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In today’s dynamic and increasingly challenging business landscape, corporate groups are actively reassessing their legal structures to better align with evolving operational needs and long-term strategic objectives. In response to shifting market dynamics, post-acquisition integration and the growing need for agility, streamlining corporate structures has become not only prudent, but a strategic imperative.
An optimised corporate structure can deliver material benefits by enhancing operational efficiency, reducing costs, improving governance and strengthening readiness for future transactions. Conversely, maintaining outdated or overly complex structures can lead to duplicated functions, compliance inefficiencies and a lack of strategic clarity.
Practical Restructuring Methods
Corporate streamlining is typically achieved through mechanisms such as asset transfers and amalgamations, each with distinct advantages and considerations. The appropriate approach depends on the specific objectives and requires careful evaluation of legal, tax and operational implications.
Summarised below is a high-level comparison to guide you through your decision-making process:
Asset Transfer involves the transfer of selected business components such as intellectual property, contracts or customer portfolios from one entity to another. This method offers flexibility but may require individual consent for the transfer of contracts, assets and employees.
Merger (Amalgamation) entails the legal consolidation of two or more companies, whereby all assets, liabilities, rights, obligations and contracts are automatically vested in the surviving entity by operation of law. This offers a cleaner and more seamless form of integration.
In Singapore, two types of amalgamations are available:
- Short-form amalgamation - applies to wholly owned subsidiaries within the same corporate group and offers a faster, simplified route for internal restructuring.
- Long-form amalgamation - A more rigorous process which requires enhanced disclosure and additional steps. Each amalgamating entity must sign an amalgamation agreement and submit it for approval at a shareholders meeting.
Key Considerations - Asset Transfer vs Merger (Amalgamation)
| Issues | Asset Transfer | Merger (Amalgamation) |
| Corporate Income Tax Implications | Transferor may be subject to tax on gains arising from asset transfers. Transferee on the other hand benefits from a step-up in the tax basis of those assets, potentially enhancing future depreciation or amortisation deductions. Subject to meeting conditions, the parties may elect for Section 24 relief under the Singapore Income Tax Act, allowing the transaction to be effected on a “no-gain, no-loss” basis. | Generally no tax is triggered as there should be no gain or loss arising from the merger. |
| Goods and Services Tax (GST) Implications | The transaction constitutes a taxable supply for GST purposes unless relief is available under the “Transfer of a Going Concern” provisions. | Generally not a GST-triggering event. |
| Stamp Duty | Stamp duty is payable on share and property transfers. | Generally no stamp duty payable. |
| Tax Attributes | Not transferrable | May be preserved (subject to meeting conditions). |
| Contracts | Novation or consents are required to transfer contracts. | Transferred by operation of law. |
| Employees | New employment contracts and fresh Employment Pass applications (if applicable) are required. | Employees transition to the merged entity by operation of law (subject to conditions). |
| Post-Transaction Cleanup | Requires a strike-off or liquidation process to eliminate redundant entities. | Amalgamated entities cease to exist by law. Requires no further dissolution steps. |
There is no one-size-fits-all solution. The most suitable approach depends on your objectives, the nature of the assets involved, existing legal and contractual relationships and the desired tax outcomes.
Each restructuring option requires careful planning, particularly in areas such as tax exposure, legal continuity, employment matters and regulatory approvals.
Our Tax, Corporate Secretarial and People & Regulatory Solutions teams work closely with clients to evaluate commercial objectives, assess transaction costs, navigate employment considerations and ensure regulatory compliance. We deliver fit-for-purpose solutions, whether through targeted business transfers or amalgamations.
