Singapore Company Law provides a number of benefits to foreign entrepreneurs interested in establishing a company in Singapore.
According to company act in Singapore, it allows foreign individuals to set up several different types of companies or to acquire existing companies in Singapore, commonly known as Shelf Company. Every company in Singapore comes with its separate advantages and disadvantages.
The decision to invest in the company totally rests in the investor’s hands based on several factors. Irrespective of the number of facilities provided by the Singapore government, there are still several numbers of foreign individuals who were unaware of the benefits and guidance to set up the shelf company in Singapore.
If you are confused about choosing to establish either a brand-new or already established company (also known as a shelf company in Singapore). Then continue reading the article as it has covered all the details that you need to consider before and after purchasing a shelf company.
What is Shelf Company in Singapore?
A shelf company is defined as a legal entity that is already established and operational, but it remains dormant, which means it doesn’t carry out any business activities and generates no revenue until the buyers take it over to carry out their business activities.
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It is also known as a shelf corporation. The shelf company is registered as per Singapore law. As mentioned, no business activities are performed by this entity. This entity is especially acquired by directors who do not want to struggle with the entire process of establishing a company in Singapore.
Those individuals who are willing to grow their business across the world, for them, Singapore is one of the most prominent investment destinations with a number of benefits for establishing a new company. Foreign entrepreneurs have two options to do business in Singapore i.e., they can either purchase an existing business or set up a new company.
The decision on either buying a shelf company or establishing a new company in Singapore rests in the hands of the investor on how they are going to use the entity.
The primary advantage of purchasing a shelf company in Singapore is that you do not need to follow the comprehensive company registration process.
However, you will only require to purchase the shelf company and continue operating your business activities within Singapore.
Shelf companies are basically registered with the basic requirements of minimum paid-up capital of S$1, a single shareholder with one share, nominal director, and resident company secretary.
However, the shelf company can be purchased by the foreign individual as well because 100% of the company’s shares might be in the hands of the foreign shareholders.
Once you have purchased a shelf company in Singapore, it will be into operation immediately.
Why choose to open a new company in Singapore?
Even after the great advantage of purchasing a shelf company in Singapore, several foreign entrepreneurs decide to set up a brand-new company. The primary motive for registering a new company over purchasing a shelf company in Singapore is because they can choose the type of structure as per their requirement and keep a note of tax benefit they will receive from the Singapore government.
Another important advantage of setting up a brand-new company in Singapore over purchasing a shelf company is its incorporation costs. No doubt, choosing to purchase a shelf company in Singapore is quite expensive, especially when purchasing an older company compared to registering a new business.
Benefits of Buying a Shelf Company
You do not need to follow the registration process.
Basically, establishing a new company in Singapore require registration of the company with the Accounting and Corporate Regulatory Authority (ACRA). In addition, several requirements associated with incorporating a company with ACRA include making basic arrangements for appointing a qualified company secretary who should be a permanent resident in Singapore, having a registered Singapore address, appointing the director, and having SingPass or CorpPass ID for the online registration process.
By purchasing the shelf company in Singapore, you do not need to follow the company incorporation process with Accounting and Corporate Regulatory Authority (ACRA); instead, you can start your business operations immediately after buying.
You may spend less time preparing the required incorporation documents.
If you proceed with incorporating a new company in Singapore, it will require several paperwork and submitting a bundle of supporting documents, including shareholder agreements and the constitution of the Company.
However, if you choose to buy a shelf company in Singapore, their supporting documents have already been prepared during company incorporation; you are only required to alter them to meet your requirements. As a result, if there are no major amendments, the process will not take much time.
Hence, you will be able to acquire an entirely operational company quicker and can continue entering into a contractual relationship with the parties.
You may find it easier to obtain business loan approvals.
Another benefit you will enjoy after purchasing a shelf company in Singapore is that it will become easier for you to obtain business loan approval. Those companies formed with longevity and operating history have larger chances of getting business loan approval from potential investment institutions and local banks.
For instance, the majority of the local banks or money lenders require at least 2 to 3 years of company incorporation history to approve a business loan. Highly reputed companies also prefer doing business with the older company rather than the newly established one.
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Registering a new company in Singapore might take a longer time. You might have to undergo the entire incorporation process, and several basic incorporation requirements also need to be followed. In case you are looking to start a business activity with immediate effect, then choosing to purchase a shelf company should be an ideal choice.
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Disadvantages of purchasing Shelf Company in Singapore
Besides advantages, there are several disadvantages of purchasing shelf company in Singapore are as follows:
- One of the disadvantages of purchasing a shelf company in Singapore is that it comes with a very high premium due to its mature status.
- Those individuals who have invested in a Shelf company in Singapore cannot benefit from government tax benefits because tax benefits are only provided to the newly incorporated company.
- However, in the case of purchasing the shelf company in Singapore, investors of the company lose the right to decide the type of structure during the time of registration.
Cost of Buying a Shelf Company in Singapore
The cost of buying a Shelf company in Singapore can be from $2500 to $20,000 based on the service included with the sale and date of shelf company Incorporation; the older will be the company, the more it will cost.
How to Buy a Shelf Company in Singapore
If you have decided to purchase the Shelf company in Singapore, then by following the below-given steps you can do so.
Choosing your shelf company
The process of purchasing the shelf company begins with selecting the company you wish to purchase.
For example, suppose you are willing to select the company depending upon its date of incorporation. As already mentioned, the older will be the company, the higher it will cost. Also, a reputed company chooses to do business with older companies.
