Preparing the Annual financial statement is a tedious task which needs meticulous processing of records of financial transactions. At Rikvin our experts can minimize the pressure on your in-house resources by helping you in

• selecting and applying suitable accounting policies
• preparing financial statements in line with the International accounting standards
• presenting information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information
• providing additional disclosures to enable clear understanding of transactions, other events and conditions on the entity’s financial position and financial performance

Companies are legally obliged to include a Directors Report in their annual financial statement. The report must give a fair review of the company’s financial and operational results and condition and also include additional information such as dividend recommendation, reserved earnings, details of directors and their interest, principal risks and uncertainties etc.

Directors Report is an important communication medium for a company to interact with various interest groups such as investors, creditors, government bodies, business analysts etc. Therefore it is essential to ensure that the report includes all the relevant information succinctly yet without any ambiguity. Rikvin can help you draft a Directors Report that is fairly simplified yet comprehensive in addressing the key elements.

Related posts:

• Drafting of Financial Statements in Singapore
• Financial Year End (FYE)
• Singapore Tax Report 2010

How do Strike Off a Singapore Company?

Striking Off / Deregistration

The Companies Act allows the ACRA strike a company off the Register if there is reasonable cause to believe that a company has ceased operation.

Conditions for striking off

The ACRA will strike a company off the Register only if the company can meet the following conditions:

• The company has ceased operation;
• The company is not and will not be involved in any court proceedings, whether in or outside Singapore;
• The company has no assets and liabilities;
• The company has no outstanding penalties or offers of composition owing to ACRA and not indebted to other government departments; the company has no outstanding tax liabilities owing to the Inland Revenue Authority of Singapore (“IRAS”);
• The company has no outstanding charges in its charge register eg. no mortgages etc.;
• none of the officers of the company have outstanding ACRA summonses.

If the application is approved

• a “striking-off notice” will be sent to the company at its registered office address, its directors at their residential address and IRAS, within 14 days of the receipt of the application;
• A period of 1 month is given in the “striking-off notice” to anyone that may wish to raise any objection to application;
• After the 1 month period has expired, a notification of the intention to strike this company off the Register 3 months later will be made in the Government Gazette. Any interested person can still raise an objection to the application during this 3 months;
• After the 3 months have expired, a final notification will be made stating that the company has been struck off the Register. The date that the company is struck off will also be stated in the final notification.

The entire striking off process will therefore take about 5 months.

If the application is NOT approved

If the application is not approved, for example, the documents submitted are incomplete or there are still outstanding assets and liabilities etc, the application will be returned to the applicant so that the necessary changes can be made or action taken. The application can then be re-submitted for our consideration again.

Click here for more information on Rikvin’s Comany Registration Services

Related posts:

• Striking Off / Deregistration
• Rikvin Singapore Company Incorporation Firm Offers Anonymous Nominee Director & Shareholder
• Rikvin Offers Special Package for Singapore Branch Office Registration

In Singapore, The Companies Act requires the names and addresses of the company secretary, directors and shareholders be available to the public. This means that if you are a director or shareholder of a Singapore Limited Company, your name and address and association with the company is available to any person or organisation that carries out a company search.

How our Anonymous Nominee Service Works?

We will appoint our personnel to act as the nominee shareholder and/or nominee director on your behalf. The Nominee is a director/shareholder of a company in name only and has no other powers or responsibilities. We will also provide our client’s with a nominee director agreement/trust deed which defines the limitations of our role as nominee.

* To act as your nominee director, we will collect a refundable security deposit of S$3,000.00 which will be refunded to you upon our resignation as your nominee director.

Singapore Nominee Director

The Singapore Companies Act requires all Singapore Private Limited companies to have at least one individual director who has to be an ordinary resident of Singapore i.e. being one of the following:

• Singapore Citizen
• Singapore Permanent Resident
• Singapore Employment Pass/EntrePass/Dependant Pass holder
• Rikvin’s personnel can act as your Nominee Director to satisfy the companies act requirements

The responsibilities of a Singapore company director are quite onerous hence we require you to:

Execute our nominee director indemnity letter

In addition to our nominee director professional service fee of S$200.00 per month, we require a S$3000.00 refundable security deposit for the provision of this service.

Note: Security deposit should not be confused with our Service Fee. It’s your money that is temporarily in our custody for the duration of us acting as your nominee director.

We will refund the security deposit back to you immediately upon termination of our nominee director service by you providing us with the details of an alternate local director. We will do the necessary paperwork, lodge the change with authorities and promptly refund the security deposit to you.

Related Links

• Singapore Nominee Shareholder Service
• Singapore Nominee Director

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• Rikvin Offers Offshore Company Incorporation with Singapore Corporate Bank Account for International Businesses
• Nominee Shareholder
• Nominee Director

Rikvin Group is a one-stop centre for your Singapore Company’s pre and post registration needs including processing of Employment Pass & EntrePass applications. We are committed to serve clients around-the-world to successfully setup companies in Singapore and secure their Singapore business migration visas.

The following are documents that are needed for the Branch Office Registration:

• Certificate of Incorporation of main office – to be certified by their ROC, affixed the seal and date.
• Memorandum & Articles of main office – to be certified by ROC of the head office affixed the seal and date.
• Affidavit – to be signed by the secretary of main office before a NOTARY PUBLIC (please insert name, Passport number and address accordingly. Please also affix the common seal of the Notary Public beside his/her signature)
• Annexure A (Memorandum of appointment of agents) – to be signed by the chairman of main office before a NOTARY PUBLIC (Please also affix the common seal of the Notary Public beside his/her signature)
• A statutory declaration by the agent confirming particulars of the branch- to be signed by the chairman of main office before a NOTARY PUBLIC (Please also affix the common seal of the Notary Public beside his/her signature)
• Information of the HQ, ie business activity, registered office address, paid up capital, and particulars of the directors (ie, name, passport number, nationality, address, appt date)

Please note that branch will be required to do an annual audit and file tax returns annually.

