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What are Different Class of Shares in Singapore
  • Article, Singapore

What are Different Class of Shares in Singapore

In brief, shares constitute the ownership of a company. After completion of the Singapore company incorporation process, the founders decide who will be the shareholders of the company. Generally, these founders constitute a major stake in the shareholding. It is very important to determine the percentage of holding each of them owns.

Mostly different shares classes are seen in public limited companies, but the concept is not so uncommon in the private limited companies as well, especially when they are in the growing stage.

The laws in Singapore are quite flexible when it comes to issuing shares with different rights. You can classify the shares in many categories like “management shares” with extra voting rights, “Preference shares” without any voting rights, or “redeemable shares”. There is no legal definition for these share classes, so all the rights every class offers should be clearly defined in the Company’s Constitution.

Here are some of the typical share classes of any company formation in Singapore, along with the rights they offer.

 

Ordinary shares

They are also called simple equity shares and are the most common type of shareholding anyone can own. Holders of ordinary shares are entitled to the profits through dividends, one vote per share, and the surplus assets when the company is wound up. However, there can be a variation in these terms and are generally mentioned in the holding documents.

As compared to preference shares, ordinary shares are of a low priority to the company. For example, when the company distributes a dividend, first the preference shareholders receive their share and then, if remaining, comes the turn for equity shareholders. Also, when a company is wound up, Creditors and preference shares are paid off first and the equity holders in the end. This is the reason why ordinary shareholders are called “residual claimants of the company”.

 

Preference Shares

These are the shares that provide a priority to the holder in areas such as dividend payment or capital payment while winding up of a company. However, preference shareholders can have more extended rights depending upon the further classification by the company issuing it.

Every company issuing preference shares needs to state the right of holders in Constitution under S 75(1) CA, related to the following points.

  • Any rights towards repayment of capital
  • Any rights related to participation in surplus assets or profits
  • Any voting rights
  • Regarding the dividends whether non-cumulative or cumulative
 

Under s 75(2) CA, if any company fails to comply with the above procedure, the company and every officer will be guilty of an offense and shall be liable to a fine not exceeding $2000.

Now, the voting rights associated with the preference shares depend upon the terms under which they are issued. Hence, it is entirely normal for a company to issue preference shares with increased voting rights or no voting rights, or voting rights on specific matters.

 

Non-Voting Shares

These shares carry no rights for voting or attending the annual general meetings conducted by the company. Generally, the preference shareholders are the non-voting ones. These shares are mostly issued to (a) the employees of a company (to pay some of the remunerations as dividends, as an incentive to the employees), and (b) the family members of the main shareholders.

 

Redeemable Shares

These shares are issued on the terms that the company may, or will, buy back the shares at a specified date in the future. This provides the shareholders with a guarantee that their capital is safe and a specified amount will be received either at the specified date or at the option of the company.

If a preferred stock does not have a maturity date, i.e. the date on which a share will be redeemed, then it is called perpetual. Such stocks have a more fluid redemption structure, which can happen on the call date. Although the company is not obligated to do so, it can redeem the share on its first call date which generally falls after five years of issuing. The price at which the company buybacks these shares id slightly higher than the original issuing price.

 

Deferred Ordinary shares

It is a stock that comes without any right of receiving the company’s assets until other shareholders have been duly paid. Also, these shareholders do not receive any dividends until others have received a minimum amount. The holders of these shares are generally the owners, the founders, venture capitalists, or private investment groups, who have a long-term stake in the company’s performance and growth.

The basic idea behind issuing such shares is to keep the investors and management intact when the company is going through an evolution phase, from a small start-up to a publically-traded brand. This category is very uncommon because the stock units are restricted. It is very important to know that the values of Deferred stocks cannot be calculated until the stakeholder decides to leave the company.

 

Management Shares

This is that category of shares which rests with the management of the company. The voting rights for management shares are greater than ordinary shares like three votes for one share. The basic idea behind issuing them is to ensure that there is a fair decision taken in a process where all other investors go against the management. At this time, the managers can use their voting rights to turn the decision in the company’s benefit.

 

 Alphabet shares

This is a different class of shares that is generally tied to a specific subsidiary of any corporation. Broadly, you can say that they are shares of common stock that are different in some way from other common stock in the same company. The reason for calling these stocks as alphabet shares is that the classification system used for identifying each class of common stocks uses letters to differentiate it from the parent company’s stock.

Publically traded companies generally issue alphabet stocks when it purchases a business unit from another company. The latter becomes the subsidiary for the former, and the holders are only entitled to the dividends and claims from the subsidiary and not the parent company.

The holders of such stocks may have limited rights for voting. This is to ensure that the inside people can control the working of the acquired subsidiary. For many, issuance of alphabet stocks can be an indication of a complex capital structure. Companies with several subsidiaries or branches may issue different alphabet shares to ensure smooth functioning of operations as well as for controlling the dividend distributions.

 

Conclusion

All startups indeed choose to give all its shareholders equal voting rights per share, but there is a great sense of flexibility and freedom for the investors and founders to be granted with varying degrees of management control and varying degrees of entitlement to the company’s capital or profits.

The law in Singapore continues to motivate a welcoming dominion for the establishment and growth of businesses, by offering some flexibility of capturing the desires different types of investors have, who may or may not desire greater control in the company’s management, or, who may or may not desire the assurance of a fixed return on their investment made in the company. Anyone who regards the creation of multiple share classes should consider the motive for the distinct classes and, at the same time, fully evaluate the rights supplied to each class.

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UAE Introduces New Regulation on Loan Based Onshore Crowdfunding
  • Article, U.A.E

UAE Introduces New Regulation on Loan Based Onshore Crowdfunding

First time in history, the UAE Central Bank (CBUAE) has launched a new Regulation of new activity on “Loan Based Crowdfunding” in mainland UAE that spells out the rules for issuing Crowdfunding Licenses under the CBUAE.

Crowdfunding is the method of raising funds usually through the licensed online platforms to financially support projects, ventures and charities. It aims to amass small funds from a large number of individuals or organizations who invest in crowdfunding projects for a potential profit and reward.

Crowdfunding is typically technology-driven alternative finance of crowdsourcing that is witnessing rapid growth worldwide for both investors and businesses. The online crowdfunding platforms act as intermediaries raising funds from people instead of conventional sources of funds such as banks, mutual funds etc.

The regulation, currently in force was released recently and published in the official gazette on 28th of October 2020.

The CBUAE launched this regulation for loan based Crowdfunding Platforms (CFPS) operating in onshore UAE to license and regulate online platforms connecting lenders and borrowers. It also aims to support administering the resulting loans.

Equity and donation-based crowdfunding investment platforms are exempt from this regulation.

