Starting a business expansion journey into new markets presents exciting possibilities. Incorporating a branch is a useful strategy for making a good first impression. This post will discuss the necessary legal procedures for setting up a branch in Singapore, including prerequisites, paperwork, and operational considerations. We'll also talk about the factors to take into account while deciding between a branch and a limited corporation.
What is a branch office?
A branch is an overseas business operating in a host nation and, in contrast to a subsidiary, operates as the foreign parent company's local representative rather than being an independent legal organisation.
With a clear link to the parent company's rules and control, the branch office carries out operations essentially in the same way.
Key features of a corporate branch
- Legal Structure: The foreign company and the branch office share the same legal structure. It uses the same legal name to do business.
- Control and Liability: The foreign business is still directly in charge of and liable for the operations of the branch office. The parent firm bears the responsibility for the debts of the branch.
- Business Activities: Generally speaking, a branch office carries out the same operations as the overseas parent company. Serving as the parent company's local representative, it develops and promotes their interests.
- Independence: Although the branch works locally, it follows to the rules and regulations set out by the overseas parent company. This framework enables a unified approach to corporate operations.
- Activities and Presence: Without forming a distinct legal organisation, branch offices are a good option for businesses wishing to create a physical presence in a new market. They frequently work in marketing, sales, or customer service.
Legal Requirements for Incorporating a Branch in Singapore
When thinking about registering a branch office in Singapore, there are a few important requirements to take into account.
Name
The parent company's name and the branch's name should normally match. However, the Accounting and Corporate Regulatory Authority's (ACRA) consent is required. The name shouldn't be considered improper or already in use.
Authorized Representative
It is essential to designate a minimum of one Singaporean citizen who possesses the authority to receive legal notifications on behalf of the branch. This representative can be an individual or a corporate entity.
Constitution and Business Activities
A branch office functions in accordance with the parent company's constitution, as opposed to that of an independent corporation. The branch does not have its own unique Memorandum and Articles of Association (MAA).
Establishment of a Physical Business Location
A branch office is required to have a physical business location in Singapore. This location serves as a place where statutory documents are maintained.
Minimum Capital Requirement
Singapore does not impose a minimum capital requirement for setting up a branch, giving flexibility for enterprises.
Essential Documentation for Branch Registration in Singapore
The registration of a branch office requires the submission of crucial documents, including:
- A completed form containing branch office details such as the registered address, local representative, particulars of the parent company, etc.
- A certified copy of the parent company's constitution, which includes the Memorandum and Articles of Association.
- A certified copy of the parent company's Certificate of Registration.
- A certified copy of the latest financial accounts of the foreign company. Exemption from submission is possible if the foreign company is not obligated to publicly disclose its accounts, provided a valid reason is provided.
-
Identification documents of the local representative of the branch office.
It's essential to note that only documents in English or Chinese are accepted for submission. Documents in other languages must be officially translated before submission.
Operational Scope of a Branch in Singapore
Once successfully incorporated, A branch in Singapore can carry out a range of business operations including entering into contracts, conducting transactions, and generating revenue. There are no restrictions on the activities a branch can carry out; however, specific business types may require licenses or permits.
Businesses in Singapore that require a license or permit include:
- Education business
- Employment agency
- Event management company
- Financial service company
- Restaurant & food business
- Retail business
- Trading company
- Travel company
Branch vs. Limited Company: Considerations
There are a few considerations to keep in mind when deciding whether to incorporate a limited liability company or a branch in Singapore:
- Financial impacts and obligations: A branch impacts liability and financial obligations because it is a component of the parent company and does not have a distinct legal standing. On the other hand, a limited company is a separate legal entity that provides its investors with limited liability protection.
- Timing: If you operate a branch instead of a limited company, the establishment process could be quicker and more efficient.
- Independency: A limited company functions autonomously. The operations of a branch are closely linked to the main firm.
- Reporting requirements: A limited corporation also ensures a clear division of financial matters by having its own financial statements and reporting requirements.
Conclusion
Incorporating a branch in Singapore can be a strategic move for expanding your business footprint. Understanding the operational scope of a branch and considering the differences between a branch and a limited company will help you make an informed decision that aligns with your business goals.
Consult our business professionals for valuable guidance throughout the incorporation process.