Note: Recently, the acquisition transaction news of Manus and Meta, the AI products of startup Monica, has attracted widespread attention in the industry.
In addition to the transaction itself, what is more worthy of attention from the legal and business practice circles is: Before the relevant transactions are advanced, Manus has moved its headquarters functions to Singapore.
This case once again triggered the market’s discussion on “reshaping international identity”. For many AI companies with a Chinese background, does establishing a Singapore headquarters and building an overseas structure mean that they can successfully complete the transformation of their "international identity", thereby reducing regulatory and geopolitical resistance in international transactions?
Singapore can be a high-quality platform for corporate internationalization, but it is by no means a simple “identity converter”. If one interprets "borrowing Singapore" as meaning that the original regulatory attributes can be weakened through the relocation of entities, it is often a serious misjudgment of the current global regulatory trends.
01 Why are more and more AI companies choosing Singapore?
From the perspective of business and legal practice, Singapore has become the international destination for technology companies, usually based on the following compliance and strategic considerations:
- Greater acceptance of international transactions and financing: The corporate governance structure under Singapore law is more likely to be legally recognized by international capital (especially US dollar funds) and merger and acquisition parties; it is also easier for overseas customers to accept Singapore entities as the contracting platform.
- More suitable as an international holding and financing hub: Singapore has a stable and mature legal system, clear corporate governance rules and complete cross-border investment and financing facilities, which facilitates future mergers and acquisitions and listing arrangements.
- Helps reduce background concerns in some sensitive transactions: In the current international environment, the background of the subject has become a key review factor in cross-border transactions. The establishment of an independent international business entity in Singapore will objectively help reduce the initial sensitivity of some counterparties to the "Chinese background."
Legal Observation: Reducing sensitivity is by no means the same as eliminating regulatory scrutiny.
02 Core misunderstanding: Singapore structure ≠ international compliance identity
In practice, many companies have a misunderstanding: they believe that completing the construction of overseas architecture (such as red-chip architecture) is equivalent to completing "identity desensitization."
But the reality is that the review of technology companies by global regulatory agencies has long since shifted from focusing solely on formal arrangements to placing more emphasis on substantive review. Its core logic is: Substance Over Form.
Regulators no longer only focus on the company's registration place, but will "penetrate" the legal person veil and examine the company's substantive control rights, technology sources and data governance arrangements.
03 Global supervision has entered the era of “penetrating review”
In cross-border transactions in the technology and AI fields, regulators, investors and large commercial partners generally adopt a look-through approach. Usually the focus is on the following five dimensions:
- Ownership of control rights (Control): Where are the founders and core management located? Who leads the board of directors in decision-making? Is the ultimate beneficiary (UBO) still controlled by Chinese entities?
- Core technology ownership (IP Ownership): To whom do key assets such as models, algorithms, and codes belong? Do overseas entities truly hold core intellectual property rights, or do they only obtain limited authorization?
- R&D Substance: Where is the core R&D team located? Does model training and technology iteration mainly occur in China? Is there a situation of "domestic research and development, overseas nameplate"?
- Data sources and compliance paths: Does it involve Chinese personal information or important data? Is the compliance path for cross-border data flow clear and are the relevant procedures complete?
- Economic Substance: Does the overseas entity have a real office space and a local management team with decision-making power? Is there an operating investment that matches the business volume?
04 AI companies usually need to face “four levels of regulatory constraints” at the same time
The internationalization of AI companies is not isolated compliance in a single jurisdiction, but the superimposed application of legal systems in multiple countries. In practice, companies usually need to deal with the following four "regulatory gates" simultaneously:
(1) Chinese Law: Focus on “Technical Security and Data Exit”
Technology Export Control: According to the "Export Control Law" and related supporting rules, if the underlying algorithms, specific technical codes or related technical achievements in the AI field fall into the scope of control, when transferring or providing such technologies to overseas entities (including overseas affiliated companies), licensing or approval procedures may be required in accordance with the law.