This Crowdfunding Regulation is fairly wide in scope and encompasses companies that are not based in the UAE if

  • Incorporated or hosted in the UAE
  • Use an address in the UAE for correspondence
  • Provide Crowdfunding to the clients residing in the UAE

 

Crowdfunding platforms located outside the UAE including those based in the Dubai International Financial Centre (DIFC) and Abu Dhabi Global Market (ADGM) also come under the purview of this new regulation.

The crowdfunding company needs to be a company incorporated in the UAE under the Commercial Companies Law excluding Joint Partnership and Simple Commandite Company.

Depending on the category of license, there is a capital requirement of AED one million or AED 300,000. The crowdfunding company also needs to submit a bank guarantee equal to the value of the paid-up capital.

The same level of governance rules and oversight applies to a crowdfunding company as that of a regulated financial entity including the management fit and other appropriate criteria, internal controls, risk management, auditing and conflict of interest.

The crowdfunding companies must comply with all the applicable Emiratization requirements as and when required.

Every platform engaged in loan-based crowdfunding is categorized based on annual cumulative loans facilitated that dictates minimum capital requirement and are

  • Category 1 with AED 5 million cumulative loans facilitated in a year
  • Category 2 of smaller platforms with less than AED 5 million cumulative loans facilitated in a year

 

The borrower in crowdfunding activity needs to be a UAE registered company and can not be an individual, sole proprietorship or a company registered outside the UAE.

The regulation doesn’t impose any restrictions on the lenders onboard, however, grouped the lenders based on the financial status as

 

  • Retail lender and not a market counterparty
  • A market counterparty with evidence of assets exceeding AED 2 million outside of the primary residence with a self-attestation of being a market counterparty

 

The regulation imposes various obligations on the crowdfunding company such as assessing the suitability of lenders, anti-money laundering, borrower diligence and risk assessment through loan administration.

The regulation also specifies clear disclosure requirements for both the borrowers and lenders.

Individual and cumulative lending limits are also imposed for retail or market counterparty lenders as well as borrowing limits, AED 10 million per borrower in any financial year.

The crowdfunding funds must be held in segregated accounts with the UAE banks subjected to regular audits.

The regulation is a welcome move for the UAE’s financial industry and would increase the funding options for customers.

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TDS and Related Information
  • Article, India

TDS and Related Information

The introduction of TDS was done to collect tax from the primary income source. Its concept says that the deductor, a person liable to make a payment of a particular nature to some other person, known as a deductee, has to deduct the applicable tax at source and remit this amount in the Central Government’s account.

The credit of the amount so deducted which is calculated based on the TDS certificate or Form 26AS issued by the deductor, shall be provided to the deductee, from whose income, the tax has been deducted at the source.

Tds Interest on Late Payment

There are two kinds of TDS interest provisions when the payment is not made on time:

  1. TDS Interest when the deduction is late:
    The interest rate for the late deduction of TDS is 1% pm. This interest rate is applicable from the date on which the tax was actually deductible to the deduction date. The default Section for TDS Interest related to late deduction is 201A. The TDS return can be filed only after the interest payment is done.

  2. TDS Interest when the payment is late:
    Section 201(1A) says that the interest payment for late TDS deposit post deduction is at the rate of 1.5% pm. The calculation of such interest is done only on a monthly basis and not on the number of days which is the reason behind considering part of a month as a full month. Such interest amount is calculated to the date on which TDS is due.


There exists a provision for paying the late payment TDS interest before actually paying the TDS return or after its demand has been raised by TRACES. There also exists a provision for adjusting such an interest from the amount pending in any Challan related to TDS under any section. This interest paid on delayed deposits of TDS is not counted as an expenditure under the IT Act of Singapore.

Tds Not Deducted In Case Of Payments Made To Residents

According to the Section 201 of the Finance Act, the payer not deducting the entire or a part of the tax amount on the payment being forwarded to the resident payee is not counted to be an assessee-in-default for that tax which he has not deducted, if the following listed conditions are satisfied:

  • The return is already provided by the resident recipient under section 139.
  • The recipient of the resident has taken into account the above-mentioned income in its return of income.
  • The resident recipient has paid the taxes due on its income that is declared in such return of income.
  • A payee of the resident has furnished a certificate to this effect from an account in Form no. 26A

Penalty Levied For Late Or Short Payment Of Tds:

The penalty can be imposed on the payer to the extent of an amount that was not remitted or deducted. The payer will be punished with meticulous imprisonment for a term not less than 3 months and this can even extend up to 7 years. Also, the payer does not pay the tax amount that is deducted to the account of the Central Government, in addition to a fine in the case. This can be considered under the provisions of Chapter XVII-B of Section 276B.

Late Filing Consequences

From 1st July 2012, any delay in submitting the e-TDS statement will result in a compulsory fee of rupees 200 per day till the return is finally filed. However, in this case, the total fee doesn’t exceed the total TDS amount deducted for the given quarter.

Before the filing of such an e-TDS statement, the payment of the late filing fee needs to be done. If the filing of the e-TDS statement gets delayed for more than one year, or the details such as Challan, PAN, and TDS amount, mentioned in the statement are incorrect, the assessee will have to bear a penalty ranging from rupees 10 thousand to 1 lakh, as per the decision of the Assessing Officer.

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Know More About Corporate Taxation in Singapore
  • Article, Singapore

Know More About Corporate Taxation in Singapore

Singapore is often lauded for having low corporate tax rates and a transparent tax filing system. The country also offers several tax incentives that draw global investments, making it one of the world’s most ‘‘business-friendly’’ countries. Thus, if you are planning to register a company here or opening a branch of an existing business, knowing about the corporate taxation is important.

Corporate Taxes in Singapore – Who Is Legally Required to Pay?

Any company that is supervised and managed from Singapore is an official tax resident in the country. However, not all branches of multinational companies qualify as tax residents. If the company is not managed in Singapore, it doesn’t qualify, even if the company holds its day-to-day operations in Singapore. Being “managed in Singapore” means that the company’s strategic decisions (e.g., company policies) are discussed in Singapore.

However, even companies that don’t get the coveted tax-residency status have to pay corporate tax on any taxable income consequent of their activities in Singapore. But, these companies will not enjoy the several benefits that tax resident companies enjoy.

Singapore levies taxes on profits and not on revenue. Profits of your Singapore company will be taxed at 17% (with an effective tax rate often lower due to various tax incentives and tax exemptions available to Singapore-resident companies).

How to Become a Singaporean tax-resident?

Every year, companies get 12 months to shift their management department to Singapore. They have to have one year of management, board meetings, strategic decisions, etc. conducted in Singapore in their Year of Assessment (YA). For instance, for the Year of Assessment 2020, the 12-month period will be 1st April 2019 to 31st March 2020.

