Private Limited Company, EPC, Subsidiary Company: What’s the Difference?
Singapore’s corporate regulations allow the creation of several different types of business entity, such as a Sole-Proprietorship, several types of Partnerships, a Public Limited Company, and a Private Limited Company. Of these, the most common and usually preferred type of Singapore entity is the Private Limited Company.
In this article, we will focus exclusively on Private Limited Companies since all three terms being explained in this article relate to a Private Limited Company. This article will clarify what a Private Limited Company is, and how it may acquire the characteristics of an Exempt Private Company or a Subsidiary Company. Thus, the very first concept that should be clear to the reader is as follows: Exempt Private Company and Subsidiary Company are types of Private Limited Company.
Private Limited Company
Exempt Private Company
An Exempt Private Company (EPC) is a Private Limited Company and thus has all the same characteristics as described above. However, it is exempted from certain compliance requirements. To qualify as an EPC, a Private Limited Company must meet the following conditions:
- It must have no more than 20 shareholders;
- No corporation should have a beneficial interest in its shares — in other words, it must have no corporate shareholder.
The main benefit of an EPC is that it is exempt from the obligation to attach financial statements to its Annual Return.
In addition, EPCs have more freedom and autonomy when obtaining or extending financial loans in comparison to non-Exempt Private Limited Companies. In particular, they can extend loans to their directors. Other types of companies are generally prohibited from extending loans to their directors unless certain requirements are met.
A Subsidiary Company is also a Private Limited Company. But it is wholly or partially owned by another business entity, which is called the parent company or holding company. Singapore Companies Act allows for 100% foreign ownership; therefore, the foreign company can own all the shares of the Subsidiary Company or it may partially share ownership with a local entity or another foreign company. The liabilities of the subsidiary are not passed to the parent company. The parent company’s assets remain insulated from the liabilities of the subsidiary. The parent company’s accounts need not be disclosed to or by the subsidiary. The Subsidiary Company is required to submit only its own annual returns, and not those of its parent company.
Although foreign companies have multiple registration options in Singapore, more than 90% of them prefer setting up a local subsidiary; as a separate legal entity, the subsidiary may enjoy tax and other incentives available to companies resident in Singapore. A subsidiary is, by far, the ideal choice for foreign companies wishing to establish a presence in Singapore.
Differences at a Glance
|Legal status||Num of shareholders||Who may be a shareholder||Special features|
|Private Limited Company||A separate legal entity where the shareholders’ liability is limited by the amount of their shares. The shares are held privately.||Up to 50.||Companies as well as individuals. 100% local or foreign shareholding is allowed.||—|
|Exempt Private Company||A Private Limited Company; i.e. its status is the same.||Up to 20.||Only individuals. 100% local or foreign shareholding is allowed.|
Exempt from the obligation to attach financial statements to the Annual Return.
Can extend loans to its directors.
|Subsidiary Company||A Private Limited Company; i.e. its status is the same.||Up to 50.||More than 50 percent of shares should be owned by the parent company. The rest may belong to other companies or to individuals. 100% local or foreign shareholding is allowed.||—|
Which Structure Is Appropriate for You?
If you are planning to incorporate a Private Limited Company in Singapore, your company will automatically be classified into one of the three types explained above and there is nothing for you to worry about. Specifically:
- If the number of shareholders is less than 20 and they are all individuals, the company will be treated as an Exempt Private Limited Company (or EPC for short).
- If more than 50% of shares are owned by a corporate entity, the Private Limited Company will be treated as a Subsidiary Company.
- In all other cases, the company will be treated as a Private Limited Company (as long as the number of shareholders is less than 50).
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