Exempt Private Limited Company Explained
The fact that an EPC is exempt from audit requirements makes it the most preferred type of business entity in Singapore. Exempt Private Companies (EPCs) are private limited companies that are exempted from undergoing statutory audits.
The main motive behind an audit is to curtail the shareholders from undergoing losses, and to safeguard their interest. However, in case of an EPC, normally the shareholders also play the role of the company directors. This aspect rules out the necessity of undergoing an audit. Therefore, the amendment of establishing EPCs came into existence in 2003 in the companies act.
A Few Pointers for an EPC
- Regulatory Framework – An EPC is governed by the Singapore Companies Act
- Shareholders – An EPC does not have the provision of allowing any other corporate body to hold its shares. In addition, it has no more than 20 shareholders who are natural persons. The shareholders can be Singapore residents or foreigners; there is no restriction to the nationality of the shareholders.
- Directors – An EPC should have at least one local director, after which there is no further restriction on the nationality of directors. A shareholder can also act as a director.
- Meetings – The EPC should have its first shareholder meeting within 18 months from the date of incorporation. Annual shareholders’ meeting has to be held no later than 15 months from the previous one. The meetings can be conducted outside Singapore also, and the shareholders are allowed to vote by proxy.
- Capital – There is no minimum capital requirement. Any currency can be used to denominate the share capital.
- Registered Office – Every EPC must have a registered physical office in Singapore, the address cannot be P.O. Box
- Company Secretary – The EPC should appoint a company secretary within 6 months from company incorporation. The company secretary should be a licensed individual resident in Singapore. The EPC cannot hire a corporate company secretary.
- Filing Requirements – EPCs need to submit their annual return to the Registrar of Companies within 1 month from their Annual General Meeting. Filing of accounts with the Registrar is not required. They also need to file their annual tax return by 30 November of the following tax year. In addition, every EPC has to declare their revenue amount and Estimated Chargeable Income (ECI) with the IRAS, within 3 months of the end of its financial year.
EPCs are mainly companies with an annual turnover of less than S$5 million. EPCs are exempted from filing its audited annual accounts; instead, they can submit a declaration of solvency, duly signed by the company’s director and company secretary. If this document is not submitted, then the EPC also has an option of submitting its unaudited accounts to the Registrar i.e. ACRA.
This factor brings in the advantage of greater privacy for the directors and shareholders. This being said, the EPCs are still required to maintain proper accounting records, which are compliant to the format prescribed by the Companies Act and the Singapore Financial Reporting Standards (SFRS).
Benefits of Incorporating an EPC
- Reduced burden of audits translates into saving of audit fees
- Full tax exemptions for first three years on their first S$300,000 taxable income every year
- The directors of EPCs can take a loan from the company to leverage on their capital and earnings
- An EPC has a distinct legal entity
- Practices asset protection for shareholders
- Can undergo transfer of shares and hence perpetuity of business as an entity
- An EPC denotes credibility
These types of benefits cannot be availed by other type of companies, especially a private limited company. All the aspects when counted together help in bagging substantial savings for the EPCs. In the midst of enjoying all these privileges, there is one factor that cannot be overlooked, and that is safeguarding the interest of the shareholders.
For the above-mentioned parameter of shareholder’s security, the Singapore Companies Act has pitched in special provisions. If a shareholder holds more than 5% of an EPC’s share, then that shareholder as well as the Registrar of companies can ask the EPC to undergo an audit, and submit audited accounts. Therefore, it can be rightly said that an EPC brings the best of both worlds, cost-effective benefits coupled with diligence to take care of the shareholders, at the behest of the Registrar.