A company incorporated in Singapore is not automatically considered a tax resident of Singapore.

To be considered a tax resident of Singapore, a company must be controlled and managed from Singapore. According to IRAS, controlled and managed refers to, “making decisions on strategic matters, such as those on company policy and strategy.”

In general, the location of board meetings is a key factor in determining where a company is controlled and managed.

Furthermore, the location of company personnel who have a key role in the company’s decision making can also determine tax residency.

Typically, a company is deemed to be a non-resident if board meetings and key management personnel are located outside of Singapore–even if the day-to-day operations of the company are in Singapore.

For example, foreign-based holding companies that only earn passive income are normally considered non-residents since these companies are run with instructions from owners and shareholders who are based outside Singapore.

Note that the tax residency of a company can change from year to year.

Following are the benefits of being a Singapore tax resident companies with Singapore tax residency enjoy the following benefits:

  • Tax benefits provided under Avoidance of Double Taxation Agreements (DTAs)
  • Tax exemption on foreign-sourced dividends, foreign branch profits, and foreign-sourced service income
  • Tax exemption for new startups

How Do Companies Benefit from Singapore’s Income Tax System?

Singapore is renowned for having a single-tier corporate income tax system. Stakeholders don’t have to pay taxes twice on their incomes. The tax filed by a company on its deductible income is the closing tax payment. All dividend installments paid to the company’s shareholders are exempt from additional taxation. Such a lenient taxation system is not common. Here are a few reasons why this taxation system is so lucrative for global companies –

  • The profits of your Singapore company will be taxed at 17% (with an effective tax rate often lower due to various tax incentives and tax exemptions available to Singapore-resident companies)
  • No taxation on capital gains
  • No tax on post-taxation profit payments to shareholders. Companies only pay taxes on profits. Post-tax profit distribution (i.e. dividends) to shareholders is tax-free.
  • Certain type of foreign-source income is exempt from taxation in Singapore

Singapore offers generous incentives and tax breaks when investing in new and promising industries, R&D, and productivity-enhancing technologies

  • No Double Taxation of Income
  • Singapore has tax agreements with more than ninety countries.
  • All foreign tax credit is exempted.
  • Companies from countries that don’t have a tax agreement with Singapore are provided with a unilateral tax credit system which respects foreign tax on all income from foreign companies.

What are Corporate Tax Rates?
 

Startup Companies Tax Exmeption

  
 

Chargeable Income (SGD)

% exempt from Tax

Amount of Tax Exempted (SGD)

  
 

First 100,000

75%

                       75,000

  
 

Next 100,000

50%

                       50,000

  
 

Total 200,000

 

                     125,000

  
 

All companies will be given 25% corporate income tax rebate, capped at $15,000 for YA 2020

      
 

Example:

    
 

Chargeable Income (SGD)

Tax before Rebate

Effective Tax Rate

  
 

100,000

4,250

4.25

  
 

200,000

                      12,750

                            6.38

  
 

300,000

                      29,750

                            9.92

  
 

400,000

                      46,750

                          11.69

  
 

500,000

                      63,750

                          12.75

  
 

600,000

                      80,750

                          13.46

  
 

1,000,000

                   148,750

                          14.88

  
 

2,000,000

                   318,750

                          15.94

  
 

3,000,000

                   488,750

                          16.29

  
 

5,000,000

                   828,750

                          16.58

  
 

10,000,000

                1,678,750

                          16.79

  
      

Partial Tax Exemption – For all Companies not fulfill the condition of SUTE YA 2020

 

Partial Tax Exemption

  
 

Chargeable Income (SGD)

% exempt from Tax

Amount of Tax Exempted (SGD)

  
 

First 10,000

75%

                          7,500

  
 

Next 190,000

50%

                       95,000

  
 

Total 200,000

 

                     102,500

  
      
 

Example:

    
 

Chargeable Income (SGD)

Tax before Rebate

Effective Tax Rate

  
 

                      200,000

                      16,575

8.29

  
 

                      300,000

                      33,575

11.19

  
 

                      400,000

                      50,575

12.64

  
 

                      500,000

                      67,575

13.52

  
 

                   1,000,000

                   152,575

15.26

  
 

                   2,000,000

                   322,575

16.13

  
 

                   3,000,000

                   492,575

16.42

  
 

                   5,000,000

                   832,575

16.65

  
 

                10,000,000

                1,682,575

16.83

  
 

20,000,000

                3,382,575

16.91

  
      
 

All companies will be given 25% corporate income tax rebate, capped at $15,000 for YA 2020

      

 

What is Taxable Income?

Taxable income in Singapore’s single-tier territorial tax system includes –

  • Profits from the trade/business.
  • Royalties, premiums, interests on the property, and other earnings from investments.
  • Earnings from investments also include rent from a property.
  • Other income that is considered ‘‘revenue.’’


What are Net Income and Taxable Income?

As per the Income Tax Act of Singapore, any earnings made in Singapore and money sent to Singapore from an overseas source is taxable. However, net profits are, in most cases, not taxable.  Some of the costs sustained by companies may or may not be deductible. Some incomes may even be taxed as a non-corporate income.

There are other forms of taxation levied on any overseas income received in Singapore. ‘‘Exemptions on Foreign Sourced Income” is an official guideline by the Singapore Income Tax Act, which deals with such sources of revenue. Some examples of exemptions include income from foreign-based dividend payments, branch profits, etc.

What Happens if a Company Loses Money?

As per the provisions prescribed in the Singaporean Income Tax Act, companies are allowed to deduct permissible costs from the money meant for taxation. This loss cumulates until a company record statutory income. The authorities allow companies to use taxable revenue only if there are no considerable changes in ownership or other important commercial activities.

What are the major Tax Incentives for Companies?

Singapore offers lucrative tax incentives for startup companies. A tax incentive scheme for startups was launched in 2005 (“SUTE”). The new companies have to meet these criteria for their first three years – consecutive YAs depending on where the YA falls to avail exemption under SUTE:

  • The company’s total share capital is beneficially held directly by no more than 20 shareholders throughout the basis period for that YA where:
  1. All of the shareholders are individuals; or
  2. At least one shareholder is an individual holding at least 10% of the issued ordinary shares of the company
  • Property and investment holding companies are not eligible for SUTE


YA 2020 Onwards

New companies that qualify are given a 75% tax exemption on the first S$100,000 of taxable income and an additional 50% exemption on the next S$100,000 of taxable income.

Partial tax exemption (PTE) scheme for companies

All companies qualify for PTE unless the company already claims under the tax exemption scheme for new startups. Under PTE, companies enjoy the following exemptions.

