Setting up a holding company in Singapore.

A holding company is a corporate structure widely adopted by businesses in Singapore, offering flexibility and strategic advantages. Whether for small enterprises or multinational corporations, the holding company enables efficient management and control of assets, subsidiaries and investments, making it an appealing choice for companies seeking to improve both operational efficiency and financial security.

This article provides a comprehensive overview of holding companies in Singapore, including the requirements, characteristics, advantages and drawbacks.

Understanding holding companies

A holding company is a business entity that holds assets but does not engage in operations or activities. Often called a parent or umbrella company, it can fully own another company, known as a wholly-owned subsidiary while leaving all operations to the subsidiary.

A holding company can own either controlling or non-controlling interests in another company and may also own property, patents, trademarks, stocks and other assets.

Setting up a holding company in Singapore is a straightforward process, and subsidiaries and owned assets can be based either in Singapore or abroad.

Holding company types

There are two types of holding companies in Singapore:

1. Finance holding companies are designed for finance, banking and insurance businesses. They are subject to additional regulations and requirements imposed by the Monetary Authority of Singapore (MAS).
2. Investment holding companies are the default set up for companies outside of finance. They focus on long-term investments and generate non-trading income like dividends or rental income. These companies can enjoy certain tax deductions related to their investment activities.

Taxation for holding companies is not determined by the type of holding company but rather by the company’s overall structure (LLC, partnership, etc.).

Key considerations

When setting up a holding company in Singapore, there are several key points to consider:

• A pre-approved company name should already be in place.
• At least one resident director in Singapore is required, but a shareholder can also fill this role.
• The holding company must have a registered address in Singapore that has been reviewed and approved by the Urban Redevelopment Authority (URA).

These are the minimum requirements that the Accounting and Corporate Regulatory Authority (ACRA) requires for the registration to proceed. Furthermore, it is important to note that the specific requirements of the chosen company structure for the holding company will also apply.

For example, if the holding company is established as a private limited company, the Company Constitution must be included in the application process.

Advantages of setting up a holding company

Setting up as a holding company in Singapore offers many advantages:

• Due to its separate legal status, a holding company provides limited liability for its shareholders. Their personal assets are not at risk in the event of the company’s losses or liabilities. Shareholders’ liability is generally restricted to the amount they have contributed to the company’s paid-up capital.
• An investment holding company can easily accommodate additional shareholders as shares represent equity.
• An investment holding company can be a vehicle for investing in a wide range of WFOE businesses in Singapore.
• The potential liabilities do not affect the subsidiaries even if an investment holding company ventures into risky industries.
• Singapore holding companies enjoy a wide range of tax incentives. For example, shareholder dividends are exempt from tax and capital gains have zero tax rates.
• Although holding companies do not have business operations, they can purchase, own or sell real estate property.
• While a holding company can be registered under various legal structures, setting it up as a private LLC is often recommended due to its numerous advantages.
• Setting up a Singapore holding company requires a minimum share capital of only 1 SGD.

Disadvantages of a holding company

While holding companies offer certain advantages, they also have several potential drawbacks. These include complexity, lack of transparency, slower decision-making processes and the risk of potential market manipulation.

Below is how these disadvantages might impact the various stakeholders in a holding company structure.

• For the parent company: In some cases, the parent company may have to make decisions for its subsidiary despite not having enough information about its business. Misinformation may result in decision-makers having different opinions and strategies, and therefore, opposing decisions.
• For the subsidiary: At the same time, the subsidiary may also lack information about the parent company’s operations and goals. Conflicts of interest between the two companies and their managers may also lead to misaligned business decisions.
• For the shareholders: Minority shareholders who are not clear on the holding company’s business operations may be disadvantaged. For example, majority shareholders may prefer suppliers they have personal interests in or use transfer pricing schemes.
• Other disadvantages: The market can penalise a parent company’s stock process because of the subsidiary’s opaque business operations. The holding company can also suffer disproportionate market penalties due to its subsidiary’s poor financial performance. On the other hand, if the parent company’s business does well, the parent company does not receive full credit for it.

