

Example

Company X issues 100,000 shares at $1 each to its shareholders. This brings the issued share capital to $100,000. However, the shareholders have only paid up 50% of their shareholding, which means that the paid up capital is $50,000 and the unpaid share capital is $50,000. If the shareholders pay the remainder 50% of their shareholding, then the company’s paid up capital will become $100,000 and the unpaid share capital will be $0. If Company X issues new shares in future, the amount of issued and paid up capital will increase accordingly.

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Company Director

A company director is responsible for managing the affairs of the company and setting the company’s strategic direction. A company director is required under the Companies Act to ensure accurate and timely record keeping, prepare financial statements (if applicable) and comply with corporate filings and other disclosures. The director also has the legal duty to advance the interests of the company, act honestly and in good faith in exercising the given powers.

The consequences of breaching the director’s duties can be both civil and criminal in nature. Different offences carry different levels of penalty.

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Financial Year End

A company’s financial year end (FYE) represents the final day of its accounting period. The accounting period is the recognised interval to complete an accounting cycle of the business. The periodicity provides perspective about the profitability of the business on an ongoing basis.

Records of transactions are kept over this period and reported in the form of financial statement.

Accounting periods can be 12 months or over 52 weeks. If the business decides on a 12-month accounting period starting 1 January 2020, the company’s FYE will be 31 December 2020. But if the business chooses to have a 52-week accounting period starting Wednesday, 1 January 2020, the company’s FYE will be on Wednesday, 30 December 2020.

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Filing Financial Statements in XBRL

eXtensible Business Reporting Language, better known as XBRL, is used as the common (computer) language for the electronic communication of business and financial reports to increase the transparency and accessibility of business information by using a uniform format.

Since 1 November 2007, Singapore companies required to file financial statements with ACRA have been encouraged to file financial statements in XBRL format. The revised XBRL filing requirements was made mandatory from 1 May 2021.

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Annual General Meeting

Unless exempted, Companies are required to hold an annual general meeting (AGM). AGMs ensure that stakeholders of the company are kept updated about the company’s financial position and direction. It also provides a platform for stakeholders and company officers to communicate with each other at least once a year.

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Annual Return

Private companies must file their annual return within 7 months after the financial year end.

Filing the company’s annual return on time helps to ensure proper and timely disclosure to all stakeholders. All companies including inactive and dormant companies are required to file annual returns as long as the company’s status is “live”, and even if IRAS has exempted your company from filing its income tax return.

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The Companies (Amendment) Act 2017 has introduced an inward re-domiciliation regime in Singapore, to allow foreign corporate entities to transfer their registration to Singapore (e.g. foreign corporate entities that may want to relocate their regional and worldwide headquarters to Singapore and still retain their corporate history and branding). The regime took effect from 11 October 2017.

A foreign corporate entity that re-domiciles to Singapore will become a Singapore company and be required to comply with the Companies Act like any other Singapore incorporated company. Re-domiciliation will not affect the obligations, liabilities, properties or rights of the foreign corporate entities.

The minimum requirements for transfer of registration are:

1. Size criteria – The foreign corporate entity must meet any 2 of the below:

• the value of the foreign corporate entity’s total assets exceeds S$10 million;
• the annual revenue of the foreign corporate entity exceeds S$10 million;
• the foreign corporate entity has more than 50 employees;

2. Solvency criteria:

• there is no ground on which the foreign corporate entity could be found to be unable to pay its debts;
• the foreign corporate entity is able to pay its debts as they fall due during the period of 12 months after the date of the application for transfer of registration;
• the foreign corporate entity is able to pay its debts in full within the period of 12 months after the date of winding up (if it intends to wind up within 12 months after applying for transfer of registration);
• the value of the foreign corporate entity’s assets is not less than the value of its liabilities (including contingent liabilities)

3. The foreign corporate entity is authorised to transfer its incorporation under the law of its place of incorporation;

4. The foreign corporate entity has complied with the requirements of the law of its place of incorporation in relation to the transfer of its incorporation;

5. The application for transfer of registration is —

• not intended to defraud existing creditors of the foreign corporate entity; and
• made in good faith; and

6. As at the date of the application, the foreign corporate entity's first financial year end at its place of incorporation has passed;

7. Other minimum requirements such as the foreign corporate entity is not under judicial management, not in liquidation or being wound up etc.

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The Variable Capital Company (VCC) is a new corporate structure for investment funds constituted under the Variable Capital Companies Act which took effect on 14 Jan 2020. The VCC will complement the existing suite of investment fund structures available in Singapore.

The VCC Act and subsidiary legislation is administered by ACRA. All VCCs must be managed by a Permissible Fund Manager i.e. a licensed fund management company holding a capital markets services licence under section 86 of the Securities and Futures Act (Cap. 289), or a registered fund management company exempted from holding a capital markets services licence under paragraph 5(1)(i) of the Second Schedule to the Securities and Futures Act (Cap 289), or other financial institutions exempted from holding a capital markets services licence under the Securities and Futures Act (Cap. 289), Banking Act (Cap. 19), Monetary Authority of Singapore Act (Cap. 186), Finance Companies Act (Cap. 108), Insurance Act (Cap. 142). The anti-money laundering and countering the financing of terrorism obligations of VCCs will come under the purview of the Monetary Authority of Singapore (MAS).

