Finance Company License in Singapore
Singapore is the fourth largest financial centre in the world. With the development of the fintech sectors, a large number of new financial industries are opening to meet the requirements of the consumers. An individual who wants to open a Finance Company in Singapore is required to comply with all the various laws, depending on the field they want to operate in.
What is a Finance Company in Singapore?
Under Finance Companies Act, a Finance Company is defined as a company governed and licensed by this Finance Companies Act which carries on the financial business. However, for the purpose of this Act, all the branches and offices of such a company located within Singapore are deemed to be one finance company.
There are several types of Financial Companies that can be established in Singapore, among which insurance companies, banking institutions, brokerage firms, investment funds, and fintech companies, among which cryptocurrency businesses are quite popular in Singapore.
When it comes to the License of Finance Company in Singapore, the following are granted:
- For wholesale banks, local banks, representative offices of foreign banks, branch offices, financial holding companies, and financial companies;
- For exempt trust companies, for corporate finance advisers, for fund management companies and licensed trust companies;
- For licensed and exempt financial advisers, as well as for exempt persons offering financial advisory services;
- For direct life, captive insurers, reinsurers for captive life and general insurers.
Cryptocurrency and other fintech companies can also obtain special registration or licenses for operating in the financial sector in Singapore. In Singapore, only a public company can apply for a License of Finance Company. A public company is a company incorporated in Singapore, which is not a private company.
Financial Companies fall under the rules and regulations of the Finance Companies Act in Singapore. These Financial Companies provide fixed and savings deposits to the citizens of Singapore. Financial Companies also provide credit facilities to corporations in Singapore.
Banks and all other types of Financial Companies in Singapore are not allowed to deal in gold or foreign currencies. These companies are also not allowed to purchase foreign currencies under the forms of shares, stocks, or debt securities. The Financial Institutions are approved to expand their activities only if a request with the MAS or Monetary Authority in Singapore.
Legislations associated with the Financial Company in Singapore
The MAS or Monetary Authority of Singapore is the main authority providing licenses which need to be obtained while opening a Finance Company in Singapore. The Ministry for Finance provides for the legal framework governing the activities of Finance Company in Singapore operating in this industry.
Depending on the kind of Financial Company, a person will open in Singapore; the following laws must be followed:
- the Monetary Authority of Singapore Act or MAS which provides for the opening of banks in Singapore;
- The Banking Law which also provides for rules and regulations for the banking institutions;
- The Securities and Future Act, the Financial Advisers Act and the Trust Companies Act which cover the opening of businesses operating on the capital markets in the city-state;
- The Insurance Act which covers the licensing and activities requirements for reinsurance and insurance companies;
- The Money-Charging and Remittance Act and the Payment Services Act provides for the opening of the payment institutions; and
- The Anti-Money Laundering Act, which covers the activities of all finance companies operating in the financial sector in Singapore.
Different Licensing options for Finance Company in Singapore
As per rules and regulations prescribed under the Finance Companies Act, the businesses intending to provide financial services are required to apply for a single License in Singapore:
- A license for capital markets services; and
- A license for a financial adviser.
The activities regulated by the above mentioned two types of financial services licenses include investment advisory services, asset management, and property fund management in Singapore. However, before applying for one of the two types of Licenses of financial services, one is advised to request the services for the formation of company consultants in Singapore.
Capital Market License
According to the rules and regulations of the Futures Act in Singapore, the License for capital markets is employed while providing the following financial services:
- Trading of securities in Singapore;
- Trading of foreign exchange;
- Fund management;
- Financing securities;
- Corporate finance advisors; and
- Real estate investment trusts in Singapore.
The License for capital markets services is only granted to the corporations in Singapore by the Monetary Authority.
Financial Advisers License
The License for financial advisers falls under the rules and regulations of the Financial Advisers Act in Singapore.
The following services are covered by the License for financial advisers:
- Offering counsel on investment products such as foreign exchange, securities, life insurance policies; and
- Collective investment schemes.
The License for financial advisers does not cover bank deposits, general insurances, and loans or mortgages.
What are the Functions of Finance Company in Singapore?
