Why Should I Start a Private Limited Company?

Private Limited Company

A private limited company is a business that is a legal entity that is separate and distinct from its directors and shareholders. Companies can be private which limits the number of members to 50 or public where it can have more than 50 members.

A private limited company is one that is locally incorporated where it has a minimum of 1 shareholder in the company and a maximum of 50. It can sue and be sued in its own name, and the directors and shareholders are not personally liable for debts or losses of the company. Its members also have limited liability to the company, meaning that there are no obligations to the company except for shares being paid up.

Advantages of setting up your business as a private limited company

1. Having a distinct legal identity

Being a private limited company, the business is given a separate legal identity from its owners and shareholders. This means that the company is able to purchase assets in the country, enter contracts, go into debt, sue or be sued in their own name. Since it has its own identity, the company can remain a perpetual business until the shareholders decide to dissolve it. Moreover, the distinctiveness of a private limited company prohibits the use of similar identities by other businesses.

Adding on, a company’s distinct legal identity implies that owners’ and shareholders’ liability in the company are limited based on their share capital. Since owners’ and shareholders’ personal assets are separate and protected from the business entity, they are given some form of security when doing business in the company. This can translate into having the ability to take more calculated risks that may not have been taken if the ownership was fully on any of the owners/shareholders. Also, the limited liability in the company serves as an attractive characteristic to encourage potential investors to be part of the company without being held personally liable.

2. Raising additional capital

As the company grows and expands, it will require additional capital to support its business operations. As a private limited company, it would find it easier to raise additional capital to support its expansion by simply issuing new shares to current shareholders or attracting new investors. This is much more feasible for a private limited to do as compared to a sole proprietor or partnership business which has to rely on their owner’s personal assets and funds.

3. Tax exemption benefits

A private limited company is able to take advantage of the tax exemption benefits given to companies. Newly established private limited companies incorporated in Singapore are eligible for full tax exemption in their first three years of assessment, and yearly partial tax exemption from then on. This makes after tax profits more competitive as compared to business run as sole proprietors or partnerships, which charges personal income tax on the business income which could range from 2 to 22%.

Moreover, income from companies are taxed only once at the corporate level and will not be taxed when the profits are transferred to shareholders. Hence the dividends received by shareholders of a private limited company will not be tax chargeable again, resulting in a sense tax free income to be received by shareholders.

4. Ease of transfer of ownership

In the case of the need for a transfer of ownership of the company from one shareholder to another due to various reasons such as a shareholder exiting the business or any dispute, ownership transfer can be easily done without comprising operations. The ownership of a private limited company may be transferred either wholly or partially by selling off shares or through issuing new shares to new investors. The process is not as complicated as it seems and can be done without disrupting current business operations. This ease of transferability of shares are beneficial to investors and hence can be a point that makes a company attractive to new investors.

Disadvantages to starting a private limited company

There are undoubtedly certain drawbacks of setting up a private limited company as well, mostly due to the governing and regulation of the company itself since it is made up of numerous members. A private limited company has to follow rules and regulations by the Singapore Companies Act, and any violation or misconduct in these area can lead to severe penalties on the company. There is also a larger amount of administrative work that a company has to deal with as compared to sole proprietors or partnership businesses. These administrative duties are extensive and include the submission of Annual Reports and Directors’ Reports. Operating costs of private limited companies are generally higher with these administrative requirements, hence overall is more expensive to set up.

Why Should I Register for GST?


Goods and Services Tax (GST) is a broad-based consumption tax levied on the import of goods, as well as almost all the supplies of goods and service in Singapore. Companies can be registered for GST either under compulsory registration or voluntary registration. The liability for compulsory registration of GST depends on the value of one’s taxable turnover, which refers to the value of goods and services supplied that are regarded as taxable under GST purposes.

By Law, IRAS states that if your taxable turnover is more than $1 million in the past year or forecasted to be in the next 12 months, then it is compulsory to register for GST. Businesses below this threshold are not liable to register for GST but may choose to on their own accord.