Holding company corporate structures

The choice of corporate structure for a holding company depends on the company’s specific objectives. While private LLCs are the most common option, other structures such as limited liability partnerships, trusts or foundations may be more suitable for certain businesses.

Limited liability company

Limited liability companies (LLCs) are ideal for businesses seeking protection from asset liabilities. They are generally easier to establish and have fewer compliance requirements than corporations.

Limited liability partnership

Limited Liability Partnerships (LLPs) offer several advantages for holding companies in Singapore. They provide limited liability to partners, a flexible structure, partnership-like features, tax efficiency and a simplified registration process.

However, LLPs may still be subject to regulatory requirements, and partners may be liable for their wrongdoings.

Trust

A corporation-and-trust combination is most suitable for wealth and succession planning. Foreign trusts can be particularly beneficial for efficiently transferring assets across generations while protecting assets and optimising tax benefits.

Foundation

Foundations are legally recognised entities in all jurisdictions. However, if a residential jurisdiction does not differentiate between formal and beneficial ownership, it may not recognise trusts. Combining a foundation and a corporation could be more suitable in such a scenario.

Requirements for registering a Singapore holding company

The requirements for setting up a holding company are:

1. Minimum paid-up capital of 1 SGD
2. At least one individual or company shareholder (local or foreign)
3. At least one local director who is a permanent resident or citizen of Singapore
4. At least one company secretary who is a permanent resident or citizen of Singapore
5. Local registered commercial or residential physical address (must not be a PO box)
6. Corporate bank account

Steps to setting up a Singapore holding company

Incorporating a holding company is a straightforward process that can be completed online through the BizFile+ portal. The registration steps involve a couple of steps as listed below:

1. Reserve a company name and ensure the chosen name complies with Singapore’s naming regulations and approval from
2. Apply online using the BizFile+ portal to submit the required documents for company incorporation.

The process can take a few hours if all required information and documents are provided. Upon approval, the company will receive a certificate of incorporation.

Post-registration requirements and compliance

Like any other business structure in Singapore, holding companies must also maintain compliance, depending on the chosen structure.

The most common requirements are:

• First board meeting within 30 days after incorporation
• Appointment of auditor
• Disclosure of director’s interests and declaration of disqualification
• Allotment of securities
• Issuance of share certificates within 60 days
• Payment of stamp duty
• Corporate tax and director’s income tax registration
• GST/IEC registrations
• Letterhead and statutory registers
• Minutes maintenance

There are also annual compliance requirements to meet, as follows:

• Board meetings with an interval of no more than 120 days
• Statutory audit of accounts
• Filing of annual returns
• Filing of financial statements
• Annual general meeting
• Director’s report

Conclusion

Setting up a holding company in Singapore is a strategic opportunity for both local and international investors. This corporate structure offers significant advantages, including tax benefits, asset protection and streamlined management of investments, making it appealing for businesses of all sizes. The setup process is straightforward, with requirements that do not differ much from those of other company structures, even though a holding company is not a structure per se.

However, it is important to remember that since it is set up like any other business structure, there are compliance requirements that must be complied with as well.

How Acclime can help with setting up a holding company in Singapore

Acclime Singapore offers complete support for holding company incorporation and corporate structure advisory. From company name reservation and entity selection to ACRA registration and post-incorporation compliance setup, our team of experts can assist with everything from determining the optimal holding company structure for your investment objectives to managing the entire incorporation process and ensuring ongoing compliance with Singapore’s regulatory requirements.

By partnering with us, businesses and investors can confidently establish a Singapore holding company while maximizing tax benefits and maintaining proper corporate governance. Contact us to learn more about how we can support your holding company setup needs and investment structure planning in Singapore.