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Introduction to Exempt Private Limited Company

The structure, working, and the incorporation process of Exempt private limited company are explained in a systematic manner in the above given excerpt. An EPC is exempt from carrying out statutory audits, therefore are the most preferred option.

Majority of the investors and entrepreneur who starts new companies in Singapore rely on incorporating private limited companies. It is the most favored business structure for incorporation of a Singapore company. These private companies are limited by shares i.e. they cannot have more than 50 shareholders.

In Singapore depending on their business needs entrepreneurs can form two types of private companies limited by shares.

a)      A private limited company with 1 – 50 shareholders as its members.

b)      An exempt private limited company with 1 – 20 shareholders as its members.

Features of an Exempt Private Limited Company (EPC)

  1. An exempt private limited company which is limited by shares cannot have more than 20 shareholders. It must have at least one shareholder and a director.
  2. Law does not allow any corporate entity to hold any shares in an exempt private limited company.
  3. It has separate legal identity than its shareholders and directors.
  4. It has the rights of a natural person.
  5. It can sue and be sued in its name.
  6. It can purchase property and estates for its own use.
  7. Shareholders and directors’ liability extends only to their amount invested in the shares of the company.
  8. An EPC is responsible for its own debts and losses.
  9. An EPC has perpetual existence which does not depend on the membership of any shareholder. It still goes on if a shareholder or a director dies or is bankrupted.
  10. Shareholders can transfer their ownership in the company by selling their shares.
  11. Compliance requirements of an EPC are not strict as compared to other types of companies.
  12. EPCs having turnover less than S$5 million are not required to file their annual accounts.
  13. An EPC must file a Certificate of an Exempt Private Company to declare its solvency.
  14. An EPC can raise fresh funds easily. It can sell shares to the new investors or the old shareholders. It can also borrow money on its property.
  15. The rules and regulations applied to these companies are stricter than those applied to partnerships.
  16. Running costs of these companies is higher as the law demands more discloser and detailed administration requirements.
  17. Directors are obliged to favor company’s prospects and not to use their powers to make secret profits.
  18. If directors have any interest in the company’s shares, debentures or contracts, they must inform the company.
  19. An EPC must follow rules and regulations while entering in contract with its directors.
  20. Shareholders of the company can pass an ordinary resolution to remove a director.
  21. Wrongful or fraudulent trading or a breach of their duties to the companies can make directors responsible for the losses of the company.
  22. In the course of business activities, if the shareholders or the directors have to give personal guarantees to banks then, they are accepting more liabilities than what is meant by limited liabilities.
  23. A lawful winding up of an EPC may prove costly.

Taxation for Exempt Private Limited Companies

These companies enjoy the tax exemptions and incentives offered by Singapore tax authorities to other companies. The government agencies tries to support newly formed companies by allowing them to have financial benefits, in order to help them survive the difficulties of these years. Corporate tax applied to them is progressive.

For the first three years of their existence these companies pay 0% corporate tax on their initial taxable income of S$100,000. If their taxable income is less than S$300,000 then the tax rate of 8.5% is applied to them. For taxable income of more than S$300,000, a tax rate of 17% is applied.

We, at Singapore Accounts, register new companies for our clients. If you are planning to incorporate a new company in Singapore, please feel free to contact us on +65-6536 0036 or drop in an email at info@accountingservice.com.sg