How to incorporate a Singapore subsidiary company?
Actually, the process of incorporating a subsidiary company is the same as that to incorporate a private limited company in Singapore. Thus the key requirements are also the same, as follows:
- at least one shareholder which may be an individual or a corporate entity
- one resident director (either a Singapore citizen, permanent resident, Employment Pass holder or a Dependant Pass holder)
- one resident company secretary
- initial paid-up share capital of at least S$1, or equivalent in any currency
- a physical Singapore office address, and cannot be a PO Box
What does the terms – parent, subsidiary, holding, a sister company, mean?
- Parent and subsidiary: A subsidiary-parent company structure is created when one (parent) holds the controlling rights in the other (subsidiary).
- Holding company: When the parent company has no primary business activity of its own, the parent is known as the holding company.
- Sister companies: All subsidiary companies owned by the same parent company are known as sister companies, which sometimes compete in the same market against each other.
Why should a parent company go for a subsidiary company?
- Save tax: Enjoy tax benefits prevailing in the region where the subsidiary is incorporated.
- Reduce liability: Cushion against liabilities as the subsidiary is a distinct legal entity.
- Raise money: Incorporating a subsidiary allows the parent company to raise capital by offering stocks in the subsidiary.
- Prevent disclosure: The parent company can choose which activities to make public and which to retain private by means of a subsidiary.
- Prevent brand dilution: Sometimes, incorporating a subsidiary is beneficial if it’s business activities are different from the parent company.
Why should a parent company incorporate a Singapore subsidiary company?
Few points to note here are:
- Accounting is easier as the the subsidiary company can have paid-up capital in the same currency as its parent company.
- Since companies in Singapore are free to determine their fiscal year, the subsidiary and parent can match theirs to streamline the operations.
- You can keep your brand separate as the subsidiary’s name can be different from that of the parent company.
- You can manage the finances better as the subsidiary is free to repatriate all its profits and capital out of Singapore.
If the parent company becomes insolvent, what happens to the Singapore subsidiary company?
Since the subsidiary is a separate legal entity, the effect on the parent company is rather limited if a subsidiary becomes insolvent. If it is the other way round and the parent becomes insolvent, the effect on a subsidiary depends on the level and type of insolvency of the parent company, which may be a balance-sheet insolvency, or a cash-flow based insolvency.
What is the difference between a Singapore Company and a Singapore Subsidiary Company?
The key difference between is the shareholding of the respective companies. A Singapore Subsidiary is a private limited company with corporate shareholders (normally), where as a normal Singapore company can have individual shareholders as well.
Can a subsidiary company also have individual shareholders in addition to the corporate shareholder?
Yes, it is possible to have both corporate and individual shareholders. As noted above, a Singapore subsidiary company is just a Singapore private limited company.
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