Asia. It is undoubtedly one of the most successful countries in terms of economic development in the world. Its small area and population size belie its importance as an international commercial centre and as entrepot centre of the region. After consistently high growth rates for over two decades Singapore is as part of the next phase of its economic development focusing on building an external wing to its domestic economy to benefit from the exciting developments taking place in the Asia-Pacific region. In this article Kala Anandarajah of Allen &Gledhill Singapore gives an insight into the business environment in Singapore. Doing Business in Singapore Introduction Singapore is an island located off the southern tip of peninsular Malaysia between latitudes 109N and 129N and longitudes 10338E and 10406E. It is approximately 640 square kilometres in area with a population of about 3.2 million. Singapores area and population size however belie its importance as an international commercial centre. Singapore has no significant natural resources other than a deep water harbour. Yet the country has developed rapidly consistently achieving high growth rates over the last 20 years due primarily to the foresight and commit- ment of the Government. It has in recent years become an important regional and international centre for commerce financial and other services. It has also emerged as a centre of operation for numerous local and international banks and is the entrepot centre of the region. In addition Singapore has ensured the development of an excellent infra- structure. It has a well-planned network of roads including expressways. It has implemented various schemes to ensure minimal traffic congestion. There is an efficient Mass Rapid Transit System. Singapore also has an excellent bus and taxi network. Singapore is a centre for advanced communications. Insofar as telecommuni- cation is concerned Singapore is well poised to become a world leader with its extensive modern network and systems. This includes satellite and submarine cable systems. Singapores telecommunication rates are also one of the lowest in the world. Singapore has one of the busiest ports in the world. The Port of Singapore is a world leader in the quality of services that it provides. It is managed by the Port of Singapore Authority which ensures the provision of a comprehensive range of services including cargo handling warehousing distribution banking and ship supplies. It is the worlds busiest port when looked at in terms of shipping tonnage and is the worlds top bunkering port. Lately Singapore has become an important hub for the major international airlines. Singapore Changi Airport is one of the worlds busiest airports in terms of international commercial passenger and air cargo traffic. The reason for this may be attributed to Singapores liberal aviation policy. Singapore is also the third largest oil refining centre in the world. The political system Singapore is a parliamentary democracy based on the Westminster model. The Executive the Legislature and the Judiciary are the three arms of the Government. The Executive is headed by the President of the Republic of Singapore who is elected by the citizens of Singapore. The President has veto powers over the Asia Business Law Review No 11 January 1996 3 Kala Anandarajah* spending of national reserves by the Government and key public appointments. Executive powers are vested in a British-style Cabinet all members of whom are elected Members of Parliament. The Cabinet is headed by the Prime Minister who is appointed by the President. The Legislature comprises elected and non-elected representatives ie nominated members. Parliaments maximum term is five years after which general elections must be held. Voting in the elections is compulsory for those over 21 years of age. The Judiciary comprises the Supreme Court and the Subordinate Courts. The Chief Justice and the judges of the Supreme Court are appointed by the President acting on the advice of the Prime Minister. Diplomatic and other relations As with its economic policies Singapore adopts an open-door approach in its diplomatic relations. Its basic policy is one of promoting and strengthening ties with the other nations regardless of differences in ideology social political or economic systems. Accordingly Singapore has diplomatic missions in all the major countries of the world. It is also a member of the Association of South East-Asian Nations (ASEAN) the Commonwealth of Nations and the United Nations. It is worth mentioning that ASEAN has recently established an Asean Free Trade Area (AFTA) using the Common Effective Preferential Treatment Scheme. This Scheme will include all manu- factured products processed agricultural products and capital goods. The applicable law The legal system When the British colonised Singapore they introduced the English common law and a court system based on the English court system. This was augmented by a body of statute law passed by Parliament (known as Acts of Parliament) and subsidiary legislation made by Ministers under powers delegated to them by Parliament. Cases decided by English courts are treated with great respect by Singapore courts and are often followed where there are no circumstances relating to the English case which are peculiar to England. Cases from other parts of the Commonwealth are also often referred to. In recent years Singapore has been heading towards the building up of its own corpus of law. To this end appeals to the Privy Council were abolished. Further the provi- sion relating to the continued reception of English law contained in s 5 of the Civil Law Act has been repealed and in its place the Application of English Law Act (Cap 7A) was passed into law on 12 November 1993. This Act sought to remove all problems and uncertainties arising in relation to; the continued applicability of the English common law and the English statute law. The present position relating to the common law is that all pre-1826 and the post-1826 cases which have been specifically adopted in Singapore are applicable in Singapore. In rela- tion to statute law the Act provides for three ways through which English statute law becomes a part of Singapore law; namely where the Act is expressly said to apply where the Act applies by virtue of other written