Entrepreneurs have the option of registering different types of companies in Singapore, depending on their scope and nature. All companies must be registered with ACRA and comply with the Companies Act, Chapter 50. There are 5 different types of entities in Singapore. These companies have to comply with rules and regulations to operate legally. Moreover, such categories facilitate the company registration process and make doing business easy. This article deals with exempt private companies in Singapore.
What is an Exempt Private Company?
The concept of exempt private companies was introduced in Companies Law of Singapore through an amendment in 2003. It is one of the most popular business entities because it has very lenient guidelines and regulations. New entrepreneurs, especially, prefer registering their business as an exempt private company. Moreover, Singaporean companies that were previously registered as private limited companies are also converting into exempt private companies (EPC).
An EPC can only have a maximum of 20 shareholders, and none of these shareholders can be an enterprise, meaning that people, and not the organizations, hold the shares of an EPC. However, any private company that is wholly owned by the Government, which the Minister, in the national interest, can be declared by notification in the Gazette.
Benefits of Registering Your Business as EPC
As discussed, EPC has emerged as the most popular and favoured kind of corporate entity in Singapore, due to a variety of reasons. Some of the most common benefits of registering your organization as an exempt private company are:
1. Limited Liability
Shareholders of EPCs are not liable for the entire company, and their investment is only concerned with their shares in an EPC. This means that if a company becomes solvent or driven to liquidation, your shares cannot be used to pay off the debt other than the amount that you have actually invested in the business. Such a benefit is not present in any other business model.
2. Relaxed Rules and Regulations
Undoubtedly, the most important advantage of EPCs is that they have relatively fewer rules and regulations, enhancing the ease of doing business. EPCs that have a yearly turnover of less than S$10 million and are solvent do not need to submit an annual audit report; similarly, they are not required to submit accounts details.
Instead, such companies can just provide a solvency declaration signed by the company secretary and company director. Accounting firms in Singapore can help companies, including EPCs, meet the legal requirements.
Other benefits of EPCs include:
- They can give loans to their directors
- Newly-established EPCs are given tax exemptions under the corporate tax laws
- They have to file a very simple version of the annual returns.
Requirements for Registering an EPC
If you want to register your business as an EPC, you must follow these requirements:
- The company must have at least one shareholder
- The company must have a maximum of twenty shareholders.
- One resident director, who can be a Singapore citizen, permanent resident, EP or Dependent Pass holder
- The company can have the same resident director and shareholder; however, it can cause issues in financial matters and Singapore company registration. Thus, it is highly recommended that a company has at least two shareholders
- One company secretary is essential in any type of Singapore company
- The business must have a physical office in Singapore
- Paid-up share capital of minimum S$1 is necessary
Setting up an Exempt Private Company
Once you meet the requirements, you can start the process of registering your organization as an EPC by following these steps:
1. Name your EPC
First of all, you have to select a name for your EPC, like in any other Singapore company registration process. The name should be unique and must not contain any inappropriate terms. A traditional private company usually uses the phrase “Pte Ltd”.
2. File company’s constitution
Once you have developed the company’s constitution and other official information, you have to submit it to the relevant authorities. ACRA normally handles Singapore company registration. The document should include every detail about your company, like the number of shares, amount of paid-up share capital, information about the director(s), company secretary and officers. Audit and accounting firms in Singapore provide services for the proper formulation and implementation of the company’s constitution by working with the company secretary.
3. Shareholder agreement
Drafting a shareholder agreement is a critical part of the company incorporation process. The agreement should contain the rules and regulations of company management. Moreover, it should include information about the duties of the directors and shareholders.
4. Company registration
Once you have submitted all the relevant documents to ACRA, it will confirm the documents and send you an e-mail. If your registration is accepted, you will be given a Unique Entity Number (UEN) for your EPC.
In a Nutshell
There are many different advantages of registering your organization as an EPC, and a lot of new businesses are enjoying its benefits. As a new business owner, you should also think about registering your business as EPC, because it is a simple process and once you have all the legal documents and fulfil the eligibility criteria, you will sail through this process. For more information, feel free to get in touch with us.