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Holding Company Challenges
Holding company managers are often pulled in multiple directions by the demands of their subsidiaries. They may have to make crucial decisions about a subsidiary without in-depth knowledge about its immediate business activities. This lack of information can result in sub-optimal decisions.
Conversely, subsidiary managers may not have enough information about the overall strategy or goals of the parent company. The interests of the two companies and its managers may not be correctly aligned. For instance, a subsidiary may wish to buy raw material from the best supplier in the market, but the parent company may want it to buy it from one of its subsidiaries. Such competing interests across management teams can result in conflict and poor business decisions.
The holding company structure provides the opportunity to create opaque business relationships. Such a framework becomes a disadvantage for the minority shareholders who might not have an accurate picture of the whole business. Majority owners can use transfer pricing or preferred supplier relationships to their advantage. This can be a particularly serious issue if ownership of the holding company and all subsidiaries is not symmetric and parties own different proportions of the subsidiaries.
Because the market doesn’t have a clear picture of the operations of all subsidiaries, it may penalize a holding company's stock price. Furthermore, if the holding company owns subsidiaries that are not performing well financially, the market may penalize the holding company disproportionately for the performance of the subsidiary while not giving the parent full credit for the financial performance of the parent company.
How to Set Up a Singapore Holding Company
If you do decide to move forward with establishing a holding company, your objectives will dictate the right type and structure for it.
Types of Holding Companies
There are only two types of holding companies in Singapore: investment and financial. Each has its own particular registration criteria, but there’s not much difference in terms of taxation:
- An investment holding company is the default structure for companies operating outside the finance, banking, and insurance industries;
- A financial holding company is meant for owning subsidiaries operating in the finance, banking, and insurance industry.
Types of Corporate Structures
If you’re considering a holding company structure, Singapore is an excellent jurisdiction due to its favorable regulatory framework, tax policies, and legal system.
Choose a reputable corporate services partner in Singapore to ensure that your holding company structure meets the economic substance requirements and won’t encounter objections from regulatory authorities.
Setting up a Singapore holding company can be done online within a few days with the assistance of a reliable service provider. All you need to do is provide the necessary information and required documents. Your service provider will handle the filing and submission process on your behalf.
How Can We Help?
Are you in search of company incorporation, immigration, accounting, tax filing, or compliance services in Singapore? If so, CorporateServices.com is here to assist.
With our extensive experience in establishing holding companies, we can help you create the ideal structure for your business and asset holdings. You’ll receive a personalized solution designed to meet your specific needs, offering protection, privacy, risk mitigation, tax optimization, and operational efficiency. Please reach out to us if you need help registering a company in Singapore or if you’d like to transfer the administration of your existing company to our team.