Order for Branch Office Registration in Singapore

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• Rikvin Offers Special Packages for “Representative Office in Singapore”
• Singapore Branch Office Registration
• Comparison Branch Office vs Subsidiary Company vs Representative Office

Profile of a shelf company at Rikvin:

• It is incorporated as a Singapore Private Limited company
• It has a single shareholder with one share
• Paid-up capital of S$1
• A registered local address
• Rikvin serves as the Company Secretary
• Rikvin serves as the current local director

To complete the purchase of a shelf company the following information is required:

• Information of new shareholder
• Appointment of a new director of your choice, or
• Engagement of Rikvin’s Director Nominee service

The following services are included with the purchase of a shelf company:

• Transfer of company share
• Assistance in opening of a bank account in Singapore, if necessary
• Provision of pertinent documents
• Certificate of Incorporation
• Certificate of Memorandum and Articles of Association (M&A)
• Share Certificate
• Certificate of Incumbency
• Company Secretarial Service for one year
• Registered Address Service for one year
• Local Nominee Director Service for 1 year (optional)

Note: Additional documents such as certificate of tax residency can be provided at an additional cost.

Related Links

• Singapore Nominee Director Service Package
• Opening of a Bank Account in Singapore
• Singapore Registered Office
• Singapore Company Secretary Services

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The collaboration is an understanding between the two where the Indian company has committed to make investments in Iskandar Malaysia to the tune of RM 15 billion over a period of 12 years.

Among others, IRDA will help BSEL seek approvals and permissions from various authorities for facilitating its development process.

BSEL is a reputed Indian company currently engaged in hospitality, hotels, IT parks, townships, commercial space, retail & shopping mall projects in India and United Arab Emirates (UAE).

The company has proven its mettle in developing quality projects in commercial, entertainment and residential sectors.

The company has grown tremendously in a short span of four years and spread its wings to countries outside India.

BSEL is listed in the Mumbai Stock Exchange Limited and National Stock Exchange of India Limited, principally engaged in development and construction of hotels, hospitality projects, industrial parks, IT parks, townships in India and UAE.

In India, some of its completed landmark projects are development of the BSEL Tech Park Hilton Center, IIP and Kharghar Phase-I.

Some of its on-going projects are the IT Park, Rajiv Gandhi IT Habitat, Goa, Dubai Project in Ajman, six shopping malls in Nagpur and a Hotel and Commercial Project in Pune.

Mr Dharmendra Raichura, Managing Director of BSEL said, “In Iskandar we have found a new territory to display our development prowess and we promise to deliver quality in our work”.

He said the anticipated development plan of 70 million sq ft will be completed in three phases with 10 million in the first year and doubling in every subsequent phase.
The investment of RM15 billion will come in three phases with a gap of almost four years each. The first phase will be of RM 2 billion, followed by RM 4 billion and RM 9 billion.

IRDA Chief Executive Officer Dato Ikmal Hijaz Hashim, said the collaboration between IRDA and BSEL was significant as it was the first with an Indian company in Iskandar.

“On our part, IRDA will endeavour to assist and facilitate BSEL in their investments within Iskandar Malaysia and obtain the necessary approvals and incentives (where applicable) from the relevant authorities.

“And I am personally committed to ensure that investors to Iskandar, such as BSEL, get the full support of IRDA,” he added.

Welcoming the MOU initiatives Mr. Satish Bakhda of Rikvin Consultancy said, this is a great achievement for both BSEL and IDRA, where BSEL being the first Indian company to be signing the collaboration MOU with IDRA.

No related posts.

The business plan assists in determining the feasibility of the new business and its prospects for success.

The completed business plan is an operating tool which, when used properly, will help in managing the business and work toward its success.

A business plan clearly indicates the steps necessary to start the business.

The plan is a means for communicating ideas to others and provides the basis for the financing proposal.

The importance of planning cannot be overemphasized; by taking an objective look at the business, areas of weakness and strength can be identified, needs can be pinpointed that might otherwise have been overlooked, problems can be stopped before they arise. A business plan assists in determining how the business goals can best be achieved. As an operation tool, the business plan helps to establish reasonable objectives and how to accomplish them. It also helps to detect problems as they arise, identifies their causes and may present ways to solve them. It may even help avoid some problems altogether.

It is important that the business plan is prepared individually since a professionally prepared business plan will not be of help if every aspect is not familiar to the people starting a new business endeavor. This understanding comes from being involved with the development of the business plan from beginning to end.

Over half of all new businesses fail within the first two years of operation-a major reason for failure is a lack of planning. The best way to enhance chances of success is to create a plan and to follow through with appropriate actions.

Once completed, the business plan should be used as a management tool and not put in a bottom drawer of the desk and forgotten about. Business plans can help to avoid going into a venture that is doomed to failure. If the proposed venture is marginal at best, the business plan will reveal its weak points, and may help avoid paying the high tuition of business failure.

Finally, the business plan provides the information needed by others to evaluate the proposed venture, especially if outside financing is needed. A thorough business plan automatically becomes a complete financing proposal which will meet the requirements of most lenders.