When one is considering voluntarily registering for GST, it has to consider certain factors. Firstly, if you are able to qualify for registration. Secondly, if you are able to meet the requirements for voluntary registration. Lastly, whether the benefits to you will even outweigh the costs of registering for GST.

Factors to Consider

Assuming that the entity is able to meet the required qualification and conditions for voluntary registration, it is crucial to weight the benefits and costs of voluntary registration. Mentioned below are some of the factors to consider.

1. Responsibility of Being GST Registered

When GST registered, you have an extended list of responsibilities that has to be fulfilled from the government. These responsibilities may increase the administrative costs and hence have to be taken into account.

2. Supplier Profile

When GST registered, you will be able to claim the GST paid from your GST registered suppliers. Moreover, the GST from imported goods can also be claimed. This may increase your gross profits even after returning GST to IRAS.

3. Customer Profile

Being GST registered, you are able to charge customers GST. If these customers are GST registered as well, the selling price can be higher to include the GST chargeable as the customers will also be able to claim the GST. This higher selling price could make you more profitable.

4. The Type of Sales

Being GST registered, you are able to claim GST incurred on your purchases. When these purchases of goods and services that are zero-rated supplies are exported to overseas customers, the GST you charge will be at 0%. This could give you a higher gross profit on your zero-rated supplies as you claim the GST on your purchases but maintain your selling price.

Benefits of Registering for GST

There is an ability to claim back input tax, which is the GST paid on a business’ purchases. If your business is one that makes large amounts of purchases, you pay a large amount of tax to your vendors in the form of GST. As a GST registered business, this input tax can be claimed back from IRAS, enabling you to collect more money which may offset some of your costs. Moreover, as a business starting up, there will be many big-ticket capital purchases that will inevitably be made. Being GST registered, this can help as the amount of GST paid from such large purchases would be substantial.

From the other point of view, if the business was not GST registered, it can be said that it technically pays 7% more on its purchased goods since it is unable to claim back this amount form IRAS.

However, it is also important to know if your business can financially handle being GST registered. With registration comes a larger amount of administrative and record keeping work that the business has to perform, which will add up to a decent about of costs as well. Hence the business has to identify if it is worth registering for GST if the claiming of tax on your purchases can cover the increase of such additional costs.

What is Withholding Tax and How Does It Affect Me and My Business?

Withholding Tax

Withholding tax in Singapore is used to collect taxes from non-resident companies and individuals who earn income sourced in Singapore. It refers to the tax withheld and paid to IRAS when a Singapore Payer makes a specified payment to a non-resident Payee for services or work done in Singapore. Singapore withholding tax is necessary for non-resident individuals or companies that have an income derived from a Singapore source or have services and work done in Singapore.

The payments that require one to withhold tax are:

  1. Payments for services, interest, royalty, rights of use etc.
  2. Payments to non-resident directors, professionals, public entertainers and international market agents
  3. Foreigners/PR withdrawing from Supplementary Retirement Scheme (SRS) Account
  4. Distribution of Real Estate Investment Trust (REITs)

A company is either a tax resident or a non-resident of Singapore. In the Singapore context, the tax residency status of a company depends on the place in which the business is controlled and managed. This control and management refers to decision making on strategic matters, such as business policies and strategies. Hence, companies where control and management is not exercised in Singapore is considered a non-resident. The place of incorporation of a company is not necessarily indicative if a company is a tax resident of non-resident.

Individuals also can be a tax resident or non-resident. Non-resident individuals include foreign professionals, non-resident public entertainers and foreign board directors.

How is withholding tax imposed?

It is important for businesses to understand withholding tax because as a Singapore payer, it is the responsibility of the business to withhold the correct amount to pay to IRAS since withholding tax is deducted directly from the payer. The tax amount that has to be withheld is a percentage of the gross payment collected from the non-resident. The percentage amount differs based on the type of payment.