law and where the particular English statute provision is inserted into a local Act. Insofar as procedure is concerned the Supreme Court of Singapore adopted the English Rules of the Supreme Court 1965 in 1970. In like vein in mid 1986 the Sub- ordinate Courts of Singapore adopted the Rules of the Supreme Court. Thus the procedural rules in the Sub- ordinate Courts are in line with those of the Supreme Court. Substantive changes in the English Rules of the Supreme Court since 1981 have not been incorporated into the local rules governing court procedure. The courts Judicial power in Singapore is vested in the Supreme Court and the Subordinate Courts. The Supreme Court The Supreme Court consists of the High Court and the Court of Appeal. The High Court has unlimited criminal and civil jurisdiction. Criminal cases involving capital punishment must be tried by the High Court. The Chief Justice and other judges of the Supreme Court are appointed by the President acting on the advice of the Prime Minister. Cases in the High Court are also tried before the Judicial Commissioners who have the same powers and carry out the same functions as those of a High Court Judge. They may also be appointed on an ad hoc basis to deal with specific cases. This would allow a person with special expertise to hear a complex case. The Subordinate Courts The Subordinate Courts consist of the District Courts the Magistrates Courts the Juvenile Courts the Coroners Court and the Small Claims Tribunal. The District Courts may try criminal cases punishable by imprisonment which does not exceed 10 years and may hear civil claims not exceeding S$ 100000. The Magistrates Courts may try criminal cases punishable by imprisonment not exceeding 3 years and may hear civil claims not exceeding S$30000. The Small Claims Tribu- nal hears disputes arising out of contracts for sale of goods or provision of services where the sum claimed does not exceed S$5000. This limit of S$5000 can be increased further to S$l0000 if both parties to the claim consent in writing for the Tribunal to hear the dispute. There are other specialised courts and tribunals such as the Shariah Court (which deals with Muslim law) the Industrial Arbitration Court (which deals with employer- employee relations) the Board of Review (which hears appeals against income tax assessments) the Valuation Review Board (which hears objections against property tax assessments) and the Copyright Tribunal (which deals with disputes involving copyright patents and other related licensing matters). Appellate jurisdiction There is a right of appeal to the High Court from the decisions of the Magistrates Courts and the District Courts. The Court of Appeal deals with appeals from any judgment or order of the High Court in any civil or criminal matter. 4 Asia Business Law Review No 11 January 1996 The Judicial Committee of Her Britannic Majestys Privy Council (the Privy Council) was until recently the final court of appeal for Singapore. In 1994 appeals to the Privy Council were abolished. The Court of Appeal is now the final appellate court in Singapore for both civil and criminal appeals. The Court of Appeal is generally presided over by the Chief Justice and the Judges of Appeal. The other High Court Judges may however sit in the Court of Appeal. Business laws There are virtually no restrictions of any kind on the type of business that may be carried on in Singapore. There are also no restrictions on the amount of foreign capital investment or on foreign ownership of business entities in Singapore. Further there are no exchange control re- strictions. The Exchange Control Act (Cap 99) has been held in abeyance since 1978. This means that foreign currency may be brought into Singapore or transferred out to any country freely. Further currency is freely convertible and any profits made can be repatriated with- out any restriction subject to tax payable. Likewise the repatriation of capital can also made without restriction. There is however a policy against the internationalisa- tion of the Singapore Dollar. There is a directive pro- hibiting banks from lending in excess of S$5 million to a non-resident without the approval of the Monetary Authority of Singapore. Law governing companies and businesses The Companies Act (Cap 50) is the main legislation on companies whilst the Partnership Act (Cap 391) and the Business Registration Act (Cap 32) are the main legislations on firms and sole proprietorships. The Companies Act governs amongst other matters the requirements to be satisfied before a company may be registered the registra- tion procedures and the formalities that a registered com- pany has to comply with in the course of its business or when it stops operating. The Partnership Act deals with among other things the formation operation and disso- lution of partnerships. The Business Registration Act on the other hand governs the requirements that a business entity including a company in some circumstances must comply with in order to carry on business in Singapore. Companies are legal persons separate and distinct from their shareholders. They are normally incorporated with limited liability whereby the shareholders are only responsible for the amount of share capital they have invested in the company and no more. Sole proprietorships and partnerships on the other hand are not legal entities and the individuals behind them are liable for their acts to an unlimited extent. Foreign investors may carry on business activities in Singapore through a company a branch of a foreign cor- poration a sole proprietorship or a joint venture or part- nership with a local corporate or non-corporate partner. They may have a business presence in Singapore through a representative office. Law governing securities market The Securities Industry Act (Cap 289) (SIA) regulates the business of securities which includes shares and bonds in Singapore. It is administered by the Monetary Author- ity of Singapore (MAS) together with the Securities Industry Council a body established under the SIA which acts as an advisory and consultative body. The SIA provides for the compulsory licensing of the players in the securities market. The Act also sets certain standards and practices to be observed in the conduct of business in the securities market including provisions on the