YA 2020 Onwards

  • 75% tax exemption on the first $10,000 of normal chargeable income and
  • A 50% tax exemption on the next $190,000 of normal chargeable income

If you are looking to know more about taxes and business in Singapore, you can hire the services of professionals.

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Opening a Branch of a Foreign Company has never been so Attractive in the Kingdom of Bahrain
  • Article, Bahrain

Opening a Branch of a Foreign Company has never been so Attractive in the Kingdom of Bahrain

The Bahrain Economic Development Board (EDB), responsible for promoting Foreign Direct Investment (FDI) in Bahrain particularly focuses on attracting FDI in Manufacturing, Information Technology, Communication, Logistics, Tourism, Financial Services and Leisure sectors. The EDB reinforced its position and commitment as one of most liberal economic institutions by winning the United Nation’s Top Investment Promotion Agency award in the Middle East for its role in attracting large-scale foreign investments and Bahrain company formation.

The Government of Bahrain puts minimum restrictions on the right of ownership and establishment of a foreign company and allows foreign private companies to form and own business enterprises and engage in all forms of profitable ventures.

There only exists a small list of business activities with the Ministry of Industry, Commerce and Tourism (MoICT) restricted to Bahraini ownership such as Press and Publications, Workforce agencies, Clearance offices and Islamic pilgrimages.

The recent amendments announced to the Bahrain Commercial Companies Law ( BCCL) are aimed at furthering Bahrain’s business-friendly reforms to foreign investments and aligning Bahrain’s Economic Vision for 2030 in line with the diversification program of the economy. The amendments include speedy company registration process and stronger corporate governance. Despite global concerns about falling oil prices, FDI flow in Bahrain continues to grow due to reforms in the process of doing business in Bahrain.


Benefits of Establishing a Business in Bahrain

  
  • The strategic location of Bahrain at the centre of the Middle East Gulf countries allows easy access to every market in the Middle East and North Africa.
  • Among all GCC member nations, Bahrain offers the lowest cost for Industrial land and office rentals, the basic cost of establishing a business.
  • Despite oil and gas being the major contributor to its GDP, Bahrain is diversifying its economy and wooing foreign investors with several business incentives. Bahrain’s economy has grown for many years and has become a key regional and global hub for business.
  • Accessing local authorities is much easier in Bahrain in comparison to other neighbouring countries, for support and dispute resolution in business. EDB, MoICT, BDB and Tamkeen also provide support to the foreign investors on how to start a small business in Bahrain.
  • Bahrain is one of the most liberal and flexible countries in the Arabian Gulf with a diverse and multicultural population. The country with approximately 50% expatriates has supportive multiple entry visa policies.
  • Though Arabic is the national language, English is widely spoken and used in business in Bahrain.
  • Bahrain offers multiple incentives to entrepreneurs including 100% foreign ownership, zero taxes, an attractive regulatory environment and an ecosystem designed for promoting startups and providing support in scaling up businesses.
 

Business Establishments in Bahrain

Bahrain essentially offers eight different options to the foreign investors willing to do business and commercial activities in Bahrain such as
  • With Limited Liability company
  • Partnership company
  • Holding company
  • Single Person company
  • Limited Partnership company
  • Joint Stock or Shareholding company-Open
  • Branch of a Foreign company
  • Joint-stock or shareholding company- Closed
 

A Branch of a Foreign company is one of the most sought after options to foreign investors as it offers a lot of advantages.


Branch of a Foreign Company in Bahrain

 A foreign company, incorporated and registered outside Bahrain can be registered as an operational office, regional office or a representative office and by the rules and regulations of foreign company registration in Bahrain. A Bahraini national or a company from a similar industry should be engaged as a sponsor unless the branch or office is established as a distribution centre for regional goods and services.

 

Principal Features of Branch of a Foreign Company in Bahrain

 The parent company shall be responsible for bearing all liabilities of its branch in Bahrain.
  • Business operations are only allowed when there is a local office in Bahrain.
  • Operational offices can only undertake business operations.
  • Representative and regional offices are allowed for marketing and promotional activities only.
  • No minimum share capital is needed.
  • Appointing a Branch Manager is mandatory.
  • A local sponsor is needed for an operational office except when the branches are licensed by Central Bank of Bahrain (CBB) and the Committee for Organizing Engineering Professional Practice (COEPP).
  • Banking, Insurance and investment activities are permitted.
  • The Parent company needs to issue a Bank Guarantee in favour of the Ministry of Finance and National Economy.
 

Registration of Branch of a Foreign Company in Bahrain

 The registration process for a foreign company branch is usually completed in 2 to 4 week time once all documents are in order. The registration process begins with an application for commercial registration and choosing a unique company name.

The process steps involved in registering a Foreign company branch are

  • Filling out a registration application form with all necessary details
  • Documenting Memorandum of Understanding (MOA) and Articles of Association (AOA) and receiving preliminary approval from the Ministry of Commerce.
  • Obtaining local Municipal approval for securing an office space
  • Notarizing the MOA and other documents, as appropriate and submitting online to the MoICT
  • Opening a national bank account and receiving the capital deposit certificate
  • Depositing a guarantee to the bank in the name of the branch, the agent or an official representative and the order of the Ministry of commerce and industry
  • Receiving the Certificate of Registration (CR) from the ministry
  • Publicizing the incorporation in the Official Gazette
  • Registering for Social Insurance for the hiring of employees
 

Documentation Requirements for Registering a Foreign Company Branch in Bahrain

  • Filled application form of company registration
  • Pre-approved documents from external entities
  • Sponsorship agreement for operational branches
  • Copy of CR
  • Copy of MOA and AOA
  • Resolution of Board of Directors
  • Guarantee certificate from the Parent company accepting full responsibility of the Bahrain branch
  • Authenticated Power of Attorney whenever necessary, e.g. Outsourced Consultancy Services
 

IMC helps entrepreneurs and business organizations create value and is committed to delivering services that exceed customers expectations.

We, at IMC, are a group of high calibre professionals acquainted with the Bahraini business and Tax laws including their culture and preferences and can render you every help every time in your quest for a foreign company branch in Bahrain.

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Here is the Process of Merging Multiple EPF Account
  • Article, India

Here is the Process of Merging Multiple EPF Account

Today, the working masses often change organizations in the quest for better career opportunities and paycheques. Now, such job switching results in alterations and merger of the old and new provident fund records of the employees. For amendment in such issues, the legislature launched a Universal Account Number (UAN). This is a unique 12-digit account number given to all EPF members. Using this, you can merge all your EPF accounts.

You will have to write to the EPFO for blocking your previous UAN and assure that you transfer the balance amount to your current active UAN. This can be done online through the official portal. The rules say that every member of the Employees’ Provident Fund Organisation (EPFO) must be having only one UAN.