Payment of Withholding Tax to IRAS

Withholding tax payments are required to be submitted by the 15th of the second month from the date of payment to the non-resident. For example, if a payment was made on 1st April, the withholding tax payment has to be filed by 1st June. If payment is made by GIRO, it would be due on the 25th of the month the tax is due. It is important to ensure that payments are made on time as penalties will be imposed if the withholding tax is not paid to IRAS before the due date.

What is Transfer Pricing?

Transfer Pricing

Transfer pricing is the price that related parties transact goods, service and intangibles between them. Related parties could be of two sorts: Either one of them directly or indirect controls the other such as in the case of branches or head offices, or both are under a common control party such as in the case of 2 subsidiary entities having a common parent company.

A brief illustration of the use of transfer pricing would be in the scenario involving two related parties, Entity A and Entity B. Entity A manufactures Good A which is used by Entity B in the production of a finished product B. The price that Entity A sells Good A to Entity B is known as the aforementioned transfer price, which to Entity B is also its cost of goods that it can either choose to purchase from Entity A at transfer price or from the open market at the market price.

Transfer price is used for accounting purposes when these related parties of the same business are evaluated separately for profit and loss. The transfer price is usually set to a price that is close to the prevailing market rate, as too large a difference would lead to one of the parties being at a disadvantage and hence better off buying from the market itself. However in Singapore, the price set also has to follow certain guidelines set by the Inland Revenue Authority of Singapore (IRAS) which ensures that the prices set by related parties are fair. IRAS controls these related parties transactions in Singapore as well as those transactions operating outside of Singapore.

IRAS endorses the Arm’s Length Principle as the standard guide, which is an internationally accepted standard of transfer pricing. This is to ensure that profits are taxed where the actual economic activities generating these profits are performed.

Arm’s Length Principle

The Arm’s Length Principle is one that ensures proper transfer prices are established between related parties, such that transfer prices for goods and services are equivalent to prices that unrelated parties would charge in same circumstances. This involves the need to compare the transaction between related parties to similar situations undertaken by unrelated parties.

For example, with reference to the previous case, Entity A manufactures Good A which is used by Entity B in the production of a finished product B. According to the Arm’s Length rule, the price of Good A sold to Entity B should be the same as what the company would pay in the open market. If the same or similar Good A costs $100 in the market, then Entity A should also set their transfer price of Good A to $100. Thus, the manufacturer of Good A has to compare the value of Good A to determine its transfer price.

Transfer prices are closely monitored for accuracy within the company’s financial reporting so that profits of the company are made appropriately within the Arm’s Length rule and the taxes associated are paid correctly. If financial statements are found to be inaccurately documented or made to illegally reduce the reported profits in Singapore, IRAS will impose an increase in the taxable profits. This would lead to the company facing additional taxation, interest and penalties.

Three Step Approach to Apply the Arm’s Length Principle

To avoid breaching the Arm’s Length Principle and to correctly match transfer prices to that of the open market, IRAS recommends that taxpayers follow a three step “comparability analysis” to apply to transactions between related parties.

Step 1: Conduct Comparability Analysis

This beginning step ensures that transactions are compared and examined based on the following 4 aspects and that the company makes adjustments for the differences to come up with an appropriate transfer price.

  • Terms of the transaction
  • Characteristics of the goods, services or intangibles
  • Functional analysis
  • Commercial and economic circumstances

IRAS also requires that consideration of other relevant aspects should be taken into account for an accurate assessment, such as:

  • The evaluation of transactions on a separate or aggregate basis
  • Using data of multiple years
  • Considering losses
  • Selecting internal and external comparables (such as commercial databases, comparables with publicly available information, non-local comparables etc.)

