Singapore is a global financial center which has ranked no 2 globally for the ease of doing business globally and is also the world’s most competitive economy based on the World Economic Forum ranking.
In fact as our former President Tony Tan has said,
“Singapore is a natural gateway for international firms looking to access Asia and for Asian businesses to access the world.”
Key Point #1- Why set up a company as compared to other non-incorporated entities
Most people would want to set up a company as compared to a partnership or business or sole proprietorship due to the concept of separate legal personality. This means that a company can be sued and sue in its own name and is a separate legal entity from the owners. This allows the company to enter into business ventures and protect the down side of the owners in case the business sours.
Other entities in Singapore with separate legal personality include, limited liability partnerships, limited partnerships, variable capital companies. But all these are outside the scope of this article.
Key Point #2- What types of companies are there?
In Singapore there are generally 2 types of companies, one is a public company and the other a private company.
Under the Companies Act in Singapore (Cap. 50), there are generally 2 types of companies:
- Public companies where they have more than 50 members and generally do not have restrictions on share transfer. In turn there are two further sub-types of public companies:
- Public company limited by shares – typically you see this in listed companies on SGX-ST in Singapore; or
- Public company limited by guarantee – these are usually for non-profit organizations and some of them are registered as charities.
- Private companies which have less than 50 members and generally have restrictions on share transfer (which usually refers to the requirement for board approval for all share transfers).
Key Point #3- What type of private companies are there in Singapore
- Exempt Private Company
An exempt private company is one that has a maximum of 20 shareholders and no corporate shareholder or is an entity deemed by the Minister as an EPC.
Some benefits of this entity include:
- The EPC can extend loans to directors. This is unlike non-EPCs that are not allowed to extend loans to directors;
- ACRA has also simplified the filing of annual returns for solvent EPCs
EPCs need to fulfil the following requirements before being eligible to file a simplified annual return:
- Financial Year End (FYE) falls on or after 31 August 2018
- The EPC is not preparing audited financial statements
- The EPC is not required to file financial statements
- There should not be any change in the previous information filed with ACRA
We routinely advise companies within a group structure on how they can structure their group holding structures to become an EPC to save on compliance costs so do speak to us for more information if you need help on this.
- Small Private Company
Under Section 205C of the Companies Act, a company, inter alia, is a small company which is exempt from audit requirements and filing such accounts with the Accounting and Corporate Regulatory Authority (ACRA).
So what is a “small company”?
Under the 13th Schedule of the Companies Act, A company is a small company from a financial year if —
- it is a private company throughout the financial year; and
- it satisfies any 2 of the following criteria for each of the 2 financial years immediately preceding the financial year:
- the revenue of the company for each financial year does not exceed $10 million;
- the value of the company’s total assets at the end of each financial year does not exceed $10 million;
- it has at the end of each financial year not more than 50 employees.
Choosing and structuring and planning your group corporate structure can help save you in annual filing and reducing of compliance costs. Do speak to us if you need help in planning what is necessary for your business needs.
Finally, we leave you with a quote from our Prime Minister,
“What we can do in Singapore may not be doable elsewhere. Some things you know you need: you want efficient government, you want clean government, you want to do away with corruption, you must educate your people. You want to get housing and so on. All these are not such secrets, not so special to Singapore.”
About Raffles CPA
Raffles CPA is a leading global professional services firm headquartered in Singapore that serves global clients.
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