keeping of proper accounts by dealers and investment advisers and the establishment of a fidelity fund. Apart from the SIA the Companies Act and the Singa- pore Code of Takeovers and Mergers are also relevant legislation. In addition public companies listed on the Stock Exchange of Singapore Ltd are required to abide by the Memorandum and Articles of Association and Rules and Bye-laws of the Exchange. Law governing contracts Unlike Malaysia and some other countries, Singapores contract law is not set out in any code. It is essentially found in the common law case authorities. However, as regards the sale and supply of goods, the Sale of Goods Act (Cap 393) and the Supply of Goods Act (Cap 394) must be looked at. Another Act to which reference ought to be made is the Unfair Contract Terms Act (Cap 396). This Act in essence restricts the extent to which civil liability for breach of contract or negligence may be excluded. Restriction on investments by foreign entities Whilst there are generally no restrictions placed on any foreign investment entering Singapore, there remain certain businesses where foreign investment is restricted. These include the following forms of businesses, namely banks, finance companies, insurance companies and stockbroking companies. These companies require special licences to be obtained under various Acts of Parliament and are primarily regulated by the MAS. Law governing intellectual property Singapore has a fairly comprehensive set of laws govern- ing various aspects of. intellectual property. Intellectual property in Singapore is protected by a statutory regime as well as the common law. Asia Business Law Review No 11 January 1996 5 Legislative protection is provided principally by the following Acts: Patents Act (Cap 221) Trade Marks Act (Cap 332) Copyright Act (Cap 63) The Patents Act introduces a patent processing system in Singapore similar to that in the United Kingdom. The Trademarks Act provides for the registration of trademarks and service marks. Registration gives the registered proprietor of the mark the exclusive right to use the trademark in relation to the goods or services in respect of which the trademark is registered. Trademarks may also be protected by the common law action of passing-off. In order to obtain copyright protection there is no need to register or pay any fees. Copyright arises auto- matically upon the creation of the work if the creator of the work is a Singapore citizen or resident or the work was first published in Singapore. The Copyright Act accords protection for literary dramatic musical and artistic works sound recordings cinematographic films cable programmes and published editions of works. Another issue to consider is the law on parallel im- ports. Parallel imports are goods which are manufactured outside Singapore by or with the consent of the copyright owner in the place of manufacture but not necessarily with the consent of the Singapore copyright owner. The Copyright Act was recently amended to allow parallel imports to be made into Singapore without the consent of the Singapore copyright owner. Consent of the Singapore copyright owner is only required where there is no copyright owner in the country of manufacture. While there is no local legislation providing for the filing of design registrations designs that are registered under the United Kingdom Designs (Protection) Act (Cap 339) obtain automatic protection in Singapore. The design and the facts of the registration in the United Kingdom should be advertised in Singapore. Finally rights relating to confidential information and trade secrets are accorded protection by the common law on confidence. Government support to business In view of the Governments policies to promote free trade a number of Government and quasi-government institutions have been established to assist investors and businessmen. The Governments support is also reflected in the number of incentives which are provided to encourage the growth of both foreign as well as local investment in Singapore. Some of the institutions which have been established include the Economic Development Board (EDB) the Trade Development Board (TDB) the Jurong Town Corporation (JTC) and the National Productivity Board (NPB). The EDB was established in 1961 with the prime motivation being the centralization of planning and supervision of all industrial developments. Apart from this the EDB is also charged with the responsibility of administering the various incentive schemes promulgated by the Government. The TDB established almost 20 years later in the early 1980s was intended to better coordinate Singapores foreign trade market. Its main functions as spelt out in s 5 of the TDB Act are: to promote assist and develop trade and the provision of technical and consultancy services to persons overseas; to organize and participate in any trade exhibition trade fair and trade mission; to represent Singapore internationally in respect of matters relating to trade; to promote facilitate and assist in the development and improvement of shipping and warehousing facilities and other related services; to advise the Government on matters affecting or in any way connected with the development of trade and to act as agent for the Government or for any person body or organisation on such matters to promote facilitate and regulate forward and futures trading in rubber and such other commodi- ties as the TDB thinks fit; and to exercise the functions powers and duties con- ferred upon the TDB under any written law. Through the TDB several on-line computer systems have been introduced to disseminate up-to-date trade invest- ment and market information. Further to better serve foreign investors interested in Singapore abroad as well as to promote Singapore as a business and financial cen- tre TDB offices known as Overseas Centres have been set up in several countries. The JTC was established in the late 1960s to comple- ment the EDB. It was charged with- the responsibility of developing and managing all industrial estates and pro- viding amongst others infrastructure facilities for the establishment of industries. Investment incentives Singapore offers an extensive package of tax incentives and concessions which serves three purposes: first it is targeted at encouraging existing companies to among other