Step 2: Identify the most appropriate transfer pricing method

  1. Traditional transaction methods (Comparing prices):
    • Comparable uncontrolled price method (CUP)
    • Resale price method (RPM)
    • Cost plus method (CPM)
  2. Transactional profits method (Comparing profits):
    • Transactional profit split method (TPSM) – Residual analysis or Contribution analysis
    • Transactional net margin method (TNMM)

Step 3: Determine the arm’s length results

Transfer Pricing Documentation

Taxpayers who have a gross revenue of their business activities exceeding $10 million or those who require transfer pricing documentation to be prepared for the previous basis period have to ensure that they have kept and prepared all necessary documents relating to their related parties’ transactions. The documents prepared have to contain information as required in the Income Tax Rules 2018, including a relevant Singapore operations overview of the businesses of the group that the taxpayer is a member of. It also has to include the taxpayer’s business transactions with its related parties. There are exemptions from the document requirements such as related party domestic transactions with the same tax rate and transactions with value not exceeding specified amounts. The full list of requirements and documentation exemptions can be referred to in the Income Tax (Transfer Pricing Documentation) Rules 2018.

These documents have to be prepared by the filing due date of the tax return, but need not be submitted unless requested by IRAS, for which then the business has 30 days to submit the transfer pricing documents. However, even as transfer pricing documents do not always need to be presented, it should be retained for a period of at least 5 years from the end of the basis period.

The Difference Between Drawing a Salary from my Company and Paying Out Dividends

Salary vs Dividends

Being an owner of a company, there will come a time when there is a need to decide how to remunerate yourself so that you can reap the benefits of your profits. There are a few ways to do so, but each having its own pros and cons. You can either draw out your own salary, pay out dividends or do a combination of both. Even though it may seem that either method would give you directly what your company earns, that is not always the case as each method serves to have some sort of compensation or tax scheme that may influence your decision.

Drawing a salary

One way of remuneration of a director in a company is through drawing a salary and paying yourself. When drawing a salary, you are liable to paying personal income tax, which is dependent on your income bracket.

What are the Roles and Responsibilities of a Company Secretary?

Company Secretary

According to the Accounting and Corporate Regulatory Authority (ACRA), it is compulsory for every company to appoint a company secretary within 6 months from its incorporation date, who must be a person locally resident in Singapore. This position in the company cannot be vacant for more than 6 months at any time.

A company secretary is an appointed compliance officer of the company, one who is the primary in charge of administrative and reporting duties that the company is required to fulfil by law. Any ACRA-related compliance work or filing deadlines are managed by the company secretary. The company secretary also has to ensure that compulsory meetings by law are held timely and appropriately. The agenda and meeting minutes for the Annual General Meetings (AGMs) and Extraordinary General Meetings (EGMs) are prepared and kept by the company secretary. Overall, the role of a company secretary is to ensure that every legal requirement set out by authorities such as ACRA are completely met on time. 

The importance of a suitable and trustworthy company secretary cannot be undermined because they are given control over the legal compliance of the business. This is extremely necessary as failure to appropriately and punctually do so can lead to costly consequences for the company.

Listed below are some of the specific responsibilities and duties of a company secretary.

  1. Maintenance and upkeeping of Statutory Registers

The company secretary has to maintain and update the statutory registers. This includes the register of shareholders, charges and members. The distribution of the company’s Annual Reports and accounts are also maintained by the company secretary.

2. Preparation of notice and agenda of meetings

The organisation and preparation of meetings such as AGMs must be done by the company secretary. They are also responsible that the company members and shareholders are notified timely if they need to attend these meetings.

3. Updating and filing with ACRA

The company secretary has to file the necessary forms and returns within specific timelines. This includes the Annual Returns, share allotments or share transfers, updating of the appointment and resignation of directors etc.

4. Custody of company seal

The company secretary ensures the safekeeping and proper use of the company seal on documents when required.

5. Insurance of the company

Ensuring that there is sufficient insurance covering for the company, directors, staff and office.

Should I Run My Business as a Sole Proprietor, Partnership or Private Limited?

Sole, Partnership, Private

A sole proprietor business is one that is owned and controlled solely by an individual. It does not provide as a separate legal entity from the owner, and the owner has unlimited liability over the business. This means that the business can sue or be sued in the sole proprietor’s name. The owner is personally liable for any debts or losses to the business.