Twelve Steps to Preparing a Successful Plan

1. Keep the business plan as short as possible without compromising the description of your venture and its potential. Cover the key issues of interest to potential investors and leave secondary details for a meeting with investors. Remember that venture capital investors are not patient readers.
2. Don’t over diversify your venture. Focus your attention on one or two specific services or product lines and markets. A new or young business does not have the management depth to pursue too many opportunities.
3. Don’t have unnamed, mysterious people on your management team, such as the Mr. G. who will join you later as a financial vice-president. The investor will want to know early on exactly who Mr. G. is and what his commitment to your venture is.
4. Don’t describe technical products or manufacturing processes in terms that only an expert can understand. Most venture capitalists don’t-and won’t-invest in what they don’t understand or think you don’t understand.
5. Don’t estimate your sales on the basis of plant capacity. Estimate your potential sales carefully on the basis of your marketing study and from these estimates determine the production facility you need. Keep in mind that pricing reflects a total package of product, service, agents and expenses.
6. Consider credit aspects carefully, for example: Will you offer credit to your customers? Can you afford to do this? Do you have to extend credit? Can you evaluate credit risk? Can you afford to write off bad debts?
7. Don’t make ambiguous, vague, or unsubstantiated statements. They make you look like a shallow and fuzzy thinker. For example, don’t merely say your markets are growing rapidly. Analyze past, present and projected future growth rates and market size and be able to substantiate your data.
8. Disclose and discuss any current or potential problems in your venture. If you fail to do this and the venture capitalist discovers them, your credibility will be badly damaged.
9. Roughly 98 pecent of business failures are the result of managerial weakness. There is no known cure for incompetence-but there are very direct cures for inexperience: a) get the necessary experience yourself, or b) find a partner or employee who has the requisite experience.
10. Involve all of your management team, as well as any special legal, accounting, or financial help, in the preparation of the business plan.
11. Don’t overstate or inflate revenue and accomplishments; be rigorously realistic and objective in making estimates and discussing risks.
12. Effective advertising can determine the success or failure of a business. This is one way a small business may compete with the larger, established companies. Advertising is a means of providing customers with convincing reasons why they should patronize a particular business. The advertising message should include a description of the particular advantages (relating to price, quality of products, convenience and accessibility of location, or quality of service) offered to customers.

Effective Advertising.

To be effective, an advertisement must:

• Attract attention-of the reader or audience.
• Offer visual and verbal persuasion-show how the product will benefit the customer.
• Outline a need-show why the product is necessary and why it should be purchased at this time.
• Invite purchasers-give reasons for buying, particularly from the business doing the advertising.

If advertising is to be profitable, three goals must be achieved:

• Sell goods and services.
• Create a good business image.
• Allow the advertiser to compete successfully.
• Often the amount spent on advertising and the amount that can be afforded are not the same. Funds should be allocated on a planned basis, typically over an extended period of around six months.

Timely Advertising.

The effectiveness of a limited advertising budget can be greatly strengthened if advertising goals are planned in relation to the total merchandising and selling program.

Timing is of utmost importance. A promotional advertisement that is not backed up by adequate merchandise stock can do more harm than good.

In short, a carefully prepared business plan can aid substantially in planning a new venture, screening would-be partners, evolving winning strategies and joining with a sound investment source, before actually launching the venture. In other words, it can mean the difference between success and failure.

Excerpted from:

• Meador, “Guidelines for Preparing Proposals.” A manual on how to organize winning proposals for grants.
• “Venture Capital, R&D Projects and Other Proposals,” Lewis Publishers Inc. 1985: 89-92.
• “Small Ventures: Tactics and Strategies,” Harvard Business Review 1980.

Useful Questions to Help You Write Your Plan

An effective business plan should answer most of the questions listed below. Some questions might not be relevant to your business, technology or market sector.

Description of Business

• What is (or will be) the business? Include:
• What type of business do you have? Is your business primarily merchandising, manufacturing or service?
• How are you going to run it?
• Why do you think your business will be successful?
• What is the date you plan to start the business?
• What are the hours your business will be open?
• If yours is a seasonal business, how the hours will be adjusted seasonally?
• Is your business new? If so:
• Why will you be successful in this business?
• What is your experience in this business?
• What will be special about your business?
• What managerial and/or technical help will prospective trade suppliers provide?
• If you will be doing any contractual work, what are the specific terms of the contract? (Reference any firm contract or letter of intent, and include it as a supporting document.)
• How will you offset the slow payment by the customers? (Note: if you are contemplating contractual work, find out how and when you will be paid. A slow paying customer can put you out of business if you aren’t prepared.)

Description of Market

• What is the market you intend to service, the size of the market and your expected share of it? Include:
• How large is your market?
• What is the present size of the market?
• Has your product ever been marketed or considered for marketing in the past? If so, explain what was marketed (or considered) and the results.
• If the results were not satisfactory in item c. above, what alternative measures will ensure the success of the marketing strategy this time?
• Have there been any independent marketing studies performed which conclude a demand for your product? If yes, describe the study, briefly relate the results and indicate the name of the market research group.
• What percent of the market will your business have?
• What is the market’s growth potential?
• As the market grows, does your share increase or decrease?
• How are you going to satisfy your market?
• How are you going to price your service, product or merchandise to make a fair profit and, at the same time, be competitive?
• Why will someone pay your price?
• How did you arrive at the price? Is it profitable?
• What special advantages do you offer that may justify a higher price?
• In marketing terminology, define your target market:
• Who needs your service?
• Who needs your product?
• Who buys the kind of merchandise you stock?
• How will you attract and keep this market?
• What is the geographic location of your market?
• How can you expand your market?
• What form of customer service do you intend to provide for each product? Who will provide this service (e.g., distributor, sales representative, field service engineer, outside service agency, etc.)?
• Why can your company service the market better than your competition?
• Who are your five nearest competitors?
• How will your operation be better than theirs?
• How is their business: Steady? Increasing? Decreasing? Why?
• How are their operations similar and dissimilar to yours?
• What are their strengths and/or weaknesses? Include price, customer service, market share, geographic penetration, distribution channel, product quality and financial position.
• What have you learned from watching their operations?
• What are the strengths and weaknesses of the marketing strategy for your product. Include price, customer service, market share, geographic penetration, distribution channel, product quality and expected annual revenue.

Risk Factors

• What are the risk factors your company will experience? Include:
• Economic risks;
• Financial risks (obtaining and payment of financing);
• Legal risks;
• Technological risks;
• Marketing risks;
• Product development risks;
• Manufacturing risks;
• Expertise of management team;
• Other risks. Unless stated above, include critical success factors and the risks involved with not achieving them.