things automate; second it is targeted at promot- ing new investments both local and foreign in various industries and services; and third it is targeted at encour- aging home grown entities to regionalise whether on their own or in partnership with foreign enterprises. Many of the incentives and concessions are administered by the EDB. Some of these incentives which are spelt out in the Economic Expansion Incentives (Relief from Income Tax) Act (Cap 86) are summarised in the table below: 6 Asia Business Law Review No 11 January 1996 Investment Incentives Tax Incentives Pioneer Status Post-Pioneer Incentive Pioneer Status for Counter Trade Expansion Incentive Investment Allowance Incentive Approved Foreign Loan Scheme Approved Royalties Venture Capital Incentive Overseas Investment Incentive Export of Service Operational Headquarters (OHQ) Tax Concessions Complete exemption of 27% corporate tax (from Year of Assessment 1994) on profits arising from pioneer products and from certain pioneer service companies, eg. companies engaged in engineer- ing or technical services, computer based information and other computer related services and the development or production of industrial designs. Tax relief period of 5 to 10 years. Approval of Minister of Finance necessary. A follow-up on pioneer status. To qualify, companies must have been enjoying pioneer status or export incentive or after 1 April 1986. It is the incremental profits of the company which are taxed at a concessionary rate of not less than 10% for a period up to 5 to 10 years from the date of expiry of the pioneer status or export incentive. Administered by the TDB. Seeks to develop Singapore into a countertrade services centre by attracting experienced counter trade companies to base their operations in Singapore. Full exemp- tion from income tax on profits from countertrade activities for 5 years. Complete exemption of 27% corporate tax (from Year of Assessment 1994) on profits arising as a result of expansion. Tax relief period of up to 5 years. Usually granted to companies incurring new capital expenditure of at least S$10 million in the purchase of productive equipment for the manufacture of approved products. Exemption of taxable income of an amount equal to a specified proportion (up to 50%) of new fixed investment. Available as an alternative to pioneer status and export incentive; granted in addition to the normal capital allowances. Exemption from withholding tax on interest where exemption does not result in increased tax liability to the lender in his country of residence. Full or partial exemption (where tax is at a concessionary rate of 20%) of withholding tax on royalties, technical assistance fees, and contributions to R&D costs, payable to non-residents. No increase in liability to tax by the non-resident person in his country of residence must result. Losses incurred from the sale of shares, up to 100% of equity invested, can be set off against the investor's other taxable income. Companies must be at least 50% owned by Singapore citizens or Singapore permanent residents. Losses incurred from sale of shares or liquidation of the overseas company, up to 100% of equity invested, can be set off against the investor's other taxable income. 90% of the qualifying export income is exempted from tax. Tax relief period of 5 years, with provision for extension. EDB approval is necessary. Income arising from the provision in Singapore of approved services will be taxed at 10%. Other income from overseas subsidiaries and associated companies are also eligible for effective tax relief. Incentive available for up to 10 years with provision for extension. Must have sizeable network of overseas companies in the region, and be well-established in home country industry etc. Each application considered on its own merits based on a set of qualitative criteria. Apart from the incentives listed in the table above Singa- pore also has numerous incentive schemes to encourage the development of enterprise. These include: Product Development Assistance Scheme Accelerated Depreciation Allowances The Export of Services Scheme The International Consultancy Services Scheme The International Trade Incentives Scheme Warehousing and Servicing Incentive Scheme Local Enterprise Finance Scheme Local Enterprise Technical Assistant Scheme Business Development Scheme Double Tax Deduction Scheme (Goods and Services) Market & Investment Development Assistance Scheme Approved International Trader Scheme Approved Oil Trader Scheme Approved International Shipping Enterprise Scheme Export Credit Insurance Franchise Development Assistance Scheme Regionalisation Training Scheme Financial services Singapore has always strived towards developing itself as an international financial centre. The authority responsi- ble for ensuring that this goal is achieved is the MAS. This body essentially functions as a central bank and more except for the issue of currency. The main role of the MAS is to act as banker fiscal agent and financial adviser to the government. The focus of the early years has led to a proliferation of a number of international banks merchant banks and financial institutions in Singapore. The focus in recent years has shifted towards developing the existing finan- cial infrastructure and to further strengthen the capital markets including for instance the development of fund management activities. To this end numerous tax incen- tives have been announced. Perhaps a distinct advantage of Singapore in its devel- opment as a financial centre is its central location in the world time zones. Singapore is able to access both the Asia Business Law Review No 11 January 1996 7 London markets as well as the Tokyo markets in any given working day. Labour and labour laws Scope of Employment Act Employment law in Singapore is governed by statute as well as the common law. For the purposes of setting up a business in Singapore a businessman would have to become familiar with the provisions of the Employment Act (Cap 91). The Act governs the terms and conditions of employment and stipulates the rights and obligations of employers and employees. The Act generally covers every employee under a contract of service with an employer including a work- man excluding the following: persons employed in a managerial executive or confidential