Exempt Private Company Limited: Comprehend before entering

In the world of business, understanding the various company structures and classifications is essential for entrepreneurs and investors. One such entity is the "Exempt Private Company Limited," abbreviated as EPC. In this article, we will explore the key aspects of an Exempt Private Company Limited and the benefits it offers to businesses.

What is an exempt private company limited?

An Exempt Private Company (EPC) is a private limited company with a maximum of 20 members, and its shares cannot be held by other corporate entities.

The Exempt Private Company (EPC) is the predominant business structure in Singapore, and for good reasons. It offers numerous benefits, including:

1. Minimal Compliance Requirements: Singapore's Registrar of Companies mandates the filing of annual returns. EPCs must submit these returns within a month of their Annual General Meeting. For businesses with a turnover under S$10 million, exemption from accounts submissions and annual audits is granted.
2. Tax Exemptions: The Start-up Tax Exemption (SUTE) scheme provides substantial tax exemptions for newly founded EPCs. Start-ups can enjoy exemptions of up to S$300,000 of chargeable income over their first three years.
3. Policy on Foreign Ownership: Singapore welcomes foreign shareholders with open arms, allowing full foreign ownership of EPCs.
4. Minimum Capital and Shareholder Requirements: Setting up an EPC requires just one shareholder with no legal restrictions on nationality or residence. The share capital has no limitations, with a minimum requirement of S$1.
5. Loan Flexibility: Unlike other companies, EPCs enjoy flexibility when it comes to granting loans and signing loan guarantees, as long as specific conditions are met.
6. Limited Liability: Shareholder liability is limited to their share capital contribution.
7. Privacy: Shareholders' names are not publicly recorded, ensuring confidentiality.

Exempt private company limited by shares overview

Exempt private company limited by shares meaning

An Exempt Private Company Limited by Shares, often referred to as an EPC, is a distinct type of business entity that is recognized in various jurisdictions. What sets it apart is that it enjoys specific privileges and exemptions compared to other types of companies.

Exempt private company limited by shares

5 Advantages of Exempt private company limited by shares

Here are 5 potential benefits of an exempt private company limited by shares:

1. Limited Liability: Similar to other private limited companies, an EPC provides its shareholders with limited liability protection. This means that their personal assets are protected, and their financial liability is confined to the amount invested in the company.
2. Privacy: EPCs typically benefit from enhanced privacy compared to other business structures. They often have fewer disclosure and reporting requirements, allowing businesses to maintain a higher level of confidentiality.
3. Streamlined Compliance: EPCs usually have reduced regulatory and compliance obligations compared to public companies. This translates to fewer administrative burdens and cost savings, making it an appealing choice for small to medium-sized enterprises.
4. Ease of Ownership Transfer: Depending on the jurisdiction, transferring ownership or shares in an EPC can be relatively straightforward. This flexibility is advantageous for businesses seeking to attract new investors or facilitate changes in ownership.
5. Exemptions from Specific Regulations: EPCs are frequently exempt from certain regulatory requirements that apply to public companies, such as the need for annual audits. This exemption can result in substantial cost savings for businesses.

Exempt private company limited by shares financial statements

Financial statements serve as a critical tool for stakeholders, including shareholders, regulators, and potential investors, to assess the financial health and performance of a company. Despite the exemptions that EPCs may enjoy, financial statements remain a fundamental requirement for these entities. They provide transparency and accountability, even for businesses with limited compliance obligations.

Key Components of Financial Statements for an EPC:

• The balance sheet offers a picture of the business's financial situation at a particular period.
• It includes assets, liabilities, and shareholders' equity. This statement helps in understanding the company's financial stability and its ability to meet its obligations.
• Income Statement (Profit and Loss Statement): This statement outlines the company's revenues, expenses, and net income or loss over a specific period. It offers insights into the company's profitability and financial performance.
• Cash Flow Statement: The cash flow statement tracks the movement of cash in and out of the company. It helps assess the company's liquidity and its ability to generate cash for operational needs and investments.