Product Description

• What is the stage of development of your product? When will it be completed?
• What are the remaining milestones required to successfully complete your product? When will these milestones be achieved?
• Personnel
• Who are the personnel responsible for product development and what experience do they have in developing any similar products? Include their names and a description of their technical background unless previously provided.
• What management and other personnel are available and required for the operation? Include:
• Personal history of key managers;
• Related work experience;
• Duties and responsibilities;
• Salaries;
• Resources available to the business.
• What is the personal history of owner(s)? Include:
• What is the their business background?
• What management experience do they have?
• What education (including both formal and informal learning experiences) have the owner(s) had which have bearing on managerial abilities?
• Personal data: age, where the owner(s) live and have lived, special abilities and interests, reasons for going into business.
• Include personal financial statements as supporting documents.
• What kinds of related work experience does the owner(s) have? Include:
• Direct operational experience in this type of business;
• Managerial experience in this type of business;
• Managerial experience acquired elsewhere, even in totally different kinds of business.
• What are the salaries of management and all employees? Include any benefits such as medical, pension, insurance coverage.
• What are the company’s personnel needs?
• What are your current personnel needs? In the near future? In five years?
• What skills must employees have?
• Are the people you need available?
• Full or part time?
• Salaries or hourly wages?
• Fringe benefits?
• Overtime?
• Will you have to train people? If so, at what cost to the business?
• Who will be the individuals for your company’s daily operation? Include resumes of the individuals as supporting documents.
• What are the stages of your business (from product development to full operation) over a five year period? Include:
• Staff positions required-number of employees for each position;
• Subcontractor work required and the number of subcontractors;
• Facilities required-office and manufacturing space (in meters squared);
• Capital expenditures.
• If you intend to use external services, what are the names and types of services you will enlist to assist your management team (e.g., accounting, legal, etc.)?
• Who will serve on your company’s board of directors? Include name, position on board, job title and experience.

Finance

• What kind of financing does the business require? Include:
• What amount of funds will you be seeking?
• How do you intend to use the funds?
• In what form do you want to receive the funds?
• From whom do you intend to receive the funds (e.g., owners, venture capitalists, banks, small business associations, government programs, etc.)?
• How do you plan to pay back the financing received?
• What amount of return on investment will you be required to pay to the providers of the financing?
• Over what period of time do you intend to repay the finances? Include the time period over which you will pay the finances, the installment period and the breakdown for principal and interest payment, if applicable.
• What is the company’s current and past financial situation? Include a balance sheet, income statement, and cash flow statement over the following time periods:
• Historical data for the past three years, if applicable;
• Monthly financial statements beginning with the month of the company’s inception through six months consecutive positive cash flow;
• Quarterly financial statements for the first three years of the company’s operations;
• Annual financial statements for the first five years of the company’s operations.

Financial Statements. Clearly document and submit with your business plan the basis of the assumptions/calculations you have used in the preparation of the financial statements. The assumptions should be developed from, and be consistent with the information contained in this plan.

Consider the following factors in formulating your financial statement assumptions:

Balance Sheet

• Inventory-Consider the levels of inventory in relation to the expected availability of products and service levels you plan to provide to your customers.
• Capital Equipment-Estimate the equipment necessary to support your operation. Identify types of equipment required in the manufacturing, engineering, sales and administrative processes. Factor assumptions for waste, shrinkage, obsolescence and slow-moving inventory.
• Receivables-Forecast buildup of receivable levels based on sales and account receivable average collection period.
• Accounts Payable-Consider maintaining a fairly current account balance in order to keep sources of financial resources a possibility.

Income Statement

• Sales-Consider, based on specific sales and marketing plans and studies, what the forecasted sales for the period will be, while keeping in mind price changes and seasonal fluctuations, if applicable.
• Cost of Sales-Estimate the lead time necessary to build inventory to forecasted sales levels and the cost components (materials, labor, overhead) of cost of sales.
• Selling Expenses-Relate selling and commission expense to sales levels. Relate sells and marketing expenses to promotion plans.
• General, Administrative, and Other Expenses-Relate expenses to specific plans formulated with each development stage, including head counts, lease agreements and other planned commitments.
• Financing-Factor in assumptions concerning the draw-down fund taken as needed. Consider financing, related interest cost and/or divided requirements.

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The term “shareholder agreement” is used to describe such agreements, although differences in scope of such agreements means that the term is not really a hint as to the contents of the agreement. Some only set out a method of having one shareholder buy out another in the event of a dispute. Others deal with the consequences of the death of a shareholder. Others set out rules for determining company policy and management. Yet others give certain shareholders rights to acquire or dispose of shares in certain circumstances. Often agreements combine all or several of these aspects.

Shareholder agreements are discussed under the following headings

Dispute Resolution

Where a bitter dispute arises between shareholders, it may be that the only point of agreement is that they cannot both continue in the business together. However decisions as to who should leave, and the price of that person’s departure may be very difficult and time-consuming. In addition, conflict between shareholders can cause the business itself to lose value. This can result from inattention to the business because of the dispute, or because customers become aware of the dispute and decide to find a supplier that they perceive to be less volatile. Finally, resolving the dispute between shareholders is likely to require either extended negotiations or litigation – or both. This usually means large bills for lawyers, business valuators and tax specialists. It also involves a lot of time and stress for the principals.

A shareholder agreement can minimize both the time frame and the costs involved. Typically a shareholder agreement deals with dispute resolution by adopting one of several possible methods of enforced share sales. These should determine these points:

• Who buys and who sells?
• What the price is?
• When does the sale take effect?

A standard method is the “shot-gun” provision. It works this way:

• The first dissatisfied shareholder gives a notice to the other shareholder’s, naming a price per share.
• The other must either buy the first shareholder’s shares at the price or sell his/her shares to the first shareholder at the same price.
• A time period is pre-set for a response to the notice, and the time until the sale takes effect is also pre-set.

Other methods may involve one shareholder having either the right or the obligation to acquire the shares of other shareholder’s at a price based on a formula, or by a third party. A formula could include a percentage of gross (or net) revenues in previous financial periods or perhaps a percentage of book value of assets. A third party might be the company accountant, charged with determining value according to pre-set criteria. Alternately, it might be an outside person charged with making a fair market value determination. 2. Restrictions on Share Transfers In a publicly-traded company, neither the management of the company nor the shareholders care very much who owns shares at any given time (except where one shareholder or a group have a control block of shares). After all, being a shareholder in a public company does not involve you in management decisions.

However, in a small private company, the identity of shareholders is very much an issue In effect, to the principals, the company is almost like a partnership – and you want to pick your partners, not have them imposed on you.

