Why Do Vietnamese Startups Spend Thousands of Dollars Every Year To Maintain Foreign Entities?

Not by chance, Singapore is known as the ‘paradise’ of startups.

In this island nation, no matter who is behind the startup, as long as you are eligible to open a business – especially in the field of technology and innovation, you will enjoy incentives like nowhere else in the Southeast. Asia get. Besides, startups are also easy to attract talent, raise capital and IPO, like Tiki – through SPAC.

Recently, information from the Department of Competition and Consumer Protection said that the Department has received a complete and valid economic concentration notice file from Tiki Global Pte. Ltd and Tiki Joint Stock Company.

According to the economic concentration announcement, Tiki Global Pte. Ltd is expected to receive the transfer of 90.5% shares of Tiki Joint Stock Company after the Company issues more shares in the form of a private placement.

After completing the economic concentration transaction, Tiki Global Pte. Ltd. will gain control and control over Tiki Joint Stock Company.

Tiki Global Pte. Ltd was established in May 2021 under Singapore law and has not had any business activities in the Vietnamese market. The sole owner and director of Tiki Global is Ms. Teo Shiot Lun Tessa, a Singapore citizen.

As for Tiki, by the end of March 2021, the company’s shareholder structure includes Mr. Tran Ngoc Thai Son (founder and CEO) owns 20.1% of the shares. VNG Joint Stock Company, one of Vietnam’s technology unicorns, owns a 20.2% stake. Foreign shareholders include JD.Com owning 18.2%; Ubiquitous Traders 9.9%; Success Elite Holdings 4.5%; Finup Asia Investment I 3.7%… Foreign shareholders are currently holding 49.4% shares of Ti Ki.

.According to the speculation of many people, Tiki Global PteLtd was established by many existing shareholders of Tiki, in order to prepare for the plans to raise capital as well as IPO in foreign markets.

Before Tiki, there were many Vietnamese startups that registered to set up companies in Singapore. Why this trend and why Singapore?

Easy Business Setup For Startups

In a few posts with the title “Why do I open a company in Singapore?’ In the Tuoi Tre newspaper in 2016, there are many reasons why Singapore has become the ‘start-up paradise’ of Southeast

Asia.In Singapore, the total time to set up a private company takes less than a week. job, the minimum capital is 1 SGD – SGD, which can be increased at any time after the company’s operation.The

company must be run by a Singapore citizen or permanent resident or a person with an EP (employment pass, (temporarily understood as a person with a work permit) to act as a director. There must be at least one shareholder, a secretary, a definite address and the name of the company must be registered and approved by the competent authority. If

we don’t have personnel, we can hire a person named Director and also hire a secretary to take care of the company’s paperwork in the future.The price for a director is 3,500 SGD/year plus 5,000 SGD deposit Corporate tax is 17%/year, but if the company’s turnover in three consecutive years is less than SGD 100,000, it will be tax exempt

. i enterprise Foreigners will be signed by the company in Singapore, the profits will be transferred to the Singapore company account, then the Singapore company itself will sign the processing contract, fulfill the contract requirements with the company in Vietnam and all The content of the contract will be performed by the Vietnamese company.

Corporate tax in Singapore is lower than in Vietnam so doing this will be more beneficial for business owners.thecontracts signed with international partners, when a dispute occurs, it is stated that it will be resolved in the courts of Singapore, this creates a sense of peace of mind and comfort if the dispute is proposed to be resolved in a Vietnamese court. Nam” – Mr. PVH, a hired director, said.

Small and medium-sized companies (SMEs) in Singapore are also allowed by the government to participate in tax reduction programs: if the business buys machinery and equipment in accordance with the government’s support program, it will be included in the expenses. of the enterprise without paying tax; information technology equipment: computers, printers… if in accordance with the government’s regulations, they will also be fully or partially supported with the purchase of equipment so that businesses can promote information technology.

In comparison, I find the startup ecosystem in Singapore to be more mature than in Vietnam.

