Small and Medium Sized Enterprises

It is critical to improve our understanding of how companies can build resilience to external shocks like pandemics, while at the same time generating long-term, sustainable value that benefits society as a whole. While many of the biggest corporations have outlined related plans, small and medium-sized enterprises (SMEs) - which account for about 90% of all companies worldwide - play a crucial role in any economy and can also be major drivers of social and environmental progress. But what exactly do we mean by SMEs? According to the Organisation for Economic Co-operation and Development, they are often defined as firms with fewer than 250 employees, and in terms of annual revenue the European Union, for example, defines them as those with less than €50 million (the separate category of “micro” enterprises usually includes those with fewer than 10 employees).

SME - Minding Your Business

January 2026 (5 minutes read)

Piercing the corporate veil is a critical and risky issue for small businesses in Asia because it can turn a company’s debts into personal debts for its owners and directors. When courts pierce the veil, they treat the company and its owners as one entity, allowing creditors, tax authorities, or employees to claim personal assets as Company assets.

Why Piercing the Veil Is Risky

A company’s separate legal identity exists to protect owners from personal liability. Veil-piercing is a rare but powerful exception, used when a company is misused. For small and family-run businesses in Asia, the distinction between the owner and the company often blurs because owners handle contracts, staff, and finances themselves. Many veil-piercing triggers arise from everyday informal practices, not just intentional fraud.

Common risky behaviours include:

Commingling funds: Using company accounts for personal expenses or moving money without clear records makes the company look like a personal wallet.
Undercapitalization: Starting with very little capital and relying on supplier credit or shareholder loans suggests the company wasn’t meant to stand independently.
Ignoring formalities: Failing to keep minutes, resolutions, or decision records weakens the company’s separate identity.
Informal guarantees: Promising to cover debts personally without formal documentation blurs corporate and personal responsibility.

Asian Business Culture and Enforcement

In Asia, veil-piercing risks are heightened by cultural and regulatory factors. Many businesses are family-run, informal, and trust-based, often treating the company as an extension of the family rather than a separate legal entity.

Meanwhile, tax and regulatory systems in countries like China, India, Indonesia, and Vietnam are becoming more digital and data-driven. Authorities can more easily detect fake companies, unpaid taxes, and non-compliance, using veil-piercing or similar tools to reach behind the company to individuals.

Labor and social security laws also increase personal exposure. In several Asian countries, directors can be held personally liable for unpaid wages and mandatory contributions such as statutory pensions and social insurance. For struggling small businesses, failure to meet these obligations can become a lifelong personal burden.

Legal Differences Across Asia

Asian countries share the goal of preventing misuse of limited liability but apply different legal approaches.

Common law systems (Singapore, Hong Kong, India) follow tried and tested English principles and are cautious about piercing the veil. Courts require clear evidence such as fraud, sham companies, or evading existing obligations rather than vague fairness arguments.
Civil law systems (China, Japan, Thailand, Vietnam) often embed personal liability in company laws for specific violations like breaking capital rules, unlawful dividends, or trading while insolvent. Chinese courts have even applied “reverse” veil-piercing to access shareholder assets hiding company wealth.

For businesses operating across borders, the same misconduct—such as trading while insolvent—may have very different personal consequences depending on the country.

Don’t let compliance concerns hold you back. Partner with Headington to unlock
peace of mind and focus on what matters most—growing your business.

Because piercing the corporate veil destroys the fundamental promise of limited liability, it is the most severe corporate law risk facing Asian small businesses. It can turn a business failure into a personal and family disaster.

Get in touch with us today to discover how Headington Management can help you achieve compliance with confidence and ease.

#SME, #Management, #Risk, #Compliance

Company Registration QueryPlease click the link to complete this form.

SME ESG obligations – the lion with a pig’s tale

December 2025 (3 Minutes Read)

In Singapore, while SMEs make up more than 99% of the businesses in Singapore (298.5 out of 299.8 thousand businesses) and employ twice as many as the non-SMEs (2.59 million v. 1.03 million) it is oftern regarded as the poor country cousins when it comes to getting stakeholder attention and support. The combined nominal value of the SMEs is slightly less than the non-SMEs ($284.1 billion v. $307.6 billion) but almost half of the total nominal value of the business economy (ie more capital at risk than is actually deployed).

The top business environment challenges cited by SME executives without the added burden of more reporting include talent acquisition and retention (52.5% respondents), growth and expansion (43.8%), funding and access to finance (35.7%), non-supportive policy environment (21%), and the difficulty of maintaining a strong culture and clear company purpose and value (20%).

SMEs can balance the cost of implementing ESG initiatives with the potential long-term benefits:

Start Small and Scale Gradually: SMEs shouldn't feel overwhelmed by trying to implement every ESG initiative at once. Begin with small, achievable steps that align with their specific business context and resources. For example, focus on one area like waste reduction or employee well-being. As they gain experience and see positive results, they can gradually expand their efforts.

Prioritize Initiatives with Clear ROI: SMEs should prioritize initiatives that offer a clear return on investment (ROI). This could include initiatives that reduce operational costs, improve efficiency, or enhance brand reputation. For example, investing in energy-efficient equipment can save money on utility bills while reducing environmental impact.
Seek Funding and Support: SMEs should explore funding opportunities and support programs designed to help them implement ESG initiatives. Government grants, subsidies, or loans specifically for sustainability projects can significantly reduce the financial burden. Additionally, they can look for partnerships with organizations or NGOs that offer expertise and resources in ESG.
Leverage Technology and Innovation: Technology can play a crucial role in making ESG initiatives more cost-effective. For example, using data analytics to track energy consumption or implementing digital solutions for waste management can streamline processes and reduce costs.
Focus on Long-Term Value: SMEs should view ESG initiatives as investments in long-term value creation rather than mere expenses. By prioritizing sustainability, they can build a more resilient business, attract environmentally conscious customers, and enhance their brand reputation, ultimately leading to increased profitability and growth.
Highlight the Benefits to Stakeholders: SMEs should communicate the benefits of their ESG initiatives to all stakeholders, including employees, customers, investors, and the community. This can help build trust, attract talent, and improve brand perception, ultimately contributing to long-term business success.

Specific quick roll out examples:

Waste Reduction: The document mentions that waste reduction and management initiatives are common among SMEs. This can be a cost-effective way to improve environmental performance and reduce operational costs.
Employee Well-being: Investing in employee well-being programs, such as health and safety initiatives or work-life balance programs, can lead to improved employee morale, reduced absenteeism, and increased productivity, ultimately benefiting the business in the long run.
Community Engagement: While there has been a decline in community initiatives, SMEs can find cost-effective ways to engage with their local communities, such as partnering with local organizations or offering volunteer opportunities. This can enhance brand reputation and foster positive relationships with the community.

#SME, #ESG, #Sustainability, #Innovation

Page updated

Google Sites

Report abuse