A Singapore Exempt Private Company (EPC) offers foreigners a separate legal entity with limited liability for its shareholders and a three year partial corporate tax exemption. In addition, an EPC is a limited by shares type of company with less red tape and government regulations than most Singapore companies. Foreigners may own all of the shares in an EPC.
Chapter 50 of the Companies Act established five different legal entities including partnerships, sole proprietorship, and limited companies.
Background
Singapore, also called the “Republic of Singapore”, is located in Southeast Asia near Malaysia. It is a sovereign city state with a political system described as a unitary dominant-party parliamentary republic. It elects its parliament and has a prime minister and a president. English is one of its official languages.
Benefits
A Singapore Exempt Private Company (EPC) offers these types of benefits:
• Foreign Owned: Foreigners can own all of the shares in an EPC.
• Partial Tax Exemptions: Startups receive a 3 year partial exemption of corporate taxes. However, U.S. taxpayers must report all global income to the IRS like everyone subject to global income taxation must disclose all income to their governments.
• Limited Liability: Shareholders liability limited to their share capital contributions.
• One Shareholder: The minimum requirement is one shareholder to form an EPC who can be a foreigner.
• No Minimum Capital: Only $1 S must be the paid up capital to incorporate.
• Privacy: The names of the shareholders are not included in any public records.
• English: One of the official languages is English.
Singapore Exempt Private Company (EPC) Name
EPC’s must choose a company name completely different from any other legal entity’s name in Singapore.
A Private Company limited by shares must either have its company name end with the words “Private Limited Company” or its abbreviation of “Pte Ltd”.
An Exempt Private Company, although a private company limited by shares, can use the abbreviation “EPC” at the end of its company name.
Advantages of an EPC
An Exempt Private Company (EPC) must have a maximum of 20 shareholders who are all natural persons. The advantages of forming an EPC over all other company types are:
• Fewer compliance requirements;
• Financial loan activities freedom; and
• Start up stage tax exemptions.
The fewer compliance requirements allow an EPC with an annual turnover of less than $5 million S while remaining solvent do not have to conduct annual audits and have fewer accounts information filing requ9rements. They simply file a declaration of solvency by the company’s directors and company secretary.
The freedom of financial loan activities allows EPC’s to obtain more independence in the manner of dealing with capital and financing. However, the Act prohibits extending loans to an EPC’s directors. In addition, the Act prohibits loans to a related company or providing security or guarantees for a loan if one company’s director(s) has an interest of at least 20% of the shares in the other company.
Limited Liability
A shareholder is not liable for the EPC’s debts, obligations, and losses beyond his or her amount of share capital contribution.
Memorandum and Articles of Association (MAA)
The Memorandum details the types of activities the EPC will engage in.
The Articles of Association provides the rules regarding how the company is managed.
These two documents will be included with the filings with the Registrar of Companies.
Registration
The two most important documents filed with the Registrar of Companies are the Memorandum and the Articles of Association.
Upon approval, the Registrar sends an email confirming the company’s incorporation success. The company is provided with a Unique Entity Number (UEM) as its identity number. A formal Certificate of Incorporation is also issued as proof of its incorporation.
The company secretary then issues share certificates for each shareholder confirming the number of shares allotted to each one. The secretary also issues the First Board of Directors Resolution. When a bank account is applied for, the secretary issues a Bank Account Opening Resolution for the bank.
Shareholders
A minimum of one shareholder is required to form an EPC.
Shareholders are limited to a maximum of 20 individuals. Only natural persons can become shareholders. Corporate bodies and other legal entities cannot become shareholders. Shareholders may be citizens of any country and reside anywhere.
A company with more than 20 shareholders but less than 50 shareholders is considered a “private company”. A company with more than 50 shareholders is considered a “public company”. A company with less than 20 shareholders with no legal entities as shareholders, is known as the “Exempt Private Company” (EPC).
Directors
A minimum of one director to manage the company is required. A shareholder may be a director.
At least one director must be a local resident. A “resident” includes a citizen, foreign permanent resident, an EP holder or Dependent Pass holder.
All of the other directors can be citizens from other countries not residing in Singapore. It is recommended to appoint two trustworthy foreign directors to out vote the local director on all important resolutions and matters.
Company Secretary
At least one company secretary must be appointed. This must occur within the first six months from registration. The secretary ensures that all legal and regulatory requirements are met. This requires knowing the laws (including the Act) and government regulations concerning the type of company and business.
Minimum Paid Up Capital
At least $1 S (Singapore Dollar) must be the paid up capital.
Paid up capital are the shares the company issued and received payments for in full by the time of registration.
Registered Agent and Address
A local registered agent must be appointed whose address may be the registered address for the EPC.
Accounting
As explained above, solvent EPC’s with annual turnover of less than $5 million S file fewer documents and are not required to perform an audit.
However, EPC’s must maintain proper internationally accepted accounting records and be prepared to provide financial statements if requested by the government.
The Act allows the Registrar of Companies and shareholders with a minimum of 5% stake in the company to ask an EPC to prepare and file audited accounts with the government.
EPC’s with annual turnover exceeding $5 million S must have their accounts audited and filed with the government like all other companies in Singapore.
Taxes
Since 2005, Singapore provides a partial tax exemption for startups during their first 3 years.
The startup tax exemption scheme (SUTE) provides the following tax exemptions for the first 3 years based on this scale:
• The first $100,000 S is exempt from taxes;
• The next $200,000 S is exempt from 50% of the taxes due.
In essence, the total exemptions for the first $300,000 S is $200,000 S during the first 3 years.
The only exception to these exemptions are the following types of startups:
• Investment holding companies; and
• Companies whose principal activities involve developing real properties for investment or sale, or both.
The normal corporate tax rate in Singapore which taxes all worldwide income is 17%.
Public Records
Only the Memorandum and the Articles of Association are filed with the Registrar meaning the names of the shareholders are not included in the public records.
Conclusion
A Singapore Exempt Private Company (EPC) has the following benefits: 100% foreign owners, privacy, partial tax exemptions, one shareholder, no minimum capital, and English is one of the official languages.
