Why Open a Singapore Representative Office?

Why Open a Singapore Representative Office?

There are some cases in which exploring the business potential of a market before making huge investments is good option especially to foreign companies operating in a speculative but potentially rewarding industry. With this consideration, a Singapore representative office is the ideal setup most professionals recommend to businessmen who want to avoid huge losses.

Why Open a Singapore Representative Office?

Aside from conducting an extensive market research and feasibility study, a Singapore representative office is also allowed to act as a liaison office of its parent company from abroad, particularly during the negotiation deals. However, this office is not allowed to enter in to any business contract since it is prohibited to conduct activities which are "commercial" in nature.

According to the Accounting and Corporate Regulatory Authority (ACRA), a representative office is not treated as a legal business entity but merely an administrative arrangement that is only allowed to conduct the following activities: oversee the activities of its parent company's local distributors and agents; establish business contacts for its main office; provide customer care service except those which involve repair and technical services; and conduct market research.

On the other hand, these are the activities a Singapore representative office is not allowed to perform: lease warehouse facilities; provide services or products for fees and other profit-generating undertakings; enter in to legal contracts and agreements; and store and ship goods in Singapore.

In case the foreign companies want to store and ship goods to Singapore, they should ask their local agents to perform these since their representative office is prohibited to conduct such activities.

These are the basic features of a Singapore representative office:

- A representative office should bear the name of its parent foreign company unless it is being used by an existing business and is deemed indecent and vulgar by the authorities. If this is the case, ACRA will allow a foreign company to choose a different name for its Singapore representative office.

- The permit of this office is renewed annually, but after three years, it is no longer allowed to operate since ACRA believes that this period is enough for any foreign companies to determine the potential of their services or products in Singapore.

- After the validity of this office has expired, foreign companies should resort to another business structures such as the branch office or subsidiary company, which are allowed to conduct money-generating activities, if they want to continue their presence in the city-state.

- A Singapore representative office is headed by a chief representative from the main office.

- It cannot conduct profit-generating and commercial activities.

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