Some key features of a VCC:

• A VCC has a separate legal personality from the directors.
• A VCC will have members (also commonly known as shareholders).
• A VCC will have a board of directors responsible for the governance of the VCC’s operations. This board of directors of a VCC is the equivalent of the board of directors in a company incorporated under the Companies Act(Cap 50).
• A VCC has a variable capital structure that provides flexibility in the issuance and redemption of its shares without the need for shareholders' approval. It can also pay dividends out of capital, and not only out of profits.
• VCCs is not required to disclose its register of members to the public, unless it is for regulatory, supervisory and law enforcement purposes.
• A VCC can be set up as a single standalone fund or an umbrella fund with two or more sub-funds, each holding a portfolio of segregated assets and liabilities. For fund managers that structure their funds as umbrella VCCs, theremay be cost efficiencies from using common service providers across the umbrella and its sub-funds.
• A VCC can be used for both open-ended and closed-end fund strategies.
• Fund managers may incorporate new VCCs or re-domicile their existing overseas investment funds with comparable structures by transferring their registration to Singapore as VCCs.
• A VCC can use either Singapore or other recognised international accounting standards (namely, International Financial Reporting Standards (IFRS) and US Generally Accepted Accounting Principles (US GAAP)) for the preparation of its financial statements.

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Businesses may need to raise money in the course of its operations. When a company applies for a loan from a bank or other institutions, it will often give security to the creditor. One common form of security is a charge over assets.

There are two categories of charges:

1.  a fixed charge is where the charge is secured on fixed assets e.g. land, piece of machinery, shares, etc. Once a fixed charge is created, the debtor cannot deal with the charged asset freely without the creditor’s consent;

2.  a floating charge is where the charge is secured on a pool of non-specific assets or generic categories e.g. inventory, book debts, undertakings etc. The debtor is free to manage and even dispose of the charged assets until the occurence of an event of default, in which the the charge crystallises into a fixed charge.

When a charge is created, it must be registered with ACRA. The following charges must be registered:

• a charge to secure any issue of debentures
• a charge on uncalled share capital of a company
• a charge on shares of a subsidiary of a company which are owned by the company
• a charge or an assignment created or evidenced by an instrument which, if executed by an individual, would require registration as a bill of sale
• a charge on land wherever situate or any interest therein
• a charge on book debts of the company
• a floating charge on the undertaking or property of a company
• a charge on calls made but not paid
• a charge on a ship or aircraft or any share in a ship or aircraft
• a charge on goodwill, on a patent or licence under a patent, on a trade mark, or on a copyright or a licence under a copyright

The full list of charges and rules governing registration of charges can be found in sections 131 to 141 of Division 8 of the Companies Act.

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The company may apply to ACRA to strike off the company's name from the register. The application may be approved if ACRA believes that the company is not carrying on business and the company is able to satisfy the following criteria for striking off.

• The company has not commenced business since incorporation or has ceased trading.
• The company has no outstanding debts owed to Inland Revenue Authority of Singapore (IRAS), Central Provident Fund (CPF) Board and any other government agency.
• There are no outstanding charges in the charge register.
• The company is not involved in any legal proceedings (within or outside Singapore).
• The company is not subject to any ongoing or pending regulatory action or disciplinary proceeding.
• The company has no existing assets and liabilities as at the date of application and no contingent asset and liabilities that may arise in the future.
• All/majority of the director(s) have given their consent to submit the application for striking off the company.

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Voluntary Wind Up

There could be many reasons why a company would want to wind up despite being solvent e.g.:

• The company is not profitable;
• The company has ceased its business activities;
• There are irreconcilable disputes amongst shareholders that make continued operations of the company unfeasible or impractical;
• Corporate or financial restructuring of the group to which the company belongs occurs;
• The company is a dormant one, and the owner(s) do(es) not want to incur ongoing compliance and maintenance costs
  

  Solvent companies can initiate a voluntary wind-up of their companies if the directors believe that the company will be able to pay its debts, in full, within 12 months after the commencement of the winding up. The company will appoint a liquidator, or provisional liquidator, to wind up its affairs and file the necessary notifications required under the Companies Act or Insolvency, Restructuring and Dissolution Act.

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A company may decide to opt for a 'creditors' voluntary winding up” if its directors believe that the company cannot, by reason of its liabilities, continue its business. The company will appoint a liquidator, or provisional liquidator, to wind up its affairs and file the necessary notifications required under the Companies Act / Insolvency, Restructuring and Dissolution Act.

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A company may be wound up under an Order of the Court under certain circumstances e.g. the company is unable to pay its debts. The Court may appoint a liquidator to wind up the affairs of the company. Where no liquidator is appointed by the Court, the Official Receiver shall be the liquidator of the company. The liquidator will file the necessary notifications required under the Companies Act / Insolvency, Restructuring and Dissolution Act.

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A company may be placed under receivership, if a receiver is appointed to enforce a charge for the benefit of holders of debentures of the company.

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If a company, or its creditor(s), considers that the company is/will be unable to pay its debts and there is a reasonable probability of rehabilitating the company, instead of resorting to a winding up, the Court may upon an application, order that the company be placed under judicial management.

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