A partnership business is one that can be owned by 2 to 20 people. Similar to a sole proprietor, the business is not a separate legal entity from its owners. The partners are personally liable over the business, and it can sue or be sued in the partners’ names. Partners are personally liable for the business’ debts and losses.

A private limited company is a legal entity that is separate and distinct from its shareholders and directors. It is one that comprises up to 50 shareholders, where the members of the company are limited in liability by their shares. It can sue or be sued in the company’s name, but members are not personally liable for debts or losses of the company.

Ownership in terms of profits

Due to the nature and structure of the businesses as mentioned above, ownership is important in considering whether to run a business in which model. If one wants complete management and ownership over their company, a sole proprietor or partnership would be more applicable. This translates to when profits are earned from the business, they will fully go straight to the sole proprietor or partners’ pockets.

On the other hand, private limited companies are owned by shareholders who appoint directors to manage the company. Company performance and profit generation is the responsibility of these directors. When the company makes a profit, it is shared among the shareholders proportionally based on the number of shares they hold. This means that even as companies may stand to make larger profits due to its size, the profits are split to a greater extent due to the multitude of shareholders a company may have. 

If I am a foreigner

Foreigners cannot apply for sole proprietorship or partnership, but they can apply and fully own a private limited company. If a foreigner who resides outside wants to register either a sole proprietorship or partnership, they must appoint a locally resident authorised representative. This representative must be a person aged at least 18 years old living in Singapore and of complete legal capacity. Foreigners residing in Singapore on the other hand would have to seek approval from the Ministry of Manpower before registering as a sole proprietor or partnership. Hence a foreigner or group of foreigners might find it cost saving and more convenient to run a business as a private limited company.

Considering the ease of obtaining capital for your business

Sole proprietors and partnerships are less attractive to potential investors as they do not sell shares due to its complete ownerships by the owners. Hence, the capital fueling the business usually stems from the owners own pockets who contribute into funding and running the business. Moreover, it is usually more difficult for a small business to obtain loans. Thus, if obtaining funds and capital for the business is something that is required for the business to be sustainable, then operating a sole proprietor or partnership may be less feasible in the long run.

On the other hand, private limited companies find it easier to make bank loans and are more attractive to investors as it is able to sell shares. Shareholders will also be attracted to companies more because they can make profits from the company while being limited in their liabilities.

Legal administration and formalities

In general, sole proprietorships and partnerships have less legal formalities and obligations that they have to fulfil year on year. This includes mainly the renewal of their business registration and their declaration of personal income tax rates (since profits made by these 2 such businesses are only taxed at the owner’s personal income tax rates).

Companies are subject to a larger amount of responsibilities in its administration work. For example, the employment of a Company Secretary is necessary to file annual returns. There are also statutory requirements for general meetings, directorship, share allotments etc. This might make it more burdensome and costly to set up and run as compared to sole proprietors or partnerships.


A private limited company pays taxes at the standard corporate rate of 17%. Moreover, it is eligible for tax exemptions under certain criteria. On the other hand, a sole proprietor or partnership pays taxes based on the owner’s personal income tax rates, which is progressive from 0 to 22%. This means that when earnings of a sole proprietor or partnership business is low, they relatively pay less than what a company would. However as business profits increase, the private limited company would pay a lower percentage of taxes in comparison.

How do I Raise Funds? What Avenues are Available to Me? What Are the Different Types of Investors?

Raise Funds

Money is the key to any business. Without sufficient funds, it is easy for a business to fall into a downward spiral of negative consequences. The biggest reason for many small startups failing each year stems from the lack of funding or capital, as these are essential in sustaining a business and generating revenue. Hence when starting a business in Singapore, it is always important to question how you are going to finance your startup. Here are some avenues available to Singapore businesses in terms of funding a startup.

1. Bootstrapping

Bootstrapping, or self-funding, refers to the process of a business utilising existing resources that it has, in this case using personal savings and finances to fund the startup. This is the most obvious and convenient method of funding for your business as it is easy to invest from your own savings or even get family and friends to contribute. This will give your business a baseline of funds that is simple to raise with minimal formalities and compliances, since the funds are either coming directly from yourself or relatives. Especially since you are taking ownership of your startup, having the means to self-fund would be a good way to be well connected and tied to your business.

