The growing economies of Southeast Asian nations, along with their pro-business regulations, attract investments from across the globe. Moreover, entrepreneurs prefer destinations such as Singapore and Malaysia for their tax incentives and robust legal frameworks. An innovative way to enter these markets is through an exempt private company. Let’s learn more about this company structure, its benefits, and how you can set one up.
What is an Exempt Private Company (EPC)?
Also known as an Exempt Private Company Limited by Shares, it is one of the most popular organizational structures in Singapore. As the name suggests, an exempt private limited company is any firm that enjoys exemptions related to taxation and auditing requirements. The numerous exemptions and minimal requirements make it a popular structure for startups and small businesses seeking limited liability and reduced administrative burdens.
An exempt company limited by shares is generally beneficial for:
- Small and Medium Enterprises (SMEs), are well-suited to the EPC company structure as it is cost-effective and quick to set up.
- Family businesses, as the business owners have complete control of the operations.
- Startups that seek limited administrative hurdles and business-boosting rebates and exemptions.
Difference between Private Company and Exempt Private Company
As the name suggests, an exempt private company enjoys various exemptions that distinguish it from a regular private company. Let’s have a look:
- An exempt company limited by shares cannot have more than 20 shareholders. Whereas, a private company typically has more than 20 and fewer than 50 shareholders.
- The significant difference between the two is related to the filing of financial statements. An exempt private limited company can file a simplified statement that merely declares its solvency. On the other hand, a private company must file complete financial statements in the XLBR format, which is lengthy and requires the intervention of a financial advisor.
Key features of an Exempt Private Company
The following characteristics set apart an exempt company limited by shares from other company structures:
- There cannot be more than twenty shareholders.
- There must be no corporate shareholders, i.e., a company cannot be the shareholder of an exempt private company.
- There must be share capital, and it can be as low as S$1.
- The firm must have Pte. Ltd. and other suitable suffixes.
- It enjoys an extended annual return filing deadline.
- Shareholders enjoy limited liability.
Top Benefits of an Exempt Private Company
You can enjoy numerous advantages by setting up an exempt company limited by shares. Here’s a list of the top benefits that make it a suitable company structure for company formation:
Exemption from Audit
Not every exempt private company is eligible for audit exemptions. It must meet any two of the following thresholds for the previous two financial years:
- Annual revenue does not exceed $10 million.
- Total assets value does not exceed $10 million
- The total number of employees must not exceed 50.
Filing Simplified Statements
An exempt private company is typically exempt from obligations to file elaborate financial statements. Instead, they only need to file two documents: the first is a certified copy by the company's directors that confirms the exempt status; the second is the auditor's statement affirming that the company maintains proper accounting records and is capable of meeting the liabilities.
Ease of Company Incorporation
Setting up an exempt private limited company is easier and requires fewer formalities. That means you only need one shareholder with no bar on nationality. Aside from this, the minimum capital requirement is also low at $1.
Tax Exemptions
The following tax exemptions are allowed for a newly exempt private company:
- 75% tax exemption on the income of the first $100,000.
- 50% tax exemption on the next income of $100,000.
A key point to note is that the above tax exemptions are not applicable if an exempt Pte. Ltd. is an investment holding company dealing in the investment or sale of real estate.
Limited Liability
The shareholders and members of an exempt private company enjoy limited liability. Meaning, they cannot be held liable for more than the amount of capital they have invested.
Loans Extension to Directors
Unlike a regular private company, an exempt company limited by shares can generally extend loans to its directors without prior approval in general meetings.
Pre-registration Checklist for Exempt Private Company
- Must have one shareholder, one resident director, and a company secretary.
- The appointment of a company secretary must be made within 6 months of the company’s registration.
- One person can be both a resident director and a shareholder. However, banks often require a minimum of two signatories.
- Must have a physical address in the jurisdiction of incorporation.
Documents Required for Company Incorporation
You must submit the following documents for a successful company registration in Singapore.
- A government-issued ID that displays the director's full name, passport number, nationality, residential address, and contact details.
- A resident director must submit proof of citizenship, permanent residential address, or employment pass.
- A government-issued ID displaying the shareholder's full name, passport number, nationality, residential address, and contact information.
- A government-issued ID depicting the Company secretary's full name, passport number, nationality, residential address, and contact information.
- Written consent of the director
- Written consent of the company secretary
Steps to Register an Exempt Private Company
The registration process for an Exempt private limited company registration is the same as that of a traditional private company. It must be done online through the Bizfile+ portal. Following are some quick steps for you to follow:
Register a Business Name
You must choose a unique name for your exempt private company. It must have the suffix Private Limited, or Pte. Ltd., or EPC.
File the Documents
Submit the above-mentioned documents on the online portal. Aside from this, you must also file the MoA and AoA with the company's registrar for review and approval.
Wait for the Approval
If your firm is approved, you will receive a unique entity number (UEN) that serves as an identification number for your exempt private company. Moreover, you can also apply for a certificate of incorporation.
Meet the Post-Registration Requirements
Once your firm is set up, comply with the following requirements on time:
- Hold an Annual General Meeting (AGM) within 6 months after the end of the financial year
- Appoint a company secretary within 6 months of incorporation
- Appoint auditors within 3 months of incorporation
- File the first annual return
- Mention UEN on the documents, such as invoices
An exempt private company limited by shares is an ideal option to bolster your business’s growth. With numerous benefits and exemptions, it provides the right environment to drive profit. However, structuring the firm to meet the thresholds and legal requirements necessitates guidance. Thus, a business consultant like Business Setup Worldwide’s legal expertise can assist you with incorporating an exempt private company. Do you require assistance with company formation? Reach out to us and get guidance.