position; seamen; domestic servants; and other class of persons which the Minister of Labour may from time to time declare not to be employees under the Act. It should be pointed out that not all parts of the Employ- ment Act are applicable to every person who comes within the above definition of an employee. In particular the provisions of the Employment Act in Part IV dealing with the rest days hours of work holidays and other conditions of service apply only to employees whose monthly salaries do not exceed S$ 1600. Employees who do not fall within the ambit of the Employment Act such as those in executive or manage- rial positions are free to negotiate the terms and condi- tions of their employment with their employers. They are not subject to any fixed rules apart from common law principles. Social security Employers in Singapore are required to make contribu- tions to the Central Provident Fund (CPF) which is a compulsory savings scheme for employees including in most instances foreign employees. It was constituted in 1955 with the objective of providing financial security for workers in their retirement. The current rate of contribu- tion to the CPF in respect of employees earning more than S$363 per month and who are below the age of 55 is 40% of an employees monthly gross wages up to a maximum of S$2400 per month. The employer may recover an amount equal to 20% of the employees monthly wage up to a maximum of S$ 1200 from the employee. This means that the employer has to pay in addition to the employees monthly salary a further 20% of that salary up to a maximum of S$ 1200 per month to the CPF. Over the years however schemes have been intro- duced to allow CPF savings to be used for home owner- ship life insurance medical insurance hospitalization expenses approved investments and education at local approved institutions. The rules relating to CPF contributions for foreign workers have been changed with effect from 1 August 1995. The primary effect of the change is that employers of all new employment pass holders professional visit pass holders work permit holders and permanent resi- dents who enter Singapore to work after 1 August 1995 need no longer pay CPF contributions. The change does not affect the existing foreign employees until the expiry of their passes or permits. There are transitory provisions. Foreigners who become permanent residents are per- mitted to contribute to the CPF at a reduced rate in the first two years of taking up permanent residency so as to soften the impact of a sudden drop in take-home pay. They and their employers only need to pay 5% each of the monthly pay into the CPF in the first year of their taking up permanent residency. In the second year they need pay only 15%. By the third year the full 20% contribution from both worker and employer is required. Immigration As a rule a foreign employee intending to work in Singapore must apply to the Controller of Immigration for an employment pass or a professional visit pass (which are issued to persons working in Singapore on short assignments) or a work permit pass. Employment passes and work permit passes are normally issued for a period of 1 to 3 years and may be renewed. It normally takes about 6 to 8 weeks to process the employment or work permit passes. A foreign employee may apply for Permanent Resident status if he has professional qualifications or specialised or technical skills which would enable him to pursue his profession occupation or skills in Singapore. If the foreign employees immediate family will be residing in Singapore with him they have to apply for dependants passes. A foreign employees children attending school in Singapore must obtain students passes. Collective bargaining and worker participation in management Subject to any other written law a contract of service cannot restrict the right of any employee: to join a registered trade union; to participate in the activities of a registered trade union whether as an officer of the trade union or otherwise; or to associate with any other persons for the purpose of organizing a trade union in accordance with the Trade Union Act. There have not been any noticeable industrial disputes between employers and employees in Singapore in the last 20 years. This has been achieved primarily through a firm Government leadership with appropriate legislative measures introduced to provide the mechanism to defuse conflicts. Thus industrial relations here have moved away from the adversarial concept to one of cooperation in the national interest under a tri-partism between the labour movement employers organisations and the government. It may be said that the legislative instrument which has paved the way for this is the Industrial Relations Act (Cap 136). The Industrial Relations Act establishes the Industrial Arbitration Court to which industrial disputes may be referred for adjudication the outcome of which is binding on the parties concerned. The Industrial 8 Asia Business Law Review No 11 January 1996 Relations Act also sets forth the process of collective bargaining between a union representing the employees of a particular employer and that employer for bargaining for a uniform agreement on terms and conditions of service. The process of collective bargaining for an agreement presupposes the existence of a trade union recognized by an employer as representing the employees of that em- ployer. It starts when the union serves on the employer or vice versa a notice in the prescribed form setting out proposals for a collective agreement in relation to any industrial matter and inviting the employer or union as the case may be to negotiate with it on those matters. Where a unions claim to representation is not con- ceded by the employer the issue may be settled by the Ministry of Labour conducting a secret ballot among the eligible employees to establish whether or not a majority of them are members of the union. Prerogatives of the employer which are not negotiable under the process of collective bargaining include promo- tions transfers filling of appointment vacancies termina- tion of an employees services by reason of redundancy or reorganization of the employers profession business trade or work or the criteria for termination dismissal and reinstatement of an employee where there is provision for representation