The flexibility and ease of funding makes bootstrapping a good first option to be considered, however this only works if your business is a small-scale enterprise. For large businesses, self-funding may be difficult and also unsustainable.

2. Crowdfunding

Crowdfunding is a more modern way of obtaining funds from interested consumers who contribute money to the business as a way of supporting the idea of the business. Crowdfunding is done through online platforms (e.g. Kickstarter, Indiegogo, FundedHere etc.) where entrepreneurs are able to put up detailed descriptions or pitches of their business. They will include the goals and intentions of the business and of course how much funding is needed and why. This will allow funders to have a clear idea of the entrepreneur’s business model and decide if they are willing to support it. If they are sold, funders can make an online pledge to the business and donate funds according.

Crowdfunding is a considerable option because it allows you to seek financial support from multiple funders and at the same time acts as a marketing avenue to the online community. Crowdfunding also makes funding simpler for your business by gaining support from common people as compared to turning to professional investors or brokers which may make the process more troublesome. Moreover, there is a chance in attracting venture capital investment if the business campaign grows and is successful.

However, the trouble with crowdfunding is that it is an extremely competitive avenue to utilise and it can be difficult especially if there exists similar business ideas. Hence, ideas pitched on crowdfunding platforms have to be unique, engaging and reliable if it wants to stand out from others and gain the attention of consumers.

3. Angel Investments

Angel investors are investors who have a high net worth and hence are able to provide financial support for small startups and businesses. In return, angel investors usually gain ownership equity in the business. Angel investors usually contribute in the early stages of a company’s growth, but may also keep ongoing injections to the business to support the business through times of need. Angel investors may also work in groups of networks to collectively decide on investing in a business.

Angel investments are a good alternative of funding as these investors are willing to take bigger risks on the business as they can expect to gain higher returns. Moreover, angel investors not only provide capital to entrepreneurs but also offer mentorship and advice to them. However, a problem with angel investors is that they usually provide lower amounts of investment as compared to venture capitalists.

4. Venture Capital

Venture capital is form of professional financing where investors provide financing to companies that have high prospective growth potential. Venture capital is usually given to small companies with great prospects, or those that are beyond the startup stage and already generating decent revenue. Venture capitals not only provide monetary support, but also support in terms of mentorship and expertise. This can help sustain a business effectively, especially startups.

However, venture capitalists have a short life span in terms of funding for businesses and usually leave after three to five years, once they have recovered their investment. As venture capitalists are heavily involved in your business, it is common that some control over your business may be lost to them. Venture capitalists also usually seek big and stable companies hence being a startup with unconvincing levels of stability may find it hard to attract such investors.

5. Business Incubators and Accelerators

Businesses can seek Incubator or Accelerators, which are programs that fund and assist startups. Incubators and Accelerators in Singapore include Startupupbootcamp Fintech, DBS, Hotspot Pre-Accelerator, Singtel Innov8 and more.

A business incubator is one that nurtures a business, providing tools, training and networking to the business. On the other hand, an accelerator also assists in similar ways but more so to help run or fast-track a business. These programs also provide the business owners opportunities to interact and connect with mentors, investors and the other startups on the program, thus providing for a collaborative support network. However, both of such types of programs usually run for 4 to 8 months and expect a large amount of commitment.

6. Bank Loans

Banks may provide financial help in 2 forms: Capital loans and funding. Working capital loans is one that is used to finance the everyday operations of the company. These are more for uses such as covering accounts payables and wages and not for purchases of long-term assets or investments. Funding on the other hand is one that involves the business sharing its plan, valuation details and reports for which a loan would be given.

Almost every bank in Singapore offers such financial assistance through programs such as the DBS BusinessTerm Loan, OCBC Business First Loan and UOB BizMoney.