So, most shareholder agreements contain provisions to deal with this. A common provision is a right of first refusal. This means that if a shareholder obtains a commitment from an outsider to purchase shares, the shares have to be offered under the same terms to the existing shareholders for a specified period. If the other shareholders do not want shares to go to the outsider, they merely have to match the price.

A more severe restriction might be a complete prohibition to sales to outsiders, but that may be quite unattractive to minority shareholders.

A middle course might be a pre-emptive offer. A shareholder desiring to sell shares may be required to send a notice to the other shareholders specifying the offer to sell. The offer must be kept open for a fixed period. If all the shares offered for sale are not purchased by the other shareholders, the selling shareholder then has the right to offer the remaining sharers for sale to outsiders for another fixed period – but only on terms no more favourable than the other shareholders were offered.

Outside Offer

Sometimes, an outsider will offer to buy 100% of a company but not all the existing shareholders want to take the offer. A provision may be added to a shareholder agreement that those who do not want to sell must buy the shares of those who do want to sell, on the same terms as the outside offer.

Death

Typically, the death of a shareholder actively involved in a business creates problems on two fronts. The surviving shareholder’s no longer have the benefit of the deceased contributing to the business, and may need to replace that person with a new shareholder. The family of the deceased want to be compensated for the deceased’s interest in the business. The obvious solution is to provide a mechanism for the shares of the deceased to be sold to the company, the other shareholder’s or a new shareholder.

The weakness with the concept of a simple sale of shares from the deceased is finding the money. Having just lost an active shareholder, neither the surviving shareholder’s nor the company itself will have enough spare cash to pay for the shares. If the family of the deceased does not need a lot of cash right away, the problem may be dealt with by providing for a series of payments over a period of perhaps several years. In this case, there should be restrictions on the surviving shareholders to ensure that the payments are duly made.

If the family of the deceased is not able to wait for payments, it may be that life insurance provides the best solution. Two methods are commonly used:

• crises-cross insurance, where each shareholder owns coverage on the other shareholder’s, and the proceeds are earmarked for the surviving shareholder(s) to buy the shares of the deceased.

• insurance owned by the company itself on the lives of each of the shareholders, so that the company will use the proceeds to re-purchase the shares of the deceased. Where shares are repurchased by the company, they are in effect eliminated, leaving the surviving shareholders with proportionately larger interests.

The tax consequences of the two schemes differ. In the past the second method provided a valuable tax saving opportunity for the deceased, but not as favourable treatment for the surviving shareholders. Now, the situation is less clear because of 1995 changes to the Income Tax Act, dealing with tax treatment of losses.

Generally, the amount to be paid for the shares of a deceased shareholder is determined by:

• the amount of life insurance proceeds available; or
• reference to a value determined between the shareholders by agreement every year; or
• a formula based on recent financial statements.

Short Term Disability

Usually, agreements dealing with short term disability will provide for shareholders who are employed by the company to receive full salary for a number of months, even if unable to work. This provides some financial stability for the disabled shareholder, but imposes a burden on the working shareholder(s).

For this reason, many shareholders purchase disability insurance, so that a certain number of days after the disability strikes, the disabled shareholder will start to receive monthly payments from the insurer. In that case, the company’s obligation to keep paying salary will normally cease on the same date the disability insurance starts generating payments. An alternative is to have the salary continue on a reduced basis where there is no disability insurance.

Disability provisions are usually structured to ensure that a disabled shareholder cannot remain forever under short-term disability coverage by returning to work for brief periods between bouts of absence from work.

Long Term Disability

It is unusual for agreements to provide for continuing salary payments to a shareholder who is disabled for a long period.

Instead, agreements may provide for a forced sale of the disabled shareholder’s shares. This benefits that shareholder by turning shares for which a ready market may not exist, into cash. It benefits the working shareholder(s) by ensuring that profits do not have to be split with a shareholder who is, in effect, no longer contributing to the company’s success.

Management

Particularly where there are more than two shareholders, or where there is a minority shareholder, provisions restricting management may be important protection for those who can be out-voted. Typically, the agreement will provide that certain decisions require unanimous approval and others a specified percentage in excess of 50%. An example might be:

Unanimous Decisions

• Elections of directors
• Issuance of new shares
• Sale of the entire business
• Changes to share rights
• Executive salaries and bonuses
• Dividends

70% Majority Decisions

• Expenditures on capital items in excess of $20,000 per item
• Decisions to call on shareholders to lend to the company

Put

A “Put” is defined as the option of selling shares at a fixed price on a given date. In a shareholder agreement, one shareholder may be granted a put which allows the shareholder to require one or more other shareholders to buy some or all of his/her shares at either a fixed price or a price determined by a formula. The put may have a period of time before it can be exercised, or it may expire if not exercised before a specified date, or it may remain in effect virtually indefinitely.

Calls

A call is more or less the reverse. It confers an option to buy stock at a fixed price on a given date. So, one shareholder may be granted the right to buy a certain quantity of shares from one or more of the other shareholders by notice, at a price that is either fixed or determined by a formula. The same comments about time made in relation to puts apply.

Financing

Typically, agreements provide that the primary source of borrowing funds for the company will be institutional lenders (banks, trust companies, credit unions, and so on). However, if funds are required and cannot reasonably be obtained from conventional sources, the shareholders amy agree to each personally lend the company a proportionate share of the amount required.

Where one or more shareholders is unable or unwilling to contribute the required amount, the agreement may provide that that shareholder is in default. This may allow the others to force the defaulter to sell his/her shares, often at a discounted value. As well, there may be a provision for another shareholder to make the loan that the defaulter should have made and charge a high interest rate to the defaulter for doing so.

When loans are made to the company by institutional lenders, shareholders may be required to sign “joint and several” unlimited guarantees. This means that each shareholder is personally responsible for 100% of the amount owed by the company to the lender. Where one shareholder is virtually without assets, this may mean very little – you can’t get blood from a stone. But the other shareholder(s) should be concerned. For if one shareholder does not cover a proportionate share of the guarantee, the other(s) will be forced to pay more than a fair share. It may be possible to negotiate with the lender to either “cap” the guarantees at an amount less than the entire indebtedness, or to make the guarantees several but not joint so that each shareholder is only responsible for a proportionate share.