But besides that, I think Vietnam also possesses many advantages that other countries do not have to be able to build a good startup ecosystem: in addition to a large number of ambitious entrepreneurs, Vietnam also has a large number of aspiring entrepreneurs. a large number of young enthusiastic and talented employees. Currently, the Vietnamese Government is also paying great attention to providing and supporting multi-faceted startups.

Personally, I think that the startup world in Vietnam needs more support in the near future, with the right connections to the resources – mentors, in order to promote Vietnamese startups to develop faster.” Tong Nhat Duong – Homage founder shared in a few interviews in 2018.

Mr. Nguyen Minh Quy – CEO of Novaon Internet Group, who once opened a company in Singapore, is more specific: “When we bought a computer for founded Novaon Singapore, they gave me money to buy computers and other equipment, I only lost 40%, they gave me 60% back. It is the responsibility of the State to do to help start-up“

Investment Landscape for both VCs and Startups

Time for new shareholders to easily pour capital and participate in running the company In Vietnam, it takes at least six months to obtain a license to buy and sell shares and related procedures, while in Singapore this only takes 1-2 weeks. 

“The payment technology that mPos is doing business in has just been launched in the US for a few years, and the most successful company is Square which has been valued at 5 billion USD. We want to become the new Square of Southeast Asia

When ordering For this goal, we have to carefully calculate where to put the parent company. Finally, we decided to choose Singapore so that when the company is big enough, we can IPO in the US and Hong Kong later,” said Mr. Nguyen Huu Tuat– General Director of mPos Vietnam Company shared with Vietnamnet in 2016.

Why? According to Mr. Nguyen Huu Tuat, it is because: the brand reputation of Vietnamese enterprises is not good. There are no IPO, well-reviewed technology companies in Vietnam, so this startup has located its parent company in Singapore. Choosing Singapore is not really a legal or a procedure, but mainly a vision to build a larger business, on par with the region.

More specifically, there are 3 reasons why this young businessman chooses Singapore: Firstly, Singapore is a transit place in terms of traffic, from Singapore can go to all countries faster and easier; second, Singapore is the financial center of Asia, all the investors are there; third is the ever-available team of entrepreneurs with a global vision in Singapore.

At that time, mPos Vietnam Company was operating as a subsidiary of Softpay Mobile International – a company founded by Mr. Tuat’s group in Singapore in October 2014. In June 2019, mPOS merged with VIMO to create NextPay and Mr. Nguyen Huu Tuat is the CEO of NextPay. NextPay and VIMO both belong to Shark Binh’s NextTech startup incubator. NextPay is planning an IPO in 2022.

Back to the case of Tiki. According to our research, if you want to go to the Singapore Commodity Exchange (SGX), the financial requirements for businesses are: The accumulated profit before tax in the last 3 years must be at least 7.5 million SGD (equivalent to 122.24 billion VND); annual profit before tax must reach at least 1 million SGD (16.29 billion dong) or accumulated profit before tax in the last 1 or 2 years must reach at least 10 million SGD. That is, the barriers to Tiki in SGX are the same as HOSE.

Therefore, according to many experts, it is possible that Tiki is looking for an IPO in foreign markets (maybe in Singapore or other exchanges) through SPAC.

IPO through SPAC.

Special purpose acquisition company (SPAC) are companies . Over time, this wave has also spread to Asia and Southeast Asia. Some prominent deals such as Grab (Singapore) is about to be listed on the US stock exchange Nasdaq through SPAC with an expected valuation of nearly 40 billion USD. Traveloka is also in deep talks for an IPO through a merger with Bridgetown Holdings, a SPAC company backed by billionaires Richard Li and Peter Thiel.

According to writer Marissa Lee on financial site Preqin, 2021 is a big boom year for Southeast Asia. The region’s most valuable “unicorns” are preparing for traditional IPOs or consolidation with SPACs.

In Vietnam, Vingroup’s VinFast and FLC’s Bamboo Airways are intending to IPO on the US stock exchange; possible through the form of SPAC.