Can Employment Pass Holder Set Up A Company In Singapore?Download Now: FREE GST 2023 GuidebookDownload Now: FREE Employment Pass ChecklistDownload Now: Free Incorporation Checklist
We have been frequently asked by Employment Pass (“EP”) Holders if they are allowed to register a company in Singapore. The strong expatriate community and connections to their home markets often open up interesting business opportunities.
The short answer is YES.
- An EP holder can own shares in a Singapore company
- However, the Ministry of Manpower (MOM) does not allow an EP holder to be a director in the company if they are on employment with another employer.
- Specifically, an EP holder is only allowed to be a director in the company which applied for his EP (or upon MOM approval, related companies of the employer or related to his/her work).
- Companies Act requires that at least 1 director of a company needs to be a resident in Singapore,
These open some challenges for the EP holder. Sprout provides solutions to get around this issue.
Let's us dive into several common scenarios and discuss our recommended solutions:
Scenario 1: EP holder wishes to be an investor in a friend’s company and the EP holder will not take an active role or a director position. The friend is a local Singaporean Citizen or PR.
This is a straightforward scenario and the EP holder can be a shareholder in the company with no issue. The EP holder may wish to look out that his/her stake in the company is small or the risk is low, so that he/she is comfortable with not taking a director position to oversee the business.
Scenario 2: EP holder wishes to set up a company while maintaining his current EP with his current employer. The EP holder’s role in the company is a shareholder and the EP holder will rely on his employment as the main income.
The EP holder will require nominee director service to fulfil the Companies Act. Sprout’s Launch package provides an all-in bundle including director services, incorporation, company secretary and registered address, which will be sufficient for the business to get started.
If the business gains traction and the EP holder eventually decides to work on the business full-time, Sprout can assist the EP holder to apply for an EP under the new company. Upon obtaining the new EP, the EP holder can be the resident director and the company will no longer require Sprout’s nominee director service.
Scenario 3: EP holder wishes to set up a company and begin an application for an EP under the new company. The EP holder is prepared to give up his current employment status and seek a new adventure as an entrepreneur.
Onshore is a Sprout solution designed for this scenario. Sprout will help the EP holder incorporate a company with nominee director service. With this new entity, we will assist the entrepreneur to apply for a new EP. EP application takes between 3-6 months for an EP to be fully issued and the EP holder can then takeover as the resident director. Our solution coupled a limited-period 6 months nominee director service with EP application support to optimise start up cost.
Commencing in September 2023, the process of obtaining an EP has become more rigorous. Higher standards are now in place. To qualify, you must excel in a two-stage eligibility framework. Besides meeting a minimum salary requirement of$5,000, you must also pass a newly introduced point system, Complementarity Assessment Framework (COMPASS).
The shareholders of the company will also need to fund a relatively large amount of paid-up capital as MOM see this as a commitment and indicative ability of the company to pay the salary of the EP applicant. The EP holder will not be at risk of losing his work visa in Singapore as the original EP will only be cancelled after obtaining approval in-principle for the new EP.
Singapore is a great gateway to Asia and hub for international business, so we hope to encourage more entrepreneurs to start their business here! The team at Sprout supports our clients in incorporation, secretarial and work pass services. Arrange a complimentary consultation if you are interested to learn about the Sprout’s approach!