You also have the option to select the shelf company depending based on your intended name. Moreover, if you do not find the name you like, don’t worry. You can still change your company name later as the seller may provide you with the name changing service for free.
Negotiating with the seller
There are a number of companies in Singapore that sell their shelf company with the inclusion of additional services. While purchasing a shelf company, you have the option to negotiate with the seller regarding the inclusion of more value-added services depending upon your requirement and budget.
Several sellers provide the changing company name service for free or provide cost-free service for setting up a Singapore bank account. At the time of negotiation with the seller, you have to make sure that there are no outstanding debts or liability in the name of the Shelf Company you are buying.
Signing the transfer agreement
The final step involved in buying the shelf company in Singapore is signing the transfer agreement. An agreement is commonly known as a contract for sale, which indicates the transferring of ownership of a shelf company from its existing user to you.
Once you have signed the contract of sale, all the company’s shares will be transferred to you or your appointed person. Then the new shareholders will be considered as the new owners of the shelf company.
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After Buying Your Shelf Company
Here are the below-given things you need to do after purchasing a shelf company in Singapore.
Making any necessary changes to the company
After getting the ownership of the company, you might need to make few changes to the shelf company. Some of the basic changes may include:
- You may change the name of the company, corporate bank account or registered office address.
- Hiring new directors in the company
- Resignation of the existing directors
- Additionally, you can also revise the Company’s constitution if you feel the need to include particular provisions in it.
- Making changes to the company’s name or address, directorship, shareholder particulars, and constitution should also be updated with ACRA at the BizFile+ website.
Complying with statutory obligations
Since the shelf company is dormant, its original owner of the company should have strictly maintained and complied with all the necessary statutory requirements so that after selling the company, it becomes operational immediately.
Once you have successfully transferred the ownership of the shelf company in your name, you need to follow the same obligations.
Some of the statutory requirements are as follows:
- Keeping track of the beginning and the closing of the company‘s financial year
- You require to assemble the Annual General Meeting (AGM) each calendar year.
- Comply with all the Accounting requirements
- Keep a record of Annual financial statement filings
- Annual returns filing
- Corporate tax filings
Frequently Asked Questions about Shelf Company in Singapore
Is Shelf Company in Singapore similar to shell companies?
No, shelf companies in Singapore are quite different from shell companies. No business is commenced in the shelf Company as these companies are newly registered in Singapore. In comparison, shell companies do not engage in any type of business activity. However, these companies only hold assets by businesses or sometimes illegally.
What are the benefits of acquiring a Shelf Company in Singapore?
There are a number of reasons why purchasing the shelf company in Singapore is considered a smart investment. In some situations, if you are looking to bid for any government work or enter into any important government contract, it is mandatory that you must have a registered business; in such cases, purchasing a shelf company is the most suitable option.
Besides minimum requirement criteria, another important advantage of purchasing a shelf company in Singapore is that its processing does not take much time, and it only requires minimum resources to continue operating the business.
Another advantage of acquiring a shelf company is that it gives a clear image of the durability of your business. Suppose you are running a sole proprietorship business in Singapore for the past few years, but suddenly you decided to convert it into a company; then in such a situation purchasing a shelf company in Singapore is a good move.
What are the minimum requirements for acquiring a Shelf Company in Singapore?
The minimum eligibility criteria to purchase a shelf company in Singapore are the same as setting up a new one in Singapore.
What are the characteristics of the Shelf Company in Singapore?
Some of the notable characteristics of a shelf company in Singapore are given below:
- It consists of the seal of the company, Certificate of Incorporation, stock certificate book, and several other relevant documents as required by law.
- The only way the buyer can make the purchase is by providing the required supporting documents.
Are there any potential risks in purchasing a Shelf Company in Singapore?
Purchasing the shelf company is one of the most common legal entities in the majority of the countries and states such as Singapore, the United States of America, Cayman Islands, Hong Kong, and the British Virgin Islands.
However, the shelf Company doesn’t hold the bank account and perform any business activity prior to its disposal, which means there is no potential risk involved in purchasing the shelf company in Singapore.
However, when the buyer purchases the shelf company, the advisory service will guarantee that the company’s stock transfer is not being associated with any such operations.
The counselling service is also assured for transferring all the business-related matters prior to the designated date on which the responsibility begins to apply. As a result, the buyer does not need to concern more about the potential liability.
Can a Shelf Company in Singapore change the name of the company?
Yes, same as the newly registered company in Singapore, you will require to choose the unique name under which no company is registered. However, the intended name will be checked in the company‘s registry in Singapore; if it is available, then you can use it as your shelf company name in Singapore by applying for a change of name.
However, it will take up to 6 to 7 working days to change the name of the shelf company in Singapore.
Can the Shelf Company in Singapore increase authorized capital after Registration?
Yes, every shelf company in Singapore needs to pay the Stamp Duty of Singapore Dollar for each increment of SGD 1000 in the authorized capital. Later on, it has the option to provide the shares to the old and new shareholders as needed.
How many directors are appointed in purchasing the Shelf Company in Singapore?
It is mandatory for every Limited company or Shelf Company in Singapore to appoint at least one director, or you can appoint as many based on your company requirements.
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The above article has covered the complete details regarding shelf companies in Singapore. Before establishing a new company or purchasing a shelf company in Singapore, consider all the points carefully.
Undoubtedly, a bundle of documents need to be submitted with Accounting and Corporate Regulatory Authority (ACRA) during the company incorporation process.
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