The UAN permits linking all your provident fund accounts in a single one. This eases the tracking of these accounts. There are a few more advantages of UAN like an employee can exchange funds beginning with one PF account then onto the next one very quickly. One can likewise interface with your Aadhar number to UAN that frees you of the signature requirement for withdrawal or transfer of PF money. In case you are having PPF accounts, you will have to combine them into a single one. Members will have access to downloading the passbook from the EPFO portal in PDF format.

Steps describing the process of merging two EPF accounts
  • The KYC process requiring PAN, Voter ID, Bank Account, etc verification must be complete.
  • The person must be having a UAN, and it must be linked to the existing EPF account.
  • After activating UAN, waiting for three days is mandatory before starting the process of merging EPF accounts.
Online Process of consolidating two EPF Accounts into one using UAN:
  1. Visit the official website of EPFO.
  2. Click on services.
  3. Then select one Employee and one EPF Account link.
  4. After this selection, you will see a window where the employees of the organization will have to fill in the necessary details like the UAN, phone number, etc.
  5. After filling in all the details click on the Generate OTP tab and verify the OTP that you receive on your registered mobile number.


The above procedure is easy to complete and, therefore, can be done by the individual itself. An alternative way of doing this is to submit the claim either through the present employer or through the person having the quit from.

Consolidating two EPF accounts is simple and the combined account so formed makes life easier. You get a single amount when you require pulling back your employee’s provident fund. EPFO is presently planning to make Aadhar, the essential address proof after the Aadhar Act of 2016 was passed. Individuals having Aadhar seeded UAN can avoid the hassle of verification of claim forms by the company.

Is the process of linking the UAN and Adhaar beneficial?

You must have figured out the importance of consolidating two EPF accounts into a single one. In the same way, it is extremely essential to comprehend that you should link your UAN with your Aadhar Card. The benefits are many like settlement of payments turns out to be easy, the process gets more precise and much more. So, if you haven’t presented your Aadhar card for the purpose so far, you ought to do it at the earliest.

Offline Process of transferring EPF account

You can apply for the offline transfer through Form 13. The standard procedure of doing the same starts with filling Form-13 after downloading it from the EPFO official website. You can even get this from your new organization HR. Now, in the form, you have to enter the details of your current PF account and submit it to your new organization HR. The Provident fund balance from the previous organization will accordingly begin accounting in the new PF sum. Whether you work in a private organization or a government firm the procedure is the same for all. Each time you switch your job it is simply the new organization detail and the related record that needs to be refreshed.

Frequently Asked Questions.

How can I get a UAN for myself?

Your employers will provide you with the required UAN. It will also be mentioned on the salary slip you receive.

What is the result of having 2 UANs in the same period?

Having two UANs in the same period is completely illegal. You should be having only one UAN, and all your operating EPF accounts must be linked to the same.

What is the portal or official URL or website to log in to the UAN?

You can enter this URL, www.epfindia.gov.in on any search engine like Google and type your username and password to check-in for the necessary UAN details.

Is it mandatory to link EPFO with Aadhaar?

Yes, the EPFO has made it mandatory to link your Aadhaar with your Employee Provident Fund Account to access the portal online. There are other benefits as well as doing the same.

How many days will it take to merge two PF accounts together?

Generally, the time taken is about 20 days for completing the process from the date of submission. However, it might take less time when you operate online.

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The Ultimate Guide to Setting up a Business in Singapore from India
  • Article, Singapore

The Ultimate Guide to Setting up a Business in Singapore from India

Planning to expand your business or register a company in Singapore? Well, you’re in the right place. Every year, Indians open over three thousand companies in Singapore. This is because Singapore is one of the most ideal regions in the world to start and run business operations. The tax rates imposed in the country are relatively very low – to both foreigners and locals. Any foreigner is eligible to own 100% of a Singapore company. Additionally, the quality of life is also very high. The World Bank has named Singapore the easiest place to open a new business. Over the past ten years or so, it has become quite common for Indian entrepreneurs to register a company in Singapore. While India is a popular industrial hub, many businesspeople look to expand their commercial empires beyond their native borders. Singapore’s business environment is very welcoming even for small enterprise owners who are looking to expand internationally. Thanks to the Singapore government’s business-friendly corporate tax policies, tax exemptions on foreign-sourced incomes, liberal foreign direct investment policies and first-world infrastructure, more and more India companies are making Singapore their incorporation destination. Let us dive deep and learn about Singapore company incorporation.

The process of setting up a company in Singapore

The process of registering a company in Singapore is fairly simple and streamlined. Opting for professional incorporation service provider can help you speed up the company formation process.

You can register a company in Singapore through Bizfile, a system that was set up by the Accounting and Corporate Regulatory Authority (ACRA). The key elements involved in the registration process include:

  • Company name
  • Names of the Directors and Corporate Secretary
  • Share structure
  • Registered address
  • Company’s Constitution (M&AA)

A Corporate secretary is someone who is qualified to act as a company secretary and is responsible for lodging and filing all the necessary documents required by law.  Your company can have as many directors as you wish, but at least one of them has to be local. The application along with supporting documents can be uploaded via Bizfile.  And the company formation application can be completed in a few hours only.  After the new firm’s directors, shareholders and the company secretary provide their consent online, the application for company registration is processed in a few days.  Please note that the online should be submitted done within 4 months from the name approval date.

Key Documents Required for Company Registration in Singapore

To register a company in Singapore, businesses must provide the following essential documents:

General Requirements

  • Approved Company Name (as per ACRA)
  • Brief Business Activity Description
  • Registered Local Office Address

For Directors, Shareholders & Company Secretary

  • Identity proof and details of directors, shareholders, and company secretary
  • Copy of Singapore resident/local director’s ID

For Foreign Individuals

  • Passport copy
  • Proof of residential address (overseas)
  • Bank reference letter & business profile (if applicable)

For Foreign Companies

  • Certificate of Incorporation
  • Memorandum & Articles of Association (M&AA)

Additional Requirements

  • Memorandum of Association (MOA) & Articles of Association (AOA)
  • Official registered business address details
  • Any other documents required by regulatory authorities

Ensuring all these documents are in place facilitates a smooth registration process under the Accounting and Corporate Regulatory Authority (ACRA).

