MARKET FAQ

A branch in Singapore is not a separate legal entity, but rather the Singapore registration of a foreign company that carries on business or has a place of business in Singapore. Under the Companies Act 1967 of Singapore (the "Companies Act"), a foreign company must register with the Registrar before establishing a place of business or commencing business here. The branch remains an extension of the foreign parent and not a standalone Singapore corporate entity. A subsidiary is a company incorporated under the Companies Act. Upon incorporation, the subscribers and future members become a body corporate capable of suing and being sued. It is typically formed as a private company limited by shares, with no more than 50 members.

1. As a branch is not a separate legal entity, liabilities incurred through the Singapore branch are liabilities of the foreign parent company itself. 2. If a subsidiary is a company limited by shares, members are generally only liable for the company's debts up to the amount of share capital subscribed. Accordingly, there is a clear separation between the subsidiary's obligations and the parent's assets. 3. Singapore imposes corporate income tax at a flat rate of 17% on chargeable income which applies to both branches and subsidiaries. Tax is imposed on income derived from or accrued in Singapore, as well as foreign-sourced income received in Singapore. 4. Branches may not enjoy certain tax exemptions which may be available to subsidiaries, such as the Start-up Tax Exemption Scheme (subject to certain qualifying conditions) (see Q1 of the Tax and Payment Collection theme of this column).

When you decide whether a subsidiary or branch should be incorporated, please note that there are different requirements. 1. Lodgement Documents Branch: To lodge the name and foreign registered office address, certified copy of certificate of incorporation, certified copy of charter/constitution/memorandum/articles, list of directors and their residential address/contact address, notice stating the identification of particulars authorised representative(s), statement by or on behalf of the foreign company confirming that each of its authorised representatives have consented to act, notice of registered office in Singapore, notice containing the identification number or registration number of the foreign company, description of business, and latest audited financial statements of head office (if required by home law). Subsidiary: Constitution of the subsidiary, choose the subsidiary's financial year end, appoint the subsidiary's director(s) and secretary(ies), and decide on the share capital and share types. 2. Local Presence Branch: Registered office in Singapore, open and accessible to the public for at least 5 hours between 9am to 5pm each business day. Subsidiary: Registered office within Singapore, open and accessible for at least 3 hours during ordinary business hours each business day. 3. Local Management Branch: At least one authorised representative who is a natural person resident in Singapore. Subsidiary: At least one director ordinarily resident in Singapore.

Singapore does not impose a general statutory minimum paid-up capital requirement for incorporating a private company limited by shares. The amount of initial capital is largely a commercial decision, unless your subsidiary will carry on a regulated activity.

1. Under the Companies Act, there is no minimum paid-up share capital amount for a private company limited by shares. 2. The statutory requirements are that there must be a minimum of one member of the company, and each subscriber to the constitution of a company must declare the number of shares "not being less than one" that the subscriber agrees to take. 3. Accordingly, the subsidiary can be incorporated with a single issued share, with the issue price and paid-up amount determined commercially. Some companies opt for one issued share paid up at S$1.

1. First confirm whether the activity the subsidiary will carry on is a regulated activity prescribing a minimum initial capital. 2. If it is not a regulated activity prescribing a minimum initial capital, the share capital and the number of shares of the subsidiary are largely a commercial decision, with the issue price and paid-up amount determined commercially.

Yes, your Taiwanese parent company can generally grant stock options over its own shares to employees of the Singapore subsidiary.

