Foreign companies planning to explore the profitability of their goods or services before they engage in a business operation in Singapore can register a representative office.

According to experts, a representative office is not treated as a legal business entity since it is prohibited to conduct anything that will create revenue. Aside from this limit, this model is not allowed to lease warehouses, enter into a contract, and perform commercial and trading activities.

Meanwhile, these are the only activities a representative office can engage to:

• Perform market research that will determine the viability of a parent company’s products or services.

• Provide customer care assistance as long as this is not related to technical or repair services.

• Act as a liaison of its parent company but is prohibited to enter into a contract.

• Oversee all the activities of the local distributors and agents of its foreign parent company.

Under the Singapore Companies Act, a representative office is prohibited to operate for more than three years as the government believes that this is enough time to determine the profitability of a certain service or goods.

In case that foreign companies still want to continue its presence in Singapore but their representative office has already passed the three-year limit, it can register a subsidiary company or branch office that will allow them to engage in profit-generating activities.

Foreign company owners should realize that they are prohibited to self-register their own business. This is because the Singapore Companies Act requires them to hire a professional registration firm that will act on their behalf during the application of their representative office to the International Enterprise Singapore.

These are the required documents foreign companies should provide if they want to register a representative office:

• A certified copy of the Certificate of Incorporation

• A copy of the main headquarters latest annual report

• A copy of audited financial statements

Another requirement is to appoint and relocate an agent from the head office who will be responsible for the activities of the Singapore representative office. Meanwhile, foreign companies should only hire a limited number of staff, both local and foreign, who will perform the activities of a representative office.

In terms of legal ramifications, a representative office is an extension of its foreign parent company which means that the latter is directly liable for all its act, debts, and liabilities during its operation.