Business Entities in Singapore: Types and Key Requirements

After registering your business in Singapore, you can select from various business structures that align with your goals. Each entity type has specific requirements set by the Accounting and Corporate Regulatory Authority (ACRA) to ensure proper establishment and compliance.
Business Type Nature of Business Key Requirements
Private Limited Company (Pte Ltd) Separate legal entity with limited liability for shareholders and directors. 1 corporate shareholder, 1 resident director, SGD 1 paid-up capital, 1 company secretary, Registered Singapore address.
Subsidiary Company Controlled by a parent company, follows Private Limited Company regulations. At least 1 shareholder, 1 resident director, 1 company secretary, SGD 1 paid-up capital, Registered Singapore address.
Branch Office Foreign company extension in Singapore, not a separate legal entity. Corporate shareholder, Local business agent, Registered Singapore address or PO box.
Limited Liability Partnership (LLP) Hybrid of a private company and a partnership, offering liability protection. Minimum 2 partners, Resident manager, Registered Singapore address.
Representative Office Temporary setup for foreign businesses to study the market, no commercial activity. Max 5 employees, Sales turnover above SGD 250,000, Employment pass for relocation.
Sole Proprietorship Single owner responsible for all liabilities. Owned by Singapore citizens, PRs, EntrePass holders, or foreigners with local representative.
Partnership Business owned by 2-20 individuals, with shared unlimited liability. Owned by 2-20 people, profits taxed under individual income tax.
Limited Partnership (LP) Requires at least one general and one limited partner with different liability levels. Requires 1 general and 1 limited partner, local manager if all partners are non-residents.
Limited Liability Partnership (LLP) No limit on partners, operates as a separate legal entity. No partner limit, operates as a separate legal entity, local manager required if partners reside abroad.
Company (Private or Public) Separate legal entity, can be privately or publicly owned. At least 1 resident director, foreign directors can apply for an EntrePass.

Costs involved in company incorporation in Singapore

Paid up capital in Singapore can be as low as just S$1. You can, of course, increase it later if you wish to. The average cost of incorporation generally ranges from S$2,500 to S$6,000, which depends on the business activity/structure of the new company and required services. This amount largely includes govt fees for company registration and the first year of annual management services (Local Nominee Director, Virtual Office Address in Singapore and Company Secretary).

The most important or the biggest part of the process is the nominee director service. It costs varies from S$1500 – S$3,000 which is based on complexity of business activity of proposed new company. Additionally, many corporate service providers require you to pay a security deposit of an additional S$2,000. This deposit money is utilized as indemnity for the nominee. You are eligible to get it back when his/her contract expires or when you terminate the local nominee director service. On the other hand, a cheaper option would be to hire someone you already know to be the resident in Singapore (Singaporean/Singapore permanent resident) director of your company.

The annual retainer fee for business management (corporate secretary, nominee director, annual returns filing, local address) will cost between S$2,600 to S$5,000. If you relocate to Singapore, you will also save the nominee director service costs. However, you will have to pay for an Employment Pass (S$1200-S$1,500) and/or Dependent Passes (S$600-S$800).

Furthermore, businesses associated with certain sectors like tourism or alcohol must pay the extra cost of licenses, which could range from S$50 to S$500. These costs vary depending on your choice of industry. Other monthly expenses could include renting an office space (about S$800), hiring employees. You will have to approximately spend S$4,000 to hire a software engineer or about S$1,700 to hire a security guard.

Commercial tax concessions in Singapore

Singapore runs a very aggressive commercial campaign in a bid to attract foreign entrepreneurs. The country offers multiple tax concessions to make the process of a new Singapore company registration easy and worth their time. Various Indian firms have greatly benefited from these tax concession schemes after moving their business headquarters to Singapore.

Some of the notable schemes are Global Trade Program (GTP), the International Headquarters Award (IHA) and the Regional Headquarters Award (RHQ). Under the RHQ scheme, business owners receive a concessionary tax rate of 15% on their income from a set of qualifying activities for three years. They can further enjoy these concession benefits for another two years if they can meet the preset conditions.

The qualified participants under the IHA scheme receive an even lower tax rates of either 10% or 5%. Nevertheless, they must exceed the criteria listed for the RHA by a large margin in order to qualify. Under the GTP scheme, the state offers incentives to entrepreneurs who prefer Singapore as their regional base. They get to enjoy a tax concession of 10% or 5% on the qualifying income.

Business VISA in Singapore

If you are a foreign entrepreneur who is planning to relocate to Singapore to run your business operations, then you must obtain an Employment Pass or a relocation visa of type EntrePass (Entrepreneur Pass). These two types of visas do no fall under any quota system. Authorities review and approve each application based on its own merits. After your relocation visa is approved, your spouse and children can also relocate to Singapore with you on Dependent Passes. In due time, you will be eligible to apply for permanent residence in Singapore.

Formation of Business Entities for 2022 - 2024

Entity type 2022 2023 2024
Companies* 31,80,455 50,21,881 52,13,965
Sole Proprietorships & Partnerships 11,70,344 17,30,384 17,16,582
Limited Liability Partnerships 1,89,299 2,04,265 2,01,527
Limited Partnerships 4,125 8108 9332
Public Accounting Firms 3,471 5051 4927
Variable Capital Companies 7,382 11074 13,025
Total Live count 50,73,958 69,80,763 71,59,358

source: https://www.acra.gov.sg/training-and-resources/facts-and-figures/statistical-highlights-2024

Benefits of running a business in Singapore

  1. Ease of starting a business and managing it: On multiple occasions, Singapore has been ranked highly in international business reports and surveys. It was recently named the city with the highest ease of doing business. It is also known for its highest quality of life and most competitive economy.
  2. Ideal location: Singapore’s strategic location makes the country the perfect hub to gain access to other South East Asian markets that are otherwise difficult to enter. Markets such as Malaysia, Indonesia, Vietnam and Philippines are difficult to penetrate without a Singapore setup, which helps ease problems like language constraints and cultural habits of people in these countries.
  3. Skilled force availability: Singapore has abundant skilled workforce available. In addition, you’ll be pleased to know that INSEAD has ranked Singapore second on their Global Talent Competitiveness Index.
  4. Low tax rates: Singapore offers one of the most attractive commercial tax rates in the world. At just 17%, it is only half of India’s corporate tax rate. Furthermore, Singapore offers tax exemption for companies that are newly formed. Though start-ups are eligible for numerous tax breaks in India, the total tax amount they end up paying is much greater than what they would have to pay in Singapore.

Commonly asked questions about company incorporation in Singapore

1. How can I register a company in Singapore from India?

Registering a company in Singapore from India is a straightforward process. You need to hire a registered filing agent (corporate service provider) as foreigners cannot register a company directly. The steps include:
  1. Choosing a unique company name and getting it approved by ACRA (Accounting and Corporate Regulatory Authority).
  2. Submitting the required documents such as passport copies and proof of address for shareholders and directors.
  3. Appointing at least one local director (can be a nominee).
  4. Paying the registration fees.

Once approved, your company is officially incorporated, typically within 1-3 days.