to be made to the Minister of Labour and assignment or allocation of duties or tasks to an employee consistent or compatible with the terms of employment. There are no laws which provide for worker participa- tion schemes. If an employer does grant to its employees worker consultation and participation in management it is purely on a voluntary basis and perhaps contractually arranged between the employer and employees. Workers compensation and survivors benefits When an employee is injured in the course of employ- ment there are two alternative means of obtaining compensation: if the monthly salary is less than S$ 1500 or the employee is engaged in manual labour the employee may make a claim for Workers Compensation pursuant to the Workers Compensation Act (Cap 354); or if the employee sustains injury by reason of the employers breach of common law or statutory duties under the Factories Act (Cap 104) for instance the employee may bring an action against the employer for damages. Note that an employee is only entitled to one of the remedies; the remedies are mutually exclusive. Thus an employee who has applied for workers compensation is barred from bringing legal proceedings for damages and vice versa. Establishing a business presence in Singapore There are basically three types of corporate bodies available to foreign investors intending to commence operations in Singapore: a Singapore incorporated company; a Singapore branch of a foreign company; and a representative office of a foreign company. In addition the foreign investor can commence operations by registering as a sole proprietor or as a partnership. These are not corporate entities. A sole pro- prietorship may be registered under the Business Regis- tration Act by any individual intending to commence business in Singapore. Likewise up to 20 people may form a partnership under the Partnership Act Cap 391 and register their business under the Business Registra- tion Act. The respective registrations under the Business Registration Act must be renewed annually. Where there are more than 20 members carrying on business for gain they are required to register as a company (s 17(3) Companies Act Cap 50). Singapore incorporated company The percentage of foreign ownership does not affect the status of a company incorporated in Singapore under the Companies Act. There is no requirement that the shares in the Singapore company be held by residents of Singa- pore. The only major requirement is that there must be at least two directors one of whom must be ordinarily resident in Singapore ie a Singapore Citizen or a perma- nent resident or a person holding an employment pass in Singapore. Only natural persons of full age and capacity can be directors. All restrictions on directors of local companies with regard to their appointments and advertisements will apply equally to directors of foreign companies. A company can be incorporated as a private company or as a public company. In the case of the former there cannot be more than 50 shareholders. A company to be incorporated can either be one limited by shares one limited by guarantee or be an unlimited company. It takes about 2 to 3 weeks to incorporate a company in Singapore depending on the type of activity which the company proposes to engage in. An application for incor- poration and the reservation of name must be filed and approved in the first instance. Following this the com- pany then submits the incorporation documents to the Registry of Companies and Businesses (ROCB). It usually takes a further 5 to 7 days for the ROCB to process these documents and issue the Certificate of Incorporation. Once the Certificate is issued a private company may commence business immediately while a public com- pany must wait until the Registrar issues a certificate entitling it to commence business. Asia Business Law Review No 11 January 1996 9 A registration fee based on a companys authorised capital is payable for the incorporation of the company ranging from S$ 1200 (for authorised capital below S$ 100000) to a maximum of S$35000 (for authorised capital above S$102 million). Singapore branch of foreign company A foreign company which establishes a place of business or commences to carry on business in Singapore must register with the ROCB. A foreign company is required to appoint at least two natural persons resident (a Singapore Citizen or a Permanent Resident residing in Singapore or an expatriate residing in Singapore who holds a valid employment pass) in Singapore as its agents for the pur- poses of accepting service of process and notices on its behalf. The process of application to register a branch of a foreign company with the ROCB is similar to the incorpo- ration of a company and takes 2 to 3 weeks to complete. The first step is to obtain the approval of the ROCB for the use and the reservation of the name of the foreign company in Singapore. Once the name is reserved the requisite documents must be lodged with the ROCB for registration of the Singapore branch including certified copies of its Certificate of Incorporation its constitutional documents particulars of its directors and a memorandum of appointment of agents as well as the prescribed registration fee. Representative office A representative office is not a legal entity and cannot carry on business in Singapore. Its activities are strictly confined to that of liaison and promotional work. It cannot engage in business conclude contracts or open letters of credit. The approval of the TDB must be obtained before the representative office can commence operation. The appli- cation process generally takes about 4 to 8 weeks and any approval granted is valid for a period of one year. Approval of government departments The proposed activity of the foreign company may require the approval of certain Government agencies. For example the approval of the MAS is required where a company intends to operate as a bank merchant bank finance company insurance company or a company providing financial services. Choice of corporate vehicle Of the three corporate vehicles a representative office is the easiest both to set up and to dismantle and is gener- ally cheaper to maintain. However it is a short term vehicle because of the limited scope of activities that may be carried out and the Governments present policy of