When is the best time for your startup to go global?
Branching out to a new market is a major milestone in any business and with startups increasingly looking to branch into the Asia Pacific region – home to one of the world’s youngest and fastest growing populations, we look at ways for young businesses to navigate the region’s cultural, economical and geographical diversity and expand their businesses successfully.
Disrupt and 500 TukTuks collaborate with Greenhouse, Asia’s market entry platform, to create an international expansion guide for aspiring entrepreneurs who aim to take their companies abroad. Greenhouse’s marketplace connects entrepreneurs with service providers who can help them launch, operate, and commercialize their businesses across Asia.
Before embarking on an expansion plan, do assess if your business has both the resources and domestic traction to pull off an expansion as a lack of funding and insights into your target market could jeopardise the success of your product before it has had the chance to take off.
International Expansion Guide Part 1 covers Greenhouse’s seven-step framework for international growth, which will give you an overview of how to carry out international expansion.
Part 2: Setting up a legal entity
Once your team has settled on a market and has crafted a go-to-market strategy, it is now time to set up a legal entity in your chosen region. In this post, we’ll cover the basics of setting up a foreign office in some of Asia-Pacific’s largest startup ecosystems.
The largest economy in Southeast Asia, Indonesia’s rising startup scene has produced several unicorns including Gojek and Bukalapak. According to Google-Temasek, the Indonesian internet economy is forecast to grow to $100 billion by 2025, perfect for burgeoning e-commerce startups.
Companies in Indonesia can be broadly classified into two categories, private-owned companies and state-owned companies. Within the former category, foreigners may choose to set up a foreign-owned limited liability company (PT PMA), a local limited liability company (PT) or a representative office (RO).
Foreign companies typically set up PT PMAs as local companies are not allowed to have any percentage of foreign ownership. Do note that setting up a PT PMA also requires the following:
- Two local or foreign shareholders,
- One local or foreign director, and
- One local or foreign commissioner.
Although the company director can be a foreigner, it is recommended to have a local director represent the company in the registration process to ease proceedings especially if the foreign director does not plan to reside in Indonesia.
With its strategic location in the heart of Southeast Asia, Malaysia serves as a great springboard into the region with investor-friendly policies and strong support from the local government.
Though the country officially recognises eight types of business entities, foreigners are allowed to register a company as one of three types of business entities in Malaysia, namely: Private Limited Company (Sdn Bhd), Labuan International Company and Representative/Regional Office. The most common type of business entity (Sdn Bhd), requires at least one director who ordinarily resides in Malaysia by having a principal place of residence in Malaysia and a minimum of one promoter.
There are five stages to starting a business entity in Malaysia:
1. Registry Commission for your Company Entity (Malaysian Sdn Bhd)
- Multiple Trade Licenses from Local Town Council, Ministry Trade Consumerism, Tourism, Central Bank, Education, Transport authorities, etc.
- Letter of Recommendation for relevant authorities to boost your application.
- Expatriate Work Visa from the Immigration Department of Malaysia.
5. Compliance and maintenance keeping company status active (Company Commission, Company Secretary, Auditor, Accountant and Tax Agencies)
In order to incorporate a foreign company in Malaysia, the company must pay a registration fee to the Suruhanjaya Syarikat Malaysia (SSM) according to the nominal share capital of the business.
Rated as the second best country to conduct business globally in the World Bank’s Ease of Doing Business Ranking, Singapore is arguably the easiest city to register a company in Southeast Asia.
Foreigners are allowed to run one of five types of business entities in Singapore. No matter the type of company chosen however, one of the directors/authorised representatives must fulfill the local residency requirements as listed in the Accounting and Regulatory Authority’s (ACRA) website.
To register a Private Limited (Pte Ltd) company, there must be one resident director and at least one shareholder with a paid-up capital of S$1.
Ranked as the 21st easiest place to do business by the World Bank in 2020, Thailand is Southeast Asia’s second largest economy backed by an expanding middle class and a thriving start-up community.
Most foreign companies choose to incorporate either a Private Limited Company or a Limited Liability Company in Thailand. However, no matter the structure of a company, unless the company is part of a Board of Investment (BOI) program, foreigners can own a maximum of 49% of the company while the remaining shareholders must be Thai.
The procedures on incorporation of a private limited company can be divided into three stages:
(a) Approval and reservation of the name of the company
(b) Registration of the Memorandum of Association (MOA)
There must be at least three promoters to prepare and register the MOA with the local registration office of the place the business is to be situated. The MOA must include the following details:
- The name and address of the proposed company
- The objectives of the company
- A declaration that the liability of the shareholders will be limited
- The amount of share capital that the company proposes to be registered
- The names, addresses, occupations, signatures and number of shares subscribed by each of the promoters
- The number of shares subscribed to by each of the promoters
- The registration of incorporation of the company
The fee for the registration of the MOA is THB 50 per THB 100,000 of the registered capital. The minimum is THB 500, and the maximum fee is THB 25,000.
(c) A Statutory Meeting of the Share Subscribers
The statutory meeting can be convened as soon as you register the memorandum of association. Its purpose is to:
- Adopt the regulations (i.e., articles of association) of the company
- Ratify any contracts entered into by the promoters or expenses incurred by the promoters in promoting the company
- Fix the amount to be paid to the promoters
- Fix the number of preference shares (if any) to be issued and the nature and extent of the preferential rights accruing to them
- Fix the number of ordinary shares or preference shares to be allotted as fully or partly paid-up otherwise than in money, if any, and the amount up to which they shall be considered as paid-up
- To appoint the first directors and auditors and the fixing of their respective powers
The resolutions of the Statutory Meeting will not be valid unless passed by a majority, including at least one half of the total number of subscribers entitled to vote.
One of Southeast Asia’s fastest-growing economies, Vietnam’s considerable technological expertise in both manufacturing and engineering coupled with its large population of tech-savvy young people makes it an attractive place to expand a business.
There are four types of business entities in the country and foreign businesses in Vietnam typically choose to incorporate as a Limited Liability Company (LLC) due to its simple corporate structure, which only requires one founder.
There are two types of limited liability companies (LLC) in Vietnam: single-member limited liability companies (SLLC) and multiple-member limited liability companies (MLLC). An MLLC can have between 2 to 50 owners, who are called ‘members’.
The incorporation process can take between 1 to 3 months and the incorporation process is as follows:
- International investors are obliged to obtain an Investment Registration Certificate (IRC) from the Department of Planning and Investment (DPI).
- An Enterprise Registration Certificate (ERC)
- After receiving both certificates, investors are obliged to proceed with their tax registration, pay business license tax and make their initial capital contribution.
While there is no standard initial capital contribution, the Department of Planning and Investment will assess if your capital contribution is in line with your business with most businesses setting aside an initial capital of USD 10,000.
All companies in Vietnam must have at least one resident director which can be either a local or a foreigner. While the resident director need not have residency status at the point of incorporation, he or she would need a residential address in Vietnam.