You are on page 1of 10

Singapore has recently been

referred to as the Jewel of
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
Singapore is an island located off the southern tip of peninsular Malaysia
between latitudes 1°09’N and 1°29’N and longitudes 103°38’E and 104°06’E.
It is approximately 640 square kilometres in area‚ with a population of about
3.2 million. Singapore’s 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. Singapore’s 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 world’s busiest port when looked at in terms of
shipping tonnage and is the world’s top bunkering port.
Lately Singapore has become an important hub for the major international
airlines. Singapore Changi Airport is one of the world’s busiest airports in terms
of international commercial passenger and air cargo traffic. The reason for this
may be attributed to Singapore’s 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
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. Parliament’s
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$ 100‚000. The
Magistrates’ Courts may try criminal cases punishable by
imprisonment not exceeding 3 years and may hear civil
claims not exceeding S$30‚000. 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$5‚000. This limit of S$5‚000 can be
increased further to S$l0‚000 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 Majesty’s 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, Singapore’s
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
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
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
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 Government’s policies to promote free
trade‚ a number of Government and quasi-government
institutions have been established to assist investors and
businessmen. The Government’s 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 Singapore’s
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
Approved Foreign
Loan Scheme
Approved Royalties
Venture Capital
Overseas Investment
Export of Service
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
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;
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$ 1‚600.
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
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 employee’s monthly gross wages‚ up to a
maximum of S$2‚400 per month. The employer may
recover an amount equal to 20% of the employee’s
monthly wage‚ up to a maximum of S$ 1‚200‚ from the
employee. This means that the employer has to pay‚ in
addition to the employee’s monthly salary a further 20%
of that salary‚ up to a maximum of S$ 1‚200 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.
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 employee’s immediate family will be residing in
Singapore with him‚ they have to apply for dependants’
passes. A foreign employee’s children attending school in
Singapore must obtain students’ passes.
Collective bargaining and worker participation in
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
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
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 union’s 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 employee’s services by reason of redundancy or
reorganization of the employer’s 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
if the monthly salary is less than S$ 1‚500 or the
employee is engaged in manual labour‚ the employee
may make a claim for Worker’s Compensation
pursuant to the Workers’ Compensation Act
(Cap 354); or
if the employee sustains injury by reason of the
employer’s 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
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 company’s authorised
capital‚ is payable for the incorporation of the company‚
ranging from S$ 1‚200 (for authorised capital below
S$ 100‚000) to a maximum of S$35‚000 (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 Government’s 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
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$2‚000.
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
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 owner’s 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 owner’s title in court as well as establishing
the priority of the owner’s 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
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.
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
Singapore’s reserves will be invested in Asia’s booming
economies. It is likely that this figure will increase.
Allen & Gledhill‚ Advocates & Solicitors‚ Singapore.
12 Asia Business Law Review No 11 January 1996