2. Can an Indian set up a company in Singapore?
Yes! Indians can fully own and operate a business in Singapore. The country allows 100% foreign ownership, meaning you can be the sole shareholder of your company. However, Singapore law requires at least one local resident director (a Singapore citizen, PR, or someone with an Employment/Dependent Pass). If you do not have a local director, you can hire a nominee director from corporate service providers. If you wish to relocate to Singapore and run your company, you need to apply for an EntrePass or Employment Pass.
3. Can Indians start companies in Singapore?
Yes, Indians can start a business in Singapore without being physically present. You just need to engage a local corporate service provider for registration and compliance. Many Indian entrepreneurs choose Singapore due to its low corporate tax (17%), ease of doing business, and access to global markets. Whether you are setting up an IT firm, consulting business, or trading company, the process is simple and efficient.
4. What are the best businesses in Singapore for Indians?

Singapore offers a thriving business environment, and some of the best sectors for Indians include:

  • IT & Software Services – Singapore is a tech hub with high demand for IT solutions.
  • E-commerce & Digital Marketing – Online businesses thrive due to strong internet penetration.
  • Import-Export & Trading – Singapore’s strategic location makes it a global trading hub.
  • Financial Services & Fintech – The country is home to many fintech startups.
  • Healthcare & Wellness – Ayurveda, yoga, and wellness businesses have great potential.
  • Education & Training – Online coaching, skill development, and corporate training businesses are booming.
5. Why do Indian companies register in Singapore?
Many Indian businesses register in Singapore due to its business-friendly policies and global market access. The key reasons include:
  • Low corporate tax rate (17%) and tax exemptions for startups.
  • 100% foreign ownership – No need for a local partner.
  • Ease of doing business – Ranked among the top in the world.
  • Strategic location – Gateway to ASEAN and global markets.
  • Stable legal and financial system – Strong protection for businesses.
  • Government grants and incentives – Various schemes support new businesses.
6. How can I set up a company in Singapore from India?

Setting up a company in Singapore from India involves the following steps:

  1. Choose a business structure – Private Limited Company (Pte Ltd) is the most common.
  2. Engage a corporate service provider – They handle company registration, compliance, and nominee director services.
  3. Submit incorporation documents – This includes shareholder details, business name, and registered office address.
  4. Appoint a local director – You can use a nominee director service if you’re not relocating.
  5. Register with ACRA – The official registration body in Singapore.
  6. Open a corporate bank account – Choose from leading banks like DBS, OCBC, or UOB.
  7. Apply for relevant business licenses (if Required)

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Shops and Eligibility Act in India – Everything you need to know
  • Article, India

Shops and Eligibility Act in India – Everything you need to know

The Shops and Establishment Act is authorized in every state in India and it controls most business entities in the nation. Some of the primary goals of this Act include controlling payment relating to wages, occasions, terms of employment, leaves, work conditions, over time work, maternity leave and advantages, the depiction of work, rules for work of youngsters among many other things for individuals involved in shops and other business establishments. The Shop and Establishment Act is enforced nationwide. All commercial establishments in India such as hotels, eateries, theatres, amusement parks, theatres and other entertainment houses all come under the purview of this Act.

In the act, a “commercial establishment” is defined as:

  • Any business organization in the commercial sector like banking, insurance or trading establishments
  • Establishments where citizens are employed or engaged to complete office work or provide professional services
  • Hotels, eateries, restaurants, boarding houses, small café or refreshment houses
  • Entertainment and amusement places like theatres, cinema halls or amusement parks


All the above mentioned enterprises fall under the Act and are thereby, expected to adhere to the rules, regulations and norms that are set by the Act for better treatment of their employees. The exceptions to the Shops and Establishment Act varies from state to state in India. Each state in the country submits a list of all shops and establishments that come into the Act and outlines who are the ones required to complete registrations under the Act in order to run their company in the state.

When do I need to register my business under the Shops and Establishment Act?

You must apply for registration under the Shops and Establishment law within 30 days of establishing your business, a store of any of the establishments mentioned above. This registration is important and necessary for multiple reasons, such as opening a new current account in a bank. This registration works as a basic license and a proof of your enterprise while applying for other registrations that are required to run and manage a business in India. Incorporation and online shopping forms are available for you access on the government website.

The application process for the registration

Each and every state in India has established different regulations and rules for registration under the Shops and Establishment law. However, the basic procedure is still the same. As per the law, every business has to obtain approval from the Ministry of Labour. You can obtain the registration certificate from the Chief of the Shops and Law inspector of the facility or from any other inspector who is authorized to the region in which the facility is run.

An application, in the specified form, must be submitted to the relevant inspector along with the following documentation:

  • Name of the business in question
  • The name and details of the owner as well as employees (during the time of business formation)
  • The address of the business facility and a copy of the bill of sale. Alternatively, the lease contract for the shop is also accepted
  • The business owner’s PAN card number


All the above listed details and documentation should be submitted in the form along with the relevant fees set for the inspector in charge.

After the application is received, the allotted inspector will review the details and visit your business facility. If necessary, the inspector will provide a certificate of registration under the law. The registration certificate obtained should be displayed in a visible, significant place inside the store and should also be renewed in case any of the details provided (like the number of employees, etc.) should be changed. The certification should also be renewed upon expiration. Registering a business the Shop and Establishment Law is one of the many mandatory requirements for all businesses operating from a store or a facility. In cases of facility changes or closures, all the relevant details should be presented to the inspector within fifteen days of the planned change or closure.

Businesses that run out of stores or facilities need this licensing or registration to prove its authenticity while planning to increase investment through bank loans or from investment capital. The above described registration process can be fully completed and the formal, printed version of the license will be issued within 10 business days in most of the cities and may take a little longer elsewhere.

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ZOHO Books and Implementation in UAE
  • Article, U.A.E

ZOHO Books and Implementation in UAE

The concept of online smart cloud-based accounting was first put into practice in 1998, and since then, there have been many innovative software developments to bring it to today’s maturity.

ZOHO Books is a smart cloud-based online accounting software that has become most popular amongst all accounting services in Dubai.

Features of ZOHO Books

ZOHO Books, an online cloud-hosted accounting software primarily designed for growing Small and Medium enterprises. It has features to automate and integrate business workflows and help manage your finances in a very timely and effective manner. Apart from being an end to end accounting solution, it is integrated with more than forty basic ZOHO applications and other company software.

