An Exempt Private Company, commonly called EPC, is a private limited company with 20 members or fewer. Generally, shares of an EPC are not beneficial to any other corporate entities. If you are looking to invest in Singapore, setting up an EPC may be a good idea. In this article, you will learn why EPCs are a popular business structure in the country and also get an overview of the registration process.
Benefits of Setting Up an EPC in Singapore
Below are some of the features of an Exempt Private Company that make this business structure a favourite among investors:
Easy Compliance Requirements
The Registrar of Companies expects Singapore-based companies to file annual tax returns within one month of the Annual General Meeting. According to Singapore law, the deadline for filing these annual returns is 30th November of the impending tax year.
There may be some exceptions for Exempt Private Companies depending on the annual turnover. If an EPC has a turnover of below SGD 10 million, it is not subject to mandatory annual audits and accounts submissions. However, the company secretary and director must prepare a solvency declaration, sign it, and present it to ACRA and the Registrar. EPCs that currently have dormant operations must also submit this signed declaration.
Once approved, ACRA and the Registrar of Companies will recognize the collection of unaudited accounts. Note that Shareholders who have 5% or more stake may request the EPC to prepare audited accounts and returns.
EPCs with an annual turnover of SGD 10 million or more must submit audited accounts every year. You are not required to attach the audited accounts when filing annual returns but you must fill up and submit a declaration of solvency.
Favourable Tax Exemptions
When choosing a business structure, tax exemption is a very important factor to be considered. Thanks to the Start-up Tax Exemption (SUTE) in Singapore, newly-established EPCs can enjoy high tax exemptions. Up to SGD 300,000 of a start-up, EPC’s chargeable income is viable for tax exemption.
This exemption is applied over the EPC’s first three business years. The first SGD 100,000 is exempted at a 100% rate for the first year after incorporation. The remaining SGD 200,000 is exempted at a 50% rate for the two following years. Thus, a total of SGD 200,000 out of the SGD 300,000 is exempted.
However, all start-up EPCs cannot enjoy these exceptions. Real-estate and holding companies will not receive any tax benefits from SUTE. What’s more, companies with a turnover of over SGD 5 million will not receive any tax exemptions. The corporate tax rate of 17% will apply to these companies.
Foreign Ownership Policy
There is no limit on how many shares a foreign shareholder can own in a Singaporean company. So, a foreigner can choose to own a Singapore-based Exempt Private Company fully.
Minimum Shareholder and Capital Requirements
You can set up an EPC in Singapore with only one shareholder. As there are no legal restrictions on shareholders, an EPC can have shareholders from anywhere in the world. Even foreigners can own partial or full shares of an EPC.
Furthermore, there is no limit on how much share capital you need to use to establish an EPC. The minimum requirement is that you pay SGD 1.
According to The Companies Act, companies cannot provide loans to other companies. Companies also cannot sign loan guarantees or grant loan security for other firms if a director has affiliations (20% ownership of shares or interest) with another organisation. The Companies Act further prohibits the companies from giving loans to any of the directors.
The Act allows Singapore companies to grant loans, loan security, and sign guarantees only if they pass a resolution. The regulations that control business entities and financial loans are flexible for Exempt Private Companies. EPCs are completely exempted from the aforementioned regulations, allowing them enhanced financial freedom on their overall capital.
Limited Liability of Shareholders
Shareholders of an EPC have limited liability. As the liability of each shareholder is directly proportional to their contribution to the EPC’s share capital, their personal assets are protected.
Privacy of Shareholders
Only the Memorandum and the Articles of Association are made public. The Company Act helps maintain the privacy of the shareholders as none of the public records has names of shareholders.
What You Need to Know Before Registering an EPC in Singapore
- The EPC must have at least one shareholder, one business director who resides in Singapore and a company secretary. The company secretary will make sure that the company adheres to all the legal and regulatory boundaries placed by the Company Act. A company secretary must be appointed within six months of EPC registration with ACRA.
- While other directors can be foreign residents, at least one of the directors must be a Singapore resident. This director should have the authority to make important decisions and oversee all vital matters. To qualify as a Singapore resident, you must either be a permanent resident, Singapore citizen, or holder of a Dependent Pass or Employment Pass.
- Even though you can use details of one person as the required single shareholder and resident director during registration, banks and financial institutions will require at least two signatories.
- It is mandatory to have a physical office address in Singapore.
- There is a minimum share capital amount to be paid. The amount is a minimum of SGD 1.
How to Register an Exempt Private Company
Incorporating an Exempt Private Company in Singapore is quite easy. The first step is to select a company name. The name must be unique and should not be similar to other companies. Private companies usually feature “Pte Ltd” in their names but EPC can use the abbreviation “EPC” in their company name.
The next step is to file the memorandum and the articles of association with the Registrar. The Registrar of companies will assess the documents submitted and send approval via email. The Registrar will also allocate a Unique Entity Number for the Exempt Private company.
When the company registration is completed, the Registrar will issue a Certificate of Incorporation, which is proof that your company has been incorporated. Then, the company secretary will give out share certificates to the shareholders on behalf of the EPC. This document will specify how many shares each shareholder owns. The Secretary will also distribute the resolution to the board of directors and a Resolution for Account Opening to respective banks.
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