Data export compliance: If an enterprise involves processing "important data" or "personal information" reaching a certain scale, when providing relevant data overseas, it may be required to perform data export security assessment, standard contract filing or other applicable compliance procedures in accordance with the law.
(2) US Law: Focus on “Penetration Attributes and Supply Chain Restrictions”
Background Penetration Review: US regulations (such as CFIUS) will not only focus on the place of registration, but also on control rights, team background and technology sources in certain scenarios. Even if the subject is registered in Singapore, it may still be subject to additional scrutiny if it is found to have certain background connections.
Supply chain and export control restrictions: Relevant companies may still face restrictions under U.S. export control rules (such as the EAR) when acquiring specific high-performance chips, controlled computing resources, or some regulated cloud services.
(3) EU Law: Focus on “Artificial Intelligence Governance and Access Thresholds”
"European Union Artificial Intelligence Act" (EU AI Act): If products enter the European market, companies must fulfill corresponding compliance obligations based on the risk level of the AI system. Regulatory requirements are particularly stringent for high-risk systems.
Model transparency requirements: For some general AI models, EU rules impose higher requirements on the source of training data, copyright compliance and transparency, which poses a real challenge to many AI companies that are still in the rapid iteration stage. (4) Singapore Law: Focus on “Business Substance and Transparent Governance”
**Business Substance Review:**Singapore is not a regulatory vacuum. Relevant regulatory and tax authorities usually pay attention to the company's management and control arrangements, business substance, and local operations in different scenarios. Without a substantial operational structure, it is often difficult to obtain long-term and stable compliance and business support.
Privacy and Governance Requirements: According to the Personal Data Protection Act (PDPA), companies need to meet clear compliance requirements in terms of data collection, use and cross-border transfer. At the same time, Singapore’s relevant generative AI governance framework also provides policy advocacy and compliance guidelines on algorithmic governance, fairness and transparency.
05 Practical pain point: The structure is set up, but the transaction still cannot be passed
Judging from our experience in assisting related projects, the real obstacle for many companies is not the establishment of the entity itself, but the failure to pass the strict compliance review of the counterparty after the structure is established.
Common “stuck points” include:
-**Bank account opening:**Required to explain the control chain, source of funds and background of the ultimate beneficiary in depth;-**Investor due diligence (DD):**Required to supplement the disclosure of the actual ownership path of core technology and IP;-**Large partners:**Required to explain the distribution of R&D teams, data sources and whether restricted technologies are involved.
The fundamental reason is that the company has only completed the formal "structural construction" but has not completed the "substantive governance reconstruction".
06 The real effective path: not "hanging the shell", but "reconstructing"
For AI companies that truly pursue long-term internationalization, the significance of Singapore’s structure is not to be an overseas “safe haven” but to reconstruct the company’s international operations and governance system:
1. Restructure governance and control arrangements:
Optimize the holding chain at home and abroad, and establish an international board of directors decision-making mechanism and management structure.
2. Reconstruct assets and rights planning:
Sort out the migration path of intellectual property rights and arrange cross-border data flow and technology licensing in a legal and compliant manner.
3. Reconstruct business essence:
Configure real management and operations teams in Singapore to clarify the functional positioning of regional or global headquarters.
4. Reconstruct the compliance collaboration system:
Simultaneously evaluate and benchmark the regulatory requirements of China, the United States, Europe and New Zealand, and establish a comprehensive compliance system.
Conclusion
The key to future competition is not who goes overseas first, but who completes "compliance internationalization" first.
In the past, the era of extensive overseas expansion where “just register a company and you can take orders” is over. For AI and technology companies, the ticket to the future is no longer “overseas structure” but “reconstruction of international operating structure and global regulatory adaptation system.”
Singapore is certainly a valuable international platform. But it was never a tool to circumvent regulation.
For Chinese technology companies that truly hope to globalize in the long term, the significance of Singapore is not to "hide the background", but to reshape the company's international trust foundation through governance optimization, transparent operations and compliance construction.
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This article is general information and not legal advice. Specific matters require assessment by appropriately qualified professionals.