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Setting Up a Finance Company

Updated: Jan 3

Finance Company

A "finance company" is any entity licensed under the Finance Companies Act to engage in financing activities within Singapore. For the purposes of this Act, all branches and offices of such a company within Singapore are considered as one unified entity.

Under the Finance Companies Act, a "finance company" refers to any company authorized to conduct financing business within Singapore. For compliance purposes, all branches and offices of such a company located within Singapore are treated as a single entity.

The term "financing business" encompasses the following activities:

(a) Public Borrowing: Borrowing funds from the public through accepting deposits, issuing certificates, or other instruments acknowledging debt and promising repayment, either on demand or after a specified period.

(b) Public and Related Company Lending: Loaning money to the public or companies deemed "related" under the Companies Act 1967 (Section 6), with repayment occurring within a specific timeframe, as installments, or not at all.

Additionally, it includes:

  • Financing hire-purchase transactions under the Hire-Purchase Act 1969, where the funding comes from public borrowing.

  • Any other activities prescribed by the Monetary Authority of Singapore as falling under "financing business" for this Act.

Setting Up a Finance Company

Setting up a finance company in Singapore can be a complex process, but it's also a rewarding one. Singapore is a global financial hub with a strong regulatory environment and a supportive government. This makes it an ideal location for starting a finance company.

Here's a general overview of the steps involved:

1. Business Incorporation

  • Choose a business structure: The first step is to choose a business structure for your company. The most common options are private limited companies and limited liability partnerships.

  • Register your business: Once you've chosen a business structure, you need to register your company with the Accounting and Corporate Regulatory Authority (ACRA).

  • Open a corporate bank account: You'll need to open a corporate bank account to manage your company's finances.

2. Licensing

  • Apply for a financial license: All finance companies in Singapore must be licensed by the Monetary Authority of Singapore (MAS). The type of license you need will depend on the types of financial services you plan to offer.

  • Meet the fit and proper criteria: The MAS will assess your company's fit and properness to operate a financial business. This includes factors such as your financial soundness, management experience, and risk management practices.

3. Compliance

  • Comply with anti-money laundering (AML) and know-your-customer (KYC) regulations: Singapore has strict AML and KYC regulations that all financial institutions must comply with.

  • Maintain adequate capital adequacy: The MAS has capital adequacy requirements for all finance companies. These requirements ensure that you have enough capital to cover your risks.

  • Report to the MAS: You'll need to submit regular reports to the MAS on your financial activities and compliance with regulations.

Additional Tips

  • Develop a business plan: A well-developed business plan will help you secure funding, attract investors, and grow your company.

  • Build a strong team: Surround yourself with experienced and qualified professionals who can help you run your business successfully.

Fees to Transact Financing Business

The following fees shall be payable for a licence to transact financing business under the Act granted by the Monetary Authority of Singapore in respect of —

(a) the head office or main office of a finance company $35,000 per annum; and

(b) each branch office or sub-branch office of that finance company $5,000 per annum.

Here are some resources that you may find helpful:

Seek Bestar Professional Advice

Setting up a finance company is a complex process and seeking professional advice is crucial for success. Bestar can definitely be a valuable resource in this endeavor.

Here are some ways Bestar can help you with setting up your finance company in Singapore:

Company Incorporation and Registration:

  • Bestar can guide you through the process of choosing the right business structure for your finance company, taking into account factors like liability, tax implications, and future growth plans.

  • We can handle the registration process with ACRA, ensuring all necessary documentation is filed correctly and efficiently.

Licensing and Regulatory Compliance:

  • Bestar has extensive experience navigating the complex licensing requirements set by the MAS for different types of financial services. We can help you identify the appropriate license for your business and ensure you meet all fit and proper criteria.

  • We can also advise you on ongoing compliance with AML/KYC regulations, capital adequacy requirements, and reporting obligations to the MAS.

Financial Management and Planning:

  • Bestar can help you develop a sound financial plan for your finance company, including budgeting, forecasting, and cash flow management.

  • We can also provide guidance on tax optimization strategies and ensure your company complies with all relevant tax regulations.

Additional Services:

  • Bestar offers a range of additional services that can be beneficial for your finance company, such as accounting and bookkeeping, payroll services, and IT consulting.

Seeking Bestar's Advice:

  • To get started, you can contact Bestar directly through our website or by phone. We offer a free consultation where you can discuss your specific needs and goals for your finance company.

  • During the consultation, you can ask questions about our fees, experience, and approach to working with clients like you.

Contact Bestar today!

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