Defaults

Normally, a shareholder agreement provides that certain acts or omissions by a shareholder are considered breaches of the agreement and result in special rights being conferred on the other shareholders.

As noted above, financial defaults can result in interest being charged against the defaulter at a high rate. There are two reasons for the high rate. The first is to make it more attractive for the defaulter to meet the financial obligations, even if that means borrowing the funds to do so. The second is to compensate the other shareholder(s) for having to step in and put up more than a proportionate share of the money.

Another common consequence of default is an option for the other shareholder(s) to buy the defaulter’s shares. Often, the price is determined by a formula designed to approximate fair market value, but is then reduced by a percentage. The reduction is that justified on the basis that it is the defaulter who created the situation, not other shareholder(s). The timing of a buy-out may well not suit the other shareholder(s).

Events of default usually include:

• not carrying out obligations under the agreement
• going bankrupt or being insolvent
• permitting any creditors to attempt to seize one’s shares.

Other events of default might include:

• having one’s spouse apply under the Family Relations Act for a portion of one’s shares
• ceasing to be a Canadian resident (under some circumstances, this could adversely affect the company’s tax treatment).

Employment

In most small companies, the shareholders (or at least some of them) are also active employees. While written employment contracts for key employees are a wise idea (for reasons ranging from limiting exposure on wrongful dismissal suits, to protection of confidential information, to income tax), shareholder agreements often are used to set the ground rules for terms of employment contracts, particularly in relation to salaries and benefits. As well, there may be advantages to putting non-competition provisions in a shareholder agreement rather than in the employment contract.

Management Companies

In some small companies, the principals do not own any shares in the company at all. Instead, they control personal (or family) holding companies which own shares in the company which really runs the business. Reasons for doing this may range from tax implications to estate planning. Tax advice (as always) will be important.

From a corporate point of view, management companies add a layer of complexity to the shareholder agreement. The holding companies will be parties to the agreement, since they are the shareholders. The principals must also be parties. After all, all references to the death or disability of a shareholder have to be changed to death or disability of a principal.

As well, a number of additional provisions come into play. Foremost is a restriction on the shareholdings of each holding company. Without such a restriction, the shares of a holding company could be sold by a principal to a third party. The practical effect would be to defeat the concept that no change in players in the company should occur without existing players having a first option to take over the position of the player leaving the company.

Key Players

There are a number of people who are or should be involved in the creation of a shareholder agreement. These include:

Shareholders

Generally, all shareholders should be party to an agreement, although it is possible to omit, for example, non-voting shareholders.

Spouses

Obviously, if spouses are shareholders, they should be included in the agreement. Like the other shareholders, spouses should each receive independent advice. This ensures that they have an opportunity to protect their interests in the agreement. It also reduces the likelihood of a spouse later challenging the enforceability of the agreement on the basis that the spouse did not sign voluntarily or failed to understand the meaning of the agreement.

Insurance Agents

Most shareholder agreements that deal with the consequences of death or disability rely on insurance. It is essential to involve the insurance agent in the preparation of those parts of the agreement to ensure that the insurance policies and the agreement mesh properly.

Lawyers

The complexities of shareholder agreements are such that they should not be drafted by the shareholders. In fact, only lawyers with considerable commercial experience should draft the agreements.

Accountants

Unless the lawyer drafting the agreement is also a tax expert, an accountant with tax expertise should be involved in the preparation of the agreement to ensure that the tax implications are dealt with correctly. This has a further advantage in that the accountant will be familiar with the agreement and can raise an alarm when changes to tax laws create a need to change the agreement.

Upkeep

As mentioned above, changes to tax laws may make changes to an agreement necessary. Adding new shareholders usually requires at least the signing of a document by which the new shareholder formally becomes a party to the agreement. Changes in the size of the company, its business, the financial circumstances of the shareholders, and other internal matters may justify at least a review of a shareholder agreement.

Where shareholders are required to decide annually on an agreed valuation of the company (usually to provide for a sale price where a shareholder dies or becomes disabled within the following year), a diary system may be critical to ensuring that the job is done regularly.

Timing & Conclusion

Most businesspeople starting up new companies agree that a shareholder agreement is important. Two reasons are put forward frequently for not putting the agreement in place at the beginning:

• We are too busy getting the business up and running (and anyway, we all get along really well)
• We don’t have the cash yet.

The first reason really doesn’t hold water. Running a small business means you are always busy. So, if you don’t have time to get around to a shareholder agreement at the beginning, face it: you won’t later on. Ever. As far as getting along really well, that is the way almost all businesses start. Yet, like marriages, a significant number of small companies encounter disputes between shareholders. By then, the goodwill between shareholders has evaporated, and it is not possible to sign a shareholder agreement.

Shareholder agreements serve a wide range of purposes. Every small company with more than one shareholder should have one. Really, the answer to the second reason for passing on shareholder agreement is you can’t afford not to have one.

The discussion above is of necessity general. Shareholder agreements can cover items not mentioned above and are capable of almost unlimited customization

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Singapore has an excellent pro-business infrastructure which is favoured by many business corporations worldwide. The Swiss-based World Economic Forum (WEF) has ranked Singapore the most competitive country in the world in its new global Competitiveness Index of 49 countries. The WEF Competitiveness Index measures the prospects for economic growth over the next five to ten years, based on factors like government, finance, infrastructure, technology, labour and management.

The Republic is also rated the second most profitable country for business to invest in – now, and for the next five years -after Switzerland, according to US-based Business Environment Risk Intelligence (BERI) Services. The ranking is based on ratings in key factors like political and operations risk (which assesses the general business environment) as well as remittance and repatriation (which assesses the ease with which private foreign companies can transfer out profits and capital )

The Singapore Investment Climate Report August 1996 in particular noted that the Republic’s investment policies are “transparent, and the bureaucracy is not oppressive.” It also pointed out that Singapore is well-known for its clean, corruption-free government, and there are no taxes on capital gains or restrictions on foreign ownership of businesses.