1. Under the Securities and Futures Act 2001 of Singapore (the "SFA"), an offer of securities or securities-based derivatives contracts to persons in Singapore must be accompanied by a prospectus lodged and registered with the Monetary Authority of Singapore ("MAS"), unless an exemption applies. 2. A stock option may potentially fall under the definition of an offer of securities under the SFA, which must be accompanied by a prospectus unless exempted. 3. The subsidiary may potentially rely on the "qualifying person" exemption in the SFA. A qualifying person in relation to an entity includes a bona fide director, former director, consultant, adviser, employee, or former employee of the entity or a related corporation of that entity (being a corporation). This extends the exemption beyond the issuer's own employees to employees of the issuer's related corporations. 4. For your Taiwanese parent company to rely on this exemption, the Singapore subsidiary would need to be a "related corporation" of the parent within the meaning of the Companies Act. Accordingly, if your Taiwanese parent company holds the requisite ownership interest in the Singapore subsidiary (i.e., it is a holding company–subsidiary relationship), the "qualifying person" exemption may apply.

1. Should you wish to establish a stock option plan, it should be restricted to employees (and other qualifying persons) of the parent and its related corporations and should not be made available to the general public. 2. For your Taiwanese parent company to rely on this exemption, confirm whether the Singapore subsidiary would be a "related corporation" of the parent within the meaning of the Companies Act. 3. You may also wish to check if such a stock option plan is compliant with relevant Taiwanese laws.

Yes, you may contribute existing technology and software in kind. The Companies Act permits shares to be allotted as fully or partly paid up otherwise than in cash. When such an allotment is made pursuant to a written contract, the company must lodge the contract (or a certified copy) with the return of allotment filed with the Registrar.

Singapore has recognised that a company may issue shares as purchase consideration for assets and that courts will not generally inquire into the quantum of consideration furnished bona fide by a company as payment for an asset.

1. The directors of the subsidiary may consider retaining documentation supporting that the value attributed to the technology and software is fair and adequate for the shares issued. 2. The subsidiary may also wish to conduct valuation for non-cash consideration for further credibility. This is to also ensure that the directors of the subsidiary are acting in good faith and in the best interests of the subsidiary.

The initial costs of setting up a Singapore subsidiary include mandatory filing fees and professional service fees which may vary depending on the service provider. The mandatory filing fees are as follows: Company name reservation – S$15; and Incorporation of private company – S$300. Please also note that all companies registered in Singapore must file an annual return with the Accounting and Corporate Regulatory Authority of Singapore ("ACRA") each year, which costs S$60.

With respect to professional service fees, this varies depending on the type of services you wish to obtain from a corporate service provider and/or an auditor. 1. Registered Office Service You may require a registered office service, if the Singapore subsidiary does not have an office initially. The Singapore subsidiary must have a registered office in Singapore from the date of incorporation, open and accessible to the public for at least 3 hours during ordinary business hours on each business day. 2. Secretary Every company must have at least one secretary who is a natural person ordinarily resident in Singapore. The rates of corporate secretarial services from professional firms may vary, and their services may include board resolutions, maintenance of statutory registers and routine ACRA filings (eg: filing of annual returns). 3. Resident Director Every company must have at least one director who is ordinarily resident in Singapore. If personnel from the Taiwanese parent company is not ordinarily resident in Singapore, appointing a nominee resident director may be required. If your Taiwanese parent does not have personnel based in Singapore, you will need either to relocate someone or appoint a nominee resident director. Similarly, the cost of nominee director services also vary. However, please note that nominee directors also bear legal duties and liabilities. 4. Financial Statements and Audit Every company must prepare financial statements. However, the subsidiary may potentially qualify as a small company exempt from audit requirements in its first financial year. A private company qualifies as a small company if it meets any 2 of 3 criteria: annual revenue not exceeding S$10 million;total assets not exceeding S$10 million; and not more than 50 employees. Even if the subsidiary qualifies as a small company exempt from audit requirements, all Singapore incorporated companies must prepare financial statements and file these statements with ACRA unless exempted. Accordingly, you may still require bookkeeping services to ensure accounting and tax compliance.

1. There are various corporate service providers in Singapore and you may wish to obtain various quotes before deciding on one. 2. When comparing quotes, check item by item which services each provider includes — registered office service, secretary, resident director and bookkeeping services — and, where an audit is required, the fee for it.