What is exempt private company limited by shares?

An exempt private company limited by shares is a type of corporate structure used in some jurisdictions, particularly in the context of company law in Singapore. This term is specific to Singapore's legal framework and may have variations in other countries.

Here's a breakdown of what an exempt private company limited by shares means:

1. Private Company Limited by Shares: This part of the term refers to the company's legal structure. A private company limited by shares is a common type of business entity where the liability of shareholders is limited to the amount they have invested in the company. Shareholders hold shares in the company, and the company's capital is divided into shares. This structure is often used by small to medium-sized businesses.
2. Exempt Private Company: In Singapore, an exempt private company is a specific category of private company that meets certain criteria. Some of the key characteristics of an exempt private company in Singapore include:
   • Number of Shareholders: An exempt private company cannot have more than 20 shareholders. This limitation is designed to keep the company relatively small and private.
   • Restrictions on Share Transfer: The shares of an exempt private company are not freely transferable. This means that the company's constitution or shareholders' agreement may include restrictions on selling or transferring shares to outsiders without the approval of existing shareholders.
   • No Corporate Shareholders: An exempt private company cannot have another corporation as its shareholder, except for certain exempt companies, such as wholly-owned subsidiaries.
   • Annual Filing Requirements: Exempt private companies typically have reduced annual filing requirements with the Accounting and Corporate Regulatory Authority (ACRA) in Singapore compared to larger companies.
   • Audit Exemption: They may also be eligible for audit exemption if they meet specific criteria, which can reduce compliance costs.
   • Financial Statements: While they are exempt from audit in some cases, they are still required to prepare and file financial statements.

The concept of an exempt private company limited by shares is designed to make it easier for small businesses and startups to operate in Singapore by reducing some of the regulatory and compliance burdens associated with larger companies. However, it's important to note that the specific rules and requirements may change over time, so it's essential for businesses to consult with legal and financial professionals or refer to the latest regulations when considering this corporate structure.