What is a Process Agent and Why Would Your Company Need One?
You’re unlikely to ever need to ask until you do need one. In Singapore, this will usually only happen if you are a foreign entity without a physical office in Singapore.
Normally you need a process agent when you approach a financial institution or other lender to finance something. The lender wants to be able to sue you if you don’t follow through with repayments. It can be a lot harder to sue you if you’re not in Singapore.
In Singapore, we have pretty clear rules on how you “get served” with papers that commence a legal action. In ordinary circumstances, you have to physically deliver the papers to the actual person getting sued or the representative of the company being sued.
Every country has its own rules on how you serve someone. Your Singaporean lender won’t know what those rules are in France, for example, and it’s not going to take any chances that it might be harder there.
To keep the legal process simple and predictable, the lender will include a clause requiring you to appoint a local company as your process agent. If your lender wants to sue you subsequently, they can do so by simply serving your process agent instead of trying to serve you in France.
Although you may not want to make it easier to sue you, you’ll normally have to agree to this as part of any agreement with a Singapore entity involving a large amount of money, if you want the deal to happen.
Appointing a Process Agent
Normally, before your Singaporean counter-party will sign on the dotted line, they’ll require you to produce some proof that you actually have appointed that process agent. This is normally by producing the contract you have signed with the process agent. This is also usually the thing that people leave to the last minute until they suddenly realise that they need to find and engage a process agent before they can execute the agreement. The contract with the process agent is usually just a simple letter of appointment with a space for you to acknowledge acceptance of its terms.
You should make sure of 2 things:
- That the letter of appointment specifically refers to the name of the agreement or agreements for which the process agent agrees to accept service of court process for you; and
- The duration of the appointment.
If you are entering into an agreement for a loan for example, the appointment will need to be as long as the repayment period for the loan in order to meet your lender’s requirements. It should also contain your overseas contact details where you want the process agent to forward any court documents that are served on it.
Most process agents will require you to provide certain basic information about you and your deal before they can provide an appointment letter. Some of this information is required just to be able to fill out a complete appointment letter. Other information is required to satisfy anti-money laundering checks.
Many process agents will also require receipt of payment for their services from you before they can provide the letter. Therefore, how quickly they can give you what you need will, at least to some extent, depend on how quickly you can give them what they need. This will usually include the following:
- Your identity and that of your counter-party;
- The nature and quantum of the contract(s) for which a process agent is required;
- How many contracts there are and, for each contract, the duration for which a process agent is required to be appointed;
- Your contact details where you want any court papers to be forwarded.
Choosing your Process Agent
How do you choose your process agent? There are really only two things that matter when it comes to choosing a process agent. The first is price and the second is responsiveness.
You’re not going to be having an ongoing relationship with your process agent and all they really need to be able to do is forward some papers to your address in the unlikely event that they are ever actually served any. Therefore, you really just want a company that can do it cheaply. However, often you will also need a company that can provide a signed letter of appointment very quickly so that your deal can go through in time. Thus, you will also need a process agent that responds quickly with minimum red tape.
Who can/cannot be your process agent? Generally speaking, lenders will only approve your choice of process agent if they are an entity such as a corporate secretarial firm or a company established purely for the purposes of acting as a process agent.
There are certain kinds of entity that lenders will usually not approve. As a general rule of thumb, if the entity is supposed to act in your company’s best interests, they are disqualified from acting as your process agent, as a process agent will need to not have any vested interest in allowing you to get sued. This rules out your law firm, whose job is to protect you from being sued. It will also rule out any Singapore-incorporated subsidiary that your foreign company may have, assuming that it is the foreign parent company that is a party to the agreement and not the subsidiary itself.
If in doubt and short on time before the deal needs to be concluded, the safest bet is always to engage a dedicated process agency company.
Situations Where Process Agents are Needed
Most of the discussion above has focused on loan agreements but there are many other kind of agreements in which you may need the services of a process agent.
Really any kind of contract you can imagine where one party may need to be able to sue the other could require a process agent if one party is a foreign entity. They are quite common in the shipping and aviation industries in ship and aircraft financing deals or in aircraft or jet engine leases. They are also common in securities and derivatives transactions, debt offerings, structured finance and project finance deals.
They are also sometimes required in the regulatory sphere, particularly in the media industry in Singapore, where foreign news organisations distributing publications in Singapore need to appoint process agents in Singapore so that the local media regulator can take action against them in the event they breach the terms of their licences or any applicable publication laws.
Cost of Appointing a Process Agent
How much should it cost? This can really vary enormously which is why it makes sense to give yourself as much time as possible to shop around and get the best price.
Some process agents charge a fixed fee per contract whereas others will charge a fixed fee per entity. Others will charge an annual rate multiplied by the number of years for which they are appointed for each contract. Some give a discount when there are a large number of contracts or entities for which they are being appointed. Do your homework if you have the time and you may make some savings.