encouraging such offices to convert themselves into locally incorporated companies or branches. A private company with limited liability has generally been the favourite choice for doing business in Singapore as it is a privately held business concern and restricts the financial risks of its investors to the amount of share capital they are prepared to invest in the company. There is presently no minimum amount of share capital pre- scribed by law. Insolvency laws Insolvency law in Singapore may broadly be classified into two categories viz. bankruptcy of individuals and winding up of companies. The primary focus of the insolvency laws in Singapore is to ensure a fair and orderly process of dealing with the financial affairs of insolvent individuals and companies. It also endeavours to ensure that there are no disruptions to any business operations. The principal legislation governing bankruptcy in Singapore is the Bankruptcy Act 1995. This Act which came into force on 15 July 1995 repealed the previous Bankruptcy Act save to the extent that the old Act con- tinues to apply in certain transitional situations as spelt out in s 166 and the First Schedule of the 1995 Act. The new Act seeks to ease the procedures as well as to fine tune it to enhance business dealings. Under the 1995 Act bankruptcy petitions can only be presented on the ground that the debtor is unable to pay liquidated debts of not less than S$2000. The principal legislation in Singapore governing the winding up of companies is the Companies Act (Cap 50). There are two main types of winding up voluntary (either by members or creditors) under a resolution of the company or compulsory under an order of court. Apart from the somewhat draconian consequences which flow from insolvency there are also alternatives prescribed. In the case of bankruptcy a new scheme known as voluntary arrangement has been introduced. In the case of winding up of companies there is the scheme of judicial management and the receivership. The former seeks to give a company which is in temporary financial difficulties but which is otherwise viable a chance to survive by appointing a judicial manager to manage its affairs. Taxation The principal statute in relation to taxation in Singapore is the Income Tax Act (Cap 134). Generally all corporate entities pay tax at a rate of 27% on income accruing in or derived from Singapore or received in Singapore from outside Singapore. Personal income tax ranges from 2.5% to 30% of the annual net income. In relation to a repre- sentative office the theoretical profit based on 5% of the expenditure incurred by the representative office is imputed. Since representative offices are not supposed to carry on a business they should not normally make any profits. Therefore the 5% formula is simply a fictional profit assumed by the Government in order to charge tax. Interestingly income from a partnership is treated as part of the income of the individual. Apart from income and corporate taxation there are several other taxes in Singapore including customs du- ties property tax and stamp duties. In addition a value added tax of 3% is imposed on the supply of goods and services. This was introduced with effect from 1 April 1994. Capital gains are not subject to taxes of any kind. On the international front Singapore has entered into double tax agreements with 34 countries including China Japan India Germany Switzerland Vietnam and Indo- nesia. These double tax agreements are generally based on the OECD Draft Double Taxation Treaty. 10 Asia Business Law Review No 11 January 1996 In some situations a tax payer may be granted a tax credit. A tax credit can be used to set-off against the tax payable in a particular year. Unlike expenses or personal reliefs which are deducted from income a tax credit is set-off against taxes payable. Unilateral tax credits are also available under the Income Tax Act for foreign service income which is derived from certain qualifying services performed in qualifying territories with which Singapore has no tax treaty. Qualifying services include accounting construc- tion engineering medical legal and management con- sultancy services. Such tax credit is also available to prescribed foreign dividend income overseas employ- ment income and overseas branch profits. As a rule any taxpayer who is granted a unilateral tax credit will not also be entitled to double tax relief on the same income. Land ownership in Singapore Types of land tenure in Singapore There are three forms of land tenure in Singapore: estates in fee simple; estates in perpetuity (also known as statutory land grants) granted under the State Lands Act; and leasehold estates. Estates in fee simple This is the largest estate one can have in land. Its tenure is unlimited in duration. In theory the owner of a fee simple owns everything up to the sky and down to the centre of the earth. However there may be restrictive covenants restricting the owners right to develop the land. These restrictive covenants are usually private in nature. The owner may also have to apply for the ap- proval of certain Government departments before he can begin developing the land. When the owner of a fee simple dies the fee simple passes with his estate to those entitled under his will. If he does not have a will then the fee simple passes to his beneficiaries under the law. Estates in perpetuity The estate in perpetuity is similar to a fee simple in its unlimited duration but unlike a fee simple a grant in perpetuity is subject to various conditions and covenants. The conditions reserve various rights to the state includ- ing: - the rights to minerals and oil in the land; the payment of ground rent; and the rights to access for the purpose of laying drains and other underground communications. Leasehold estate for a term of years A leasehold interest entitles a tenant to exclusive posses- sion of land for a specified period of time usually at a rent. Long leases of 999 years were commonly granted in the past but terms of 99 and 30 years have become more common recently. Longer leases are sometimes granted to public bodies such as the Housing and Development Board the JTC and the Urban Redevelopment Authority. These bodies in turn usually sublet the land. Land located in Singapore may be mortgaged to banks or finance companies for