The Importance of Financial Statements for an EPC:

• Internal Decision-Making: Financial statements are crucial for internal management and decision-making within an EPC. They provide insights into the company's financial health, helping management make informed choices about investments, budgets, and growth strategies.
• Tax Compliance: Financial statements are essential for tax compliance. They serve as the basis for calculating income tax liabilities and ensuring that the company fulfills its tax obligations accurately.
• Investor Confidence: If an EPC intends to attract external investors or secure loans, accurate and transparent financial statements are vital. They instill confidence in potential investors or lenders by demonstrating the company's financial stability.
• Legal and Regulatory Compliance: While EPCs may enjoy certain exemptions, they are still subject to legal and regulatory requirements. Properly maintained financial statements ensure compliance with these obligations.

Some knowledges of exempt private limited company in Singapore

At the glance

In Singapore, an Exempt Private Company (EPC) is essentially a private limited company with a maximum of 20 individual shareholders. EPCs are highly favored in Singapore due to their numerous advantages and tax incentives.

True to its name, an EPC can qualify for exemptions related to specific tax responsibilities and audit obligations. Additionally, like other private limited companies, an EPC offers the benefits of separate legal status and limited liability for its members based on their shareholdings.

In Singapore, Exempt Private Companies are categorized into two types based on their ability to meet financial obligations. According to the Accounting and Corporate Regulatory Authority (ACRA), the filing requirements for these two types differ significantly:

1. Insolvent EPCs (unable to meet debts) are required to submit either a complete set of financial statements in XBRL format or essential financial statement data in XBRL format, accompanied by a PDF version of the financial statements.
2. Solvent EPCs (capable of meeting debts) are exempt from filing financial statements. However, it is advisable to fulfill the filing requirement, even for solvent EPCs.

This revised text provides a clearer and more concise explanation of an Exempt Private Company in Singapore and its filing requirements.

Exempt private limited company in Singapore

How to register an exempt private company in Singapore

The process of registering an Exempt Private Company (EPC) in Singapore shares similarities with establishing a limited company. To initiate the registration, it's important to familiarize yourself with the basic requirements, which closely resemble those of a limited company:

1. Directors: You must appoint at least one director who will shoulder managerial responsibilities and fiduciary duties for the EPC. This key individual should be a local resident, which includes Singaporean citizens, permanent residents, Employment Pass holders, EntrePass holders, or Dependant's Pass holders. Other directors can be of any nationality in accordance with Singapore's legislation.
2. Shareholders: The number of shareholders must not fall below the minimum requirement of one and cannot exceed a maximum of 20. Corporate entities are not allowed to hold shares in an EPC. According to the Company Act, a shareholder can also act as a director concurrently.
3. Initial Paid-up Capital: To proceed with incorporation, you must have a minimum share capital of S$1.
4. Company Address: It's mandatory to have a registered office address in Singapore; a P.O. Box is not acceptable.
5. Company Secretary: You have a grace period of six months from the incorporation date to appoint a company secretary. This individual plays a crucial role in the registration of the EPC, and they must be ordinarily resident in Singapore, possess the necessary qualifications, and have relevant administrative expertise to ensure compliance with regulatory requirements.

The registration process closely mirrors that of establishing a company in Singapore:

1. Registering a Business Name: As an EPC falls under the private limited category, it requires a unique business name. This name must be followed by "Private Limited," "Pte. Ltd" (the abbreviation for private limited), or "EPC" for Exempt Private Company.
2. Memorandum and Articles of Association: Declare the incorporation by filing a memorandum and articles of association, then submit them to the Registrar of Companies for review and approval.
3. Notification of Approval: You will be notified of the incorporation's approval status via the specified email address.

If approved, you will receive:

• A Unique Entity Number, serving as your EPC's identity number.
• A Certificate of Incorporation, providing proof of its incorporation.

Subsequently, delegate the secretary to issue share certificates to shareholders, confirming the number of shares held. The secretary will also handle the circulation of the First Board of Directors Resolution and prepare the Bank Account Opening Resolution when necessary for bank account application.

Conclusion

In conclusion, an Exempt Private Company Limited by Shares in Singapore offers a unique business structure that caters to the needs of small to medium-sized enterprises. Its benefits, including audit exemptions and enhanced privacy, make it an attractive choice for entrepreneurs and investors looking to establish their presence in the thriving Singaporean business landscape. Understanding the criteria, meaning, and financial statement requirements of an EPC is crucial for anyone considering this business structure in Singapore.