There are other forms of fund raising for a business in Singapore that may not directly involve investors but still provide sufficient and attainable capital. There are avenues such as through business plan competitors where prizes for a business can be won, or Peer-to-peer (P2P lending) platforms that connect the public to businesses in need of funding. The Singapore government also provides programs that introduce grants to help growing businesses, such as the Productivity Solutions Grant, Enterprise Development Grant and PACT Scheme.

Are Electronic Signatures Legally Binding in Singapore?

Electronic Signature

An electronic signature is one that allows someone to sign documents digitally as an alternative to using the traditional handwritten method. This serves as a quicker and more convenient method of agreement and saves the trouble and mess with masses of physically printed out documents. In today’s day and age where going digital and online becomes more popular, there is a growing use of electronic signatures for various types of transactions, especially in Singapore. However, before one decides if an electronic signature is sufficient for its business transactions, they should know the laws that govern the use of the electronic signature.

The Electronics Transactions Act

When it comes to any transaction, Singapore’s contract law states that any contract is considered legally binding if the parties have clearly and willingly agreed, whether the agreement may be verbal, on paper or digital.

In Singapore, the use and security of electronic signatures is governed by the Electronics Transactions Act (ETA), which provides a legal foundation for the use of electronic signatures in contracts or transactions. This provides a certain set of standards and regulations that signatures must meet to be valid. This would ensure that the transacting parties have a reliable and appropriate set of rules to follow such that they can have concrete proof of the signed documents. The conditions that must be met are as such:

  1. There must be specific identification of the signed document. This refers to the ability for one to personally identify with the signature, such as a name, date or company address. This gives a unique value to the signature and not leave room for ambiguity.
  2. There must be a clear intention of the signer reading and agreeing to the transaction documents. It must be clear that the content and the signature are linked, such as it being in the same document and not separated.
  3. The electronic signature must be reliable and appropriate for which the electronic record was generated and communicated.

Once knowing the requirements to an electronic signature, it is also important to know that electronic signatures do not necessarily have to look like a copy of your handwritten signature on the screen. There are several forms that an electronic signature can take which still make them legally binding according to the ETA.

  • The sender’s name used in an email – When typing out emails and signing off with your name, it can be considered as an electronic signature especially when using a corporate account that you are held accountable for. This signature proves that you have personally read and replied to the transaction through email. However it is ideal that it should be clearly expressed in such emails that the information communicated are legally binding so that one can be clear that the email itself is a transaction.
  • Digitally scanned copy of a handwritten signature – This method serves to be a basic translation of what you would sign normally on paper but instead scanned and attached to an online document as an image. This would be accepted as it is in fact your normal signature just as an image. 
  • Using a mouse or touchscreen to draw your signature – A common method of creating an electronic signature is to use a touchscreen to physically draw out your signature straight onto and electronic document. This is commonly used in courier services where digitally drawn signatures are used to prove that you have personally received your items as it is convenient and can be directly accounted for.
  • Clicking a button online – Clicking acceptance buttons or confirmation buttons that usually have “terms and conditions” attached to them can serve as a method of signifying an electronic signature, as you are able to confirm your transaction by personally clicking the button. This is commonly used in online retail platforms.

Cases where electronic signatures are commonly used in Singapore

With respect to Singapore, business and individuals can use electronic signatures to create legally binding documents. Here are some commonly used transactions and agreements:

  • Commercial agreements between organisations
  • Consumer agreements such as sales terms and conditions, purchase orders etc.
  • Employment contracts and other HR related documents
  • Software licensing agreements
  • Copyrights and patent licenses
  • Trademark licenses
  • Service agreements

Cases where electronic signatures cannot be used

The ETA states that there are certain documents that have to be signed traditionally and not electronically. These documents will not be able to have a legally binding electronic signature and examples are as such:

  • Wills
  • Negotiable instruments, documents of title, bills of exchange etc., that entitles a beneficiary or bearer to claim the delivery of goods or a payment of a sum of money
  • The declaration or enforcement of powers of an attorney
  • Legal actions or contracts of sale or disposition of real estate