Main features of ZOHO Books are

Main Features of ZOHO Books
  • End to end application covering all stages of business process stages
  • Can be easily integrated with all cross-functional applications
  • A collaborative software as ZOHO Books CRM can facilitate communication with customers
  • Intelligent and intuitive user interface organizing tools in clear sections and interlinking pages for easy navigation and help save lots of time
  • Time tracking with timesheet modules for tracking time spent in completing projects
  • Contact management features instant customer support through customer query mitigation and narrowing down the gap between sales and support teams
  • Once activated, the automatic bank feed fetches all banking transactions from your listed banks on a daily basis, by default
  • Have an option for creating customized reports by integrating ZOHO Books reports
  • Once a bank rule is created by defining transactions, all your banking transactions are automatically categorized

Advantages of ZOHO Books

ZOHO Books is always your preferred and better choice for accounting.

  • The intuitive interface makes it very easy and convenient for use
  • Zoho Books pricing is one of the lowest in this category, making it most lucrative and affordable for you
  • It is very robust and accurate software and help prevent accounting blunders and keep you within regulations and standards
  • The mobile application helps you to continuously track the financial status of your organization without a laptop and even when you are moving and can be run on both android and iOS
  • All your accounting needs can be comfortably met with this software and help you save money and increase customer base. Payables & receivables, inventory, Payroll, and VAT management can be easily and comprehensively done

ZOHO Books Implementation in UAE

Whenever any new system is employed, the need for experience and expertise arises for the successful implementation and maintenance of the new system.

As ZOHO Books are gaining wide acceptance and popularity, ZOHO Analytics initiated ZOHO consulting partners program to equip the consulting partners with the necessary skills and expertise and for providing customer solutions around ZOHO Books. On successful completion of this program, all consulting partners are certified and approved as ZOHO Books consultants.

ZOHO Books consultancy services in UAE provide complete implementation through

  • Analyzing customer needs and business processes and creating prototypes
  • Implementation and Customization of ZOHO Books through necessary selection and integration of essential ZOHO books from forty plus products, e.g., CRM, Projects Campaign, etc.
  • Training on ZOHO case studies and customer success stories
  • All-time customer support for ensuring continued maintenance
Though primarily created for SMEs and start-ups, ZOHO accounting software is equally applicable and useful for large enterprises.

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Here is All you Need to Know About ESOP Process in Singapore
  • Article, Singapore

Here is All you Need to Know About ESOP Process in Singapore

An employee stock options plan is an employee benefit scheme to provide them an ownership interest in the corporation. The Company’s board of management administers the ESOP process and lays down specific rules regarding the same.

A part of the total equity amount is set aside to offer this benefit to the key employees of the organization. The offer price is decided by the board of directors in advance and it remains very close to the fair market value.

The structure of ESOP is generally governed by the company’s financial needs, health, and objectives. Different issues have to be accounted for before making the final decision of setting up an ESOP.

Here is a step-by-step guide to set it up for your employees.

Drafting the rules

These rules set forth the terms that apply to all options granted under the plan, including the granting options process, when and how employees can exercise their options, and what happens to the options on an exit event, or if an employee leaves the organization.

An efficiently drafted ESOP Agreement helps in structuring the ESOP by creating an Employee Stock Option Pool (ESOP Pool) that helps in placing an equity shareholding percentage on the side for employees.

Hence, employees can participate in the company shares because of this pool. Further, an ESOP Agreement will clarify the details of members of an ESOP committee. The ESOP committee is a committee that comprises the company’s directors and other officers.

The responsibility of managing the ESOP Pool lies with the ESOP committee and it recommends suitable actions to the Board of Directors of the company.

Approval of rules and the ESOP pool

Once your set ESOP rules are completely satisfactory, your directors and shareholders can sign the corporate approval documents for adopting the ESOP rules and successfully setting up the option pool.

For Singapore companies, these resolutions will be practically handled by your corporate secretary. If your company is not Singapore based, you should be confirming this step with a local law firm.

Board and Shareholder Approval

Your corporate secretary will prepare a set of directors’ resolutions in writing for your company’s directors to sign and a similar set of written shareholders’ resolutions for your existing shareholders to sign. The following points should be included in the resolutions:
  • ESOP rules approval
  • The total number of ESOP pool options.
  • Authorization for the board on granting options to recipients
  • Authorization for issuing shares on any exercise of such options

Shareholder waivers and consents

The company’s constitution and your shareholders’ agreement may include precautionary rights on the issue of new shares.

If this is the case then those shareholders having the precautionary rights will have to sign a waiver in respect of any options granted under the ESOP. If required, you should ask your corporate secretary for preparing this shareholders’ waiver also.

Finally, your existing constitution and shareholders’ agreement should also be checked for specific consents required from any shareholder for issuing shares, grant options, or establishing an ESOP. For instance, if you have gone through external funding round, your investor might have a veto right over the issue of any new options. If that is the case then you will need that party’s written consent for granting options and issuing shares under the ESOP.

Granting your options

Here’s what you need to do for granting options to the selected recipients.
  • Prepare your directors’ resolutions
    Every time you feel like granting options, you should ask your corporate secretary for preparing a new set of directors’ resolutions in writing, approving the grant of options to a specific or a list of recipients.

  • Send grant letter to each recipient
    Send each recipient:
  1. A completed & signed grant letter including the number of options granted, the exercise price along with the vesting schedule.
  2. An attached copy of the ESOP rules.
    If the recipient is willing to accept the offer then they should counter-sign the letter of grant and send it back to you.

  • Issuing the option certificate
    After receiving the countersigned letter, you are allowed to issue them their option certificate.

  • Updating your options register
    Internally, you should also maintain an options register, containing the record of all the options the company has granted, the vesting schedules, expiry dates, and the respective exercise dates.

The Process of Checking a Registered Company in Singapore READ MORE


Important Factors to be considered while implementing ESOPs

 
Despite numerous advantages, many critical factors should be considered while implementing ESOP in any organization.
 

Complicated Process

Initially setting up an ESOP is a flexible process but is also very complex. Some many rules and regulations are to be followed in every aspect and considering many different scenarios are extremely crucial. The process of setting up an ESOP is quite costly and should necessarily involve a practicing lawyer.
 

Deciding the Equity percentage

No rule tells how big your ESOP Pool should be. However, experts recommend that companies should set a limit on the amount of equity they are willing to share with their employees. This task can be time-consuming as various trends are to be studied in the process.
 

What happens when an employee exits the organization after the shares are vested?

The ESOP agreement should contain a transparent provision for the happenings when any employee who holds an ESOP decides to leave the company. Generally, an outgoing employee takes back all his unvested options but retains the vested options until a specified period.

Conclusion

Setting up an ESOP is not a very difficult task once you have a set of ESOP rules that are satisfying for you. In most cases, your company secretaries are efficient enough to be able to prepare all the necessary resolutions quite efficiently. You just need to finalize on what is best for your employee’s interest and how you can safeguard this interest in the long-run. Any foolish decision of even a small scale can lead you towards a dangerous future.

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