Singapore’s appeal as a global business centre is also evident in the increasing number of international trading companies setting up their regional base in the Republic. There are more than 100 international trading companies under the Approved Oil Trader and Approved International Trader schemes administered by the Singapore Trade Development Board (TDB). These schemes have encouraged specialist traders and international oil traders to use Singapore as their regional headquarters by providing tax breaks and assistance in developing their business.

In addition, more than 5,000 multinational corporations (MNCs) have set up their operations here. MNCs as well as local companies have found that Singapore’s efficient infrastructure and strategic location effectively cater to their operational needs.

Economic Growth

The Singapore economy grew by 7 per cent in the second quarter of 1996. Employment in the Singapore economy remained strong with 26,100 jobs created in the same period. Growth for the first half of the year came to 8.9 per cent.

In the second quarter of 1996, the manufacturing sector, affected by a slowdown in the global electronics industry, grew by 6.3 per cent, down from 14 per cent a quarter ago. The financial and business services sector expanded at 6.5 per cent, benefiting from demand for headquarters and information technology services, as well commercial and office space. The transport and communications sector registered a growth of 8.4 per cent, as the sector continued to experience strong demand for air travel and communications services. The commerce sector also expanded at 5.7 per cent, while the construction sector grew strongly by 14 per cent in the quarter, boosted by a strong pipeline of projects in the last two years.

Investment commitments in the manufacturing sector remained strong, reaching a total of S$2.5 billion, most of which were in the electronics and chemicals clusters. Foreign investors accounted for almost 75 per cent of these commitments. The US took the lead with a large demand investments of S$808 million in the electronics, industrial chemicals and petroleum industries. Japanese investments amounted to S$662 million, while investments from Europe totalled S$359 million.

In the area of business services, foreign investors also accounted for more than two thirds of the commitments in the quarter, with the bulk coming from Europe. These were in projects relating to headquarters activities, communication and information services.

As Singapore moves into the 21st century, its open economy is likely to become more exposed to global changes in international trade.

To meet these challenges, the government will focus its efforts on creating wealth and grooming talent through education and training. At the same time, sound population and immigration polices will be formulated.

In addition, Singapore will seek to maintain a pro-business environment by keeping costs competitive, increasing productivity yields, deepening the technology base, and promoting regionalisation.

Business/Company Registration

Singapore’s Business Registration Act requires all businesses to be registered on-line with the Accounting and Corporate Regulatory Authority (ACRA). The registration process normally takes one working day.

The incorporation of a company is normally takes 1 to 2 working days.

Upon approval, the company name will be reserved by ACRA for two months.  The applicant will then prepare the incorporation papers and lodge them within the reservation period. Similar procedures apply to foreign companies which may either set up subsidiaries or register branch offices in Singapore. When the foreign company’s name is approved, the applicant must then lodge the relevant documents with ACRA. These include a certified copy of the Certificate of Incorporation of the company, a copy of the Memorandum and Articles of Association, and particulars of all directors of the company and at the end of which a Certificate of Registration of Foreign Company is issued.

Branches of foreign companies registered with ACRA must have two agents in Singapore. Both must be Singaporeans, permanent residents or employment pass holders. In addition, applications to station expatriate staff in Singapore are to be made separately with the Ministry of Manpower. Applicants are advised to seek professional help in preparing and submitting the documents.

Annual Requirements For Corporations

Under the Companies Act, every company must hold an annual general meeting (AGM) every calendar year, during which audited/unaudited financial statements (not more than six months’ old) and the directors’ report are presented.

The first AGM must be held within 18 months of a company’s incorporation. After that, they must be held once every calendar year, and not more than 15 months apart.

Within a month of the AGM, the company directors must lodge with ACRA an annual return and if required with the Financial Statements. Failure to do so is an offence.

Minimal Regulations And Licences

Business regulations in Singapore are established to ensure that only legitimate businesses are set up. This helps protect the interest of the general public when they come into contact with certain business operations. Hence, some businesses need to contain the relevant licences before they can start operating.

Examples of such businesses include banks, financial houses, insurance companies, stockbroking firms, commodities trading companies, and money changers. Manufacturers of cigars, cigarettes, matches, and firecrackers also require a special licence to operate. Other companies like electrical work contractors, housing developers, shipping firms with foreign interests, broadcasting newspapers and printing companies, travel agents, massage and health centres, hotels, restaurants and entertainment companies also have to apply for relevant operating licences.

Tax System

The Inland Revenue Authority of Singapore is responsible for assessing, collecting, and enforcing payment of taxes, duties and levies under the various revenue acts.

Income tax is levied on any person who derives incomes in Singapore or receives income from outside Singapore.

The corporate tax rate in Singapore has been progressively reduced and stands at 20 per cent. Resident individuals, including foreigners who are either physically present or employed in Singapore for 183 days or more in a calendar year, are taxed on a graduating scale ranging from 3.75 per cent to 21 per cent. Non -resident employees are taxed at a flat rate of 15% or resident rates, whichever gives rise to higher tax. However, non-resident employees(except director and entertainers) who work in Singapore for not more than 60 days in a year are exempt from tax.

Capital allowances are available to companies for their industrial buildings, plant, machinery and the expenditure incurred in acquiring approved know-how or patent rights.

Singapore has double taxation agreements with 34 countries providing for the avoidance of double taxation on a bilateral basis. Under these agreements, unilateral tax credit provisions are available for income received in and from outside Singapore, including service income from specified territories, dividends employment income and branch profits.

Investment Incentives

Several tax incentives are available to encourage foreign companies to make Singapore their regional manufacturing, servicing or financial base. These incentives are also offered to industries which require skilled labour, new and sophisticated technology and equipment.

Subject to a company satisfying specific criteria, tax breaks are also available to a range of businesses . These include the financial services industry, venture capital companies incorporated and operating in Singapore.

Employment And Labour Laws

Democratic and responsible trade unionism is promoted in Singapore. This helps maintain harmonious industrial relations and create a conducive working environment that greatly encourages investments and industrial growth for the country.