the purposes of obtaining loans. System of registration All land in Singapore is subject to one of two systems of registration. Both systems are presently in operation but land under the first system is being systematically con- verted to the second system. The first is the common law conveyancing system under the Conveyancing and Law of Property Act combined with a procedure for registra- tion of deeds under the Registration of Deeds Act. The principal features of the common law system is that title passes under the instrument of transfer or lease or mortgage at the time of execution and registration of the instrument is only necessary for the purposes of proving the owners title in court as well as establishing the priority of the owners claim to ownership. The second system of registration is based on the registration system used in Australia and New Zealand. Under the Land Titles Act the registered title of the land passes only when the instrument of transfer lease or mortgage is actually registered; the signing of the instru- ment as such does not operate to pass title. Condominiums and high rise buildings for both resi- dential and commercial uses are regulated under the Land Titles (Strata) Act. The owner of a strata unit not only owns a flat or shop or office (as the case may be) but also a proportionate part of the common areas of the building for example the lifts the gardens the swimming pool and car parks. Ownership of land in Singapore by foreign companies Although leasing of industrial properties to foreign corporations or individuals is unregulated there are restrictions on ownership of residential property by foreign corporations and individuals. These restrictions are spelt out in the Residential Properties Act (Cap 274). The ownership of residential property is restricted to:- citizens of Singapore; companies incorporated in Singapore whose share- holders and members are all Singapore citizens; or anyone who has obtained approval to acquire resi- dential property. Singapore permanent residents may own flats or condo- miniums in a building which is at least 6 storeys high. Although permanent residents cannot buy Housing Development Board flats directly from the Housing Development Board they are allowed to buy resale flats on the open market. Property tax and stamp duty Property owners have to pay property tax at a rate of 15% on the annual value of the property (the gross amount at which the property can reasonably be expected to be let). Stamp duty is payable by purchasers (but not owners) of landed property at a rate ranging from 1% to 3% on either the purchase price of the property or the market value of the property whichever is the higher. Dispute resolution choice of law and jurisdiction Under Singapore law there are three main ways of resolving legal disputes. These are expert determination arbitration and legal proceedings. Any one of the three methods or a combination of the methods can be used. Asia Business Law Review No 11 January 1996 11 Litigation in Singapore is becoming increasingly more attractive as the court system and rules have been re- organised and revised in the last few years to achieve a much quicker and more efficient litigation process. Thus a suit filed in the High Court of Singapore can now be heard within a period of six months. An appeal from a decision delivered by the lower court is also usually heard within six months from the date of appeal. The Government has also been active in promoting arbitration in Singapore and the infrastructure has been boosted by the establishment of the Singapore International Arbitration Centre (SIAC) in 1991. The SIAC provides free information and advice on dispute resolution in Singapore and will on request administer arbitrations from the onset of dispute up to the making of the award. The SIAC also maintains a Panel of Accredited Arbitrators of local and international experts from which parties may appoint the arbitrators for their dispute. Recently the International Arbitration Act (Cap 143A) which came into force with effect from January 1995 was enacted primarily to adopt the Model Law on Interna- tional Commerce Arbitration (Model Law) in Singapore subject to the modifications set out in the Act. The Model Law is annexed to the Act. The Model Law was adopted by resolution of the United Nations Commission on International Trade Law in June 1985. As the name suggests the Model Law is a model legal framework for the operation of international com- mercial arbitration which individual countries are recom- mended to adopt subject to whatever modifications they feel necessary to tailor the Model Law to suit their own circumstances. With the coming into effect of the Act international commercial arbitration will be treated differently from domestic arbitration. The latter will continue to be gov- erned by the Singapore Arbitration Act and will be subject to a higher degree of judicial supervision. Conclusion Singapore is undoubtedly one of the most successful nations in terms of economic development in the world. To overcome the limitations imposed by its small size and to respond to the rapid growth of countries in the Asia-Pacific region Singapore is as part of the next phase of its economic development focusing on building an external wing to its domestic economy. To this end the Government sees the Asia-Pacific region as a priority for direct investments into the region. It is hoped that such investments will facilitate access into the emerging markets as well as allow Singapore companies to tap the abundant land labour and other resources in the region and provide economic spin-offs for Singapore. Where appropriate Singapore companies can work with multi- national companies based in Singapore as well as companies from the emerging markets on such overseas investment. Perhaps as an encouragement to private enterprise and further as a show of support the Singapore Government indicated that in 1994 as much as 30% of Singapores reserves will be invested in Asias booming economies. It is likely that this figure will increase. Allen & Gledhill Advocates & Solicitors Singapore. * 12 Asia Business Law Review No 11 January 1996
A Global / Country Study and Report ON "Policies and Norms of India For Import or Export To The Srilanka Country Including Licenses or Permission Taxations"