A Finance Company in Singapore is regulated by the MAS or Monetary Authority of Singapore. The Monetary Authority also defines the scope of activities of a Finance Company in Singapore. The scope of the activities of such finance companies can be expanded by taking approval from the authority.
The Finance Company in Singapore can provide the following facilities to individuals as well as to corporations.
The facilities provided are as follows:
- Provide savings and fixed deposit facilities.
- Provide credit facilities. However, these finance companies cannot provide unsecured credit facilities to a single person who, at any point of time, exceeds 5,000 Singapore dollars.
What facilities does the Finance Company in Singapore cannot do?
The Finance Company in Singapore do not have the power to provide the following facilities:
- These companies cannot provide deposits facilities that are repayable on demand either by cheque, order, or draft.
- These companies cannot deal in;
Other Precious Metals.
- These companies are not authorized to acquire stocks, debt securities, or shares denominated in foreign currency.
Minimum Capital Requirement for obtaining a License for Finance Company in Singapore
The applicant is required to fulfil a certain capital requirement which is as follows:
- If the application for License for a Finance Company in Singapore is filed after 18th January 1995, then the applicant is required to have a minimum issued and paid-up capital of $50 million. The capital funds of the company should also not be less than the minimum capital requirement.
- If the application for License is filed on or before 18th January 1995, the applicant is required to have minimum capital funds of $50 million. However, if 8 years have expired from 18th January 1995, the Authority in Singapore can order them to meet the minimum issued and paid-up capital requirement of $50 million within the stipulated time period.
Note: In Singapore, Capital Funds are defined as ‘the company total paid-up capital and its published reserves, less any debit balance appearing in the profit of company and loss Account.
Procedure for License of Finance Company in Singapore
The procedure for License of Finance Company in Singapore is as follows:
- When the applicant submits a License registration application, the authority will consider the same and verify the following factors are synchronized with the requirements:
- The authority has the power to alter the pre-conditions for such finance company license registration.
- Only after thorough consideration of such application, the Authority may issue the License.
- In order to operate as a Finance Company, the applicant is required to apply to the MAS or Monetary Authority of Singapore for the License in Singapore.
- The financials of the finance company;
- The management of the applicant finance company;
- The capital adequacy and earnings statements;
- If the objects mention in the MOA of the company specify the financial activities;
- The main object of the finance company is to serve the society and make credit facilities available to the needy section; and
- If the registration is in the public interest or not;
- After consideration of all the aspects mentioned above in the application, the Authority in Singapore can either grant the License for Finance Company or reject the application.
- If any person is aggrieved by such an order of refusal, then they have a right to file an appeal for the same within 3 days of such an order of refusal.
- Such an appeal is to be made in writing to the Minister in the Authority, and the decision of the Minister will be binding and final.
- After all the necessary aspects been fulfilled by the applicant, the authority will issue a License for the Finance Company in Singapore.
Penalties for not complying with the provisions for the License of Finance Company in Singapore
Operating without License
In Singapore, only a public company that has a valid License of Finance Company can transact any financing business.
In the contravention of such provision, the guilty party is liable to the following:
- Fine that should not be exceeding $20,000; or
- Imprisonment for a term up to 3 years; or
- With both.
Contravention with License Conditions
If the licence holder breaches the above conditions then the following fines would be levied by the authority:
- Fine that will not exceed $20,000, or
- If the offence is a continuing offence, then an additional fine of $2,000 for every day of the offence.
Providing Misleading and False Information
If at the time of submitting an application for registration, anyone provides false or misleading information either knowingly or recklessly, they will be liable to:
- Fine not exceeding $50,000; or
- Imprisonment for a term up to 3 years; or
- With both.
Advantages of a Finance Company in Singapore
The benefits of applying for License of Finance Company in Singapore:
- Singapore is one of the largest financial centres in the world;
- The workforce in Singapore is highly qualified, especially in the financial field;
- There are anti-money laundering rules and regulations which provide high confidence for investors;
- Setting up a Finance Company in Singapore is quite simple and easy;
- A finance company brings several tax benefits for its shareholders, no matter if these shareholders are natural persons or corporate ones.