The Employment Act stipulates terms and conditions of employment as well as the rights and obligations of employers and employees. Trade disputes in unionised establishment, which cannot be resolved through conciliation, can be referred to the Industrial Arbitration Court for resolution.

Where health and safety of workers are concerned, compensation is provided under the Workmen’s Compensation Act for workers who are hurt in accidents or contract a disease as a result of their work. Such incidents are reportable under the Act. Furthermore, serious and fatal accidents in factories must be reported in accordance with the Factories Act. The Ministry of labour has inspectors who carry out regular factory inspections to ensure that adequate safety measures are adequately taken to protect employees.

The Central Provident Fund (CPF), a comprehensive social security scheme, provides for old age, housing and medical needs of workers. Both employers and employees are required to contribute to CPF. The current contribution rates, as a percentage of salary, are 20 per cent for both employers and employees. Since August 1, 1995, new foreign employees and their employers are not required to make CPF contributions.

In line with Singapore’s emphasis on skills training, employers are also required to contribute to the Skills Development Fund (SDF), another employee related fund which is administered by the Singapore Productivity and Standards Board.

The government has a selective policy regarding the employment of foreign nationals, welcoming suitably qualified executives and technically skilled workers. To work in Singapore, they have to apply for an employment pass issued by the Singapore Ministry of Manpower.

International Arbitration

Supported by the TDB and the Economic Development Board (EDB), the Singapore International Arbitration Centre (SIAC) provides facilities and services for the conduct of conciliation and arbitration of international and domestic commercial disputes.

The chairman of the SIAC has the authority to appoint arbitrators and conciliators when the parties in dispute or the parties fail to do so. The centre offers hearing and meeting rooms, administrative and transcription services, audio and video recording, and other amenities for these proceedings.

Exchange Controls

Foreign exchange controls in Singapore reflect the government’s pro-business stance. With full liberalization in mid-1978, capital and profits can be brought in and repatriated freely. This is a prime incentive for foreign corporations to put their investment dollars in Singapore.

Trade Documentations

Singapore is a free trade economy, where most goods can be imported without a licence or quota restrictions, although an import permit must be obtained. Certain categories of goods, like firearms, firecrackers, lighters in the shape of guns, toy currency notes and coins, are not allowed entry. A 3 per cent Goods and Services Tax (GST) is also levied on all imports.

In terms of trade documentation, Singapore has a highly efficient computerized system in Trade Net, the world’s first nation wide electronic data interchange (EDI). Implemented by TDB, Trade Net links the trading community with relevant government authorities and operates virtually round-the-clock, seven days a week. About 20 controlling agencies involved in trade documentation are accessible through Trade Net.

Trade Net is being extended by links with international EDI networks. This will enable Singapore traders to be part of the global trading network and to exchange business documents and information electronically worldwide.

The TDB is also developing a total electronic trade documentation system, Trade Net Plus, which will computerize the entire chain of trade procedures including financial and shipping documentation. In this way, the TDB can further enhance its efficiency and service standards for the business community.

Protection of Intellectual Property

Singapore’s Copyright laws protect the original literary, dramatic, musical and artistic works of Singapore residents and citizens, and those belonging to nationals of WTO countries. Protection is given, for a limited period, against copying, reproducing, publishing, broadcasting, adaptation, and public performances of such works.

Any disputes between copyright owners and users of copyright materials are dealt with expeditiously by the courts. In some instances, disputes may be referred to the Copyright Tribunal, comprising a president and three members appointed by the Minister for Law.

Protection for patents, trademarks, industrial designs and trade secrets are also available.

A Global Business Hub

Singapore’s world-class transport and telecommunication links, its intensive use of information technology, low political risk and pro-business environment helps the Republic to shine as an international business hub. In 1995, US-based Fortune magazine ranked Singapore as the number one location for doing business in the world.

Singapore has also consistently come out tops international competitiveness rankings, based on a wide range of criteria covering economic strength, infrastructure and government, to management, finance and the quality of its workforce.

Strategically located at the cross-roads of major trade and shipping routes in Asia, Singapore is also well-positioned to tap the growth opportunities prevalent in the booming regional markets. Given these advantages, Singapore has been and continues to be an ideal choice for companies wishing to set up base in Asia.

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Tip 1: Private expenses are not deductible

If you are a director of a company, do take note that your private expenses arising from entertainment, vacation and personal purposes are not allowable for tax deduction. These private expenses should be segregated and excluded from your claims in Form C.

Examples of such private expenses:

• Monthly subscriptions to country clubs
• Personal dining or shopping bills
• Family trips overseas

Tip 2: Some expenses are not deductible

There are certain expenses which you cannot claim as deductions even if you had incurred them for business purposes. One example is motor vehicle expenses for private-plate cars (i.e. non-Q plate cars) and business passenger vehicles (Q-plate cars) registered on or after 1 Apr 1998.

These motor vehicle expenses include petrol, insurance, parking fees, ERP charges, hire purchase interest, etc.

Tip 3: Remuneration expenses in respect of employed family members must match services performed

For family owned companies, if you have family members (for example parents, spouse, children and siblings) working for you, the amount of remuneration claimed as tax deductible expenses must match the actual services they perform.

The salary expenses claimed should be comparable to that of an independent employee with the same qualifications and experience, performing the same services. Excessive amounts should therefore be added back in the tax computation.

If your family member is no longer involved in the operations of the company, he/she cannot be considered as an employee. We have a case study below to illustrate this.

Madam A and her son, Mr B are the only shareholders and directors of ABC Pte Ltd. However Mr B had migrated overseas some years ago and is no longer involved in the day-to-day running of the company. As such, the company should no longer be paying any remuneration to Mr B and should not claim directors’ fees/ remuneration for Mr B.

Voluntary disclosure

If you have discovered any filing errors made for back years, we encourage you to come forward and disclose them voluntarily. For such cases, the offences can be compounded at reduced penalty rates.

For more help

To find out more about Form C filing, visit our website www.iras.gov.sg

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