Exempt private companies in Singapore, explained

Key figures

• 20 Maximum members of an exempt private company, with no corporate legal or beneficial owner

• 7 months Deadline after financial year end to file the annual return

• S$10m · S$10m · 50 Small company audit test, any two of revenue, total assets and employees

• S$125,000 Income exempt each year under the start-up tax exemption, for three years

• 10% Minimum direct holding by one individual for the start-up tax exemption

• 2 business days Time to lodge a change to the register of controllers with ACRA

Contents

1. Exempt private company vs other private limited companies

2. What changes, and what does not

3. Financial statements of a solvent exempt private company

4. Loans to directors

5. SAFE and CARE conversions

6. Start-up tax exemption eligibility and audit rules

There is no need to apply for exempt private company status. A company either meets the statutory definition or it does not. What usually moves the needle is when a corporate investor or fund join the shareholder register.

1. Exempt private company vs other private limited companies

A Singapore private company is an exempt private company only if it meets both conditions in section 4(1) of the Companies Act 1967. A single corporate shareholder, or a 21st member, ends the status.

• No beneficial interest in the company’s shares is held, directly or indirectly, by any corporation.

• The company has not more than 20 members.

Both conditions must be met cumulatively. A separate category covers wholly government-owned companies that the Minister declares exempt. Every other private limited company is an ordinary private company, which section 18 allows up to 50 members. Joint holders count as one member. Current employees do not count, and nor do former employees who became members while employed.

Holding shares through a nominee does not alter the situation. If an individual holds shares on behalf of a company, that company has an indirect beneficial interest and the status ends. The company’s register of controllers will normally show who stands behind the nominee. Changes to that register must be filed with ACRA within two business days.

ACRA shows the status in the ‘Company Type’ field of the company’s business profile. That field reflects what has been filed. If it does not match the facts, the statutory definition prevails.

2. What changes, and what does not

Exempt private company status affects two things, the filing of financial statements and loans to directors. Audit exemption and the start-up tax exemption each have their own tests.

3. Financial statements of a solvent exempt private company

A solvent exempt private company does not have to file financial statements with its annual return. An insolvent one must file them in XBRL, the structured data format ACRA requires.

The annual return is due within seven months of the financial year end. When filing, the company declares whether it is solvent, insolvent, or an exempt private company that must file accounts for another reason. Annual filing requirements for Singapore companies, explained sets out the full calendar.

Note

Cash flow, not balance sheet

ACRA’s solvency test asks whether debts can be paid as and when they fall due.

Solvency here is a cash-flow test. ACRA treats a company as solvent ‘where you can meet your debts as and when they are due’. A balance sheet showing net liabilities does not, on its own, answer the question. What matters is whether the company can pay its debts from cash and committed resources as they fall due.

Smaller filers have a simpler option. A company that is not publicly accountable may use ACRA’s simplified XBRL template, filed with a PDF copy of the statements. Broadly, that means a company whose shares or debt are not publicly traded.

4. Loans to directors

An exempt private company may lend to its directors. Other companies generally may not. Section 162(2) prohibits any company ‘other than an exempt private company’ from entering into a ‘restricted transaction’, which covers the following.

• A loan or quasi-loan to a director, or to a director of a related company.

• A guarantee or security for such a loan.

• Credit extended, guaranteed or secured for a director’s benefit.

A quasi-loan is the company paying a director’s bills on the understanding that the director will repay it. The rules also treat a director’s spouse and children, including adopted and stepchildren, as the director.

Section 163 is a separate rule. It applies where the directors together hold 20% or more of the votes in another company. A company that is not exempt needs prior shareholder approval before it lends to that company, or guarantees or secures its debts. Exempt private companies are outside both sections.

Both rules can catch everyday transactions.

• Personal costs paid by the company. A company card used for a director’s personal spending can amount to a loan or quasi-loan. So can a personal bill paid from the company account on the basis that the director will repay it.

• Drawings ahead of salary or dividends. Cash taken before pay is processed or a dividend is declared may leave the director owing the company in the meantime.

• Guarantees and security for a director. A company guarantee or charge supporting a director’s mortgage or car loan falls within section 162. No cash needs to leave the company.

• Lending to the founder’s other business. Cash moved to a company in which the directors together hold 20% or more of the votes falls within section 163. It needs prior shareholder approval.

Section 162(3) sets out narrow exceptions. They cover expenses incurred for the company’s purposes and a home loan to a full-time director. They also cover a shareholder-approved scheme for full-time employee directors, and ordinary lending by a regulated lender. The first two also need prior shareholder approval, or repayment within six months of the next AGM, under section 162(4). Loans from a director to the company are not restricted. Directors’ duties apply in both directions.

Case in point

The founder advance

Two founders of an early-stage exempt private company take a S$50,000 advance from the company to meet personal expenses. The board approves it and it is documented as a loan. Section 162 does not prohibit it. A venture fund then agrees to subscribe for 15% of the company. Due diligence flags the advance. The term sheet makes repayment, or documentation on agreed terms, a condition of completion. That condition is commercial. The Act does not unwind a loan lawfully made while the company was an exempt private company. Once the fund’s shares are issued, the company is no longer an exempt private company. Any new advance to the founders is then prohibited.

5. SAFE and CARE conversions

An unconverted SAFE (simple agreement for future equity) should not affect exempt private company status, because the holder has no shares until conversion. The same applies to a CARE (convertible agreement regarding equity) and a convertible note. A corporate holder of these instruments should therefore have no beneficial interest in the company’s shares.

The Companies Act does not address the point directly, so the position depends on the documents. The instrument or a side letter might give the holder an interest in existing shares, for example through a share charge, an option over issued shares or a trust. The status could then be lost before conversion. Once the instrument converts into shares held by a corporation, the status ends.

Case in point

The priced round conversion

A Singapore start-up raises S$1 million at pre-seed from a regional venture capital fund that invests through a company. The fund uses a mix of Y Combinator post-money SAFEs and VIMA CAREs. It holds no shares. The start-up remains an exempt private company. Eighteen months later the start-up closes a S$4 million Series A. The SAFEs and CAREs convert under their terms into preference shares held by the fund. On issue, a corporation holds a beneficial interest in the company’s shares. exempt status ends. From then on the company files XBRL financial statements with ACRA, using the simplified template if it qualifies. New loans to its directors are prohibited, save for the narrow statutory exceptions. Series A investors often ask for small SAFE and angel holdings to be brought into a single vehicle at the same closing. Consolidation into a corporate SPV has the same effect on exempt status. A bare trust nominee holding only for individuals may not. See cap table consolidation.

6. Start-up tax exemption eligibility and audit rules

Neither the start-up tax exemption nor audit exemption depends on exempt private company status. Each has its own test.

Start-up tax exemption. IRAS offers this scheme to new companies incorporated and tax resident in Singapore. The company must have no more than 20 shareholders throughout the financial year on which the tax is based. It must also meet one of two ownership tests.

• All shareholders are individuals holding shares directly and beneficially in their own names.

• At least one individual directly and beneficially holds at least 10% of the issued ordinary shares.

Investment holding and property development companies are excluded.

The exemption applies for the company’s first three tax years. A qualifying company pays no tax on 75% of the first S$100,000 of chargeable income and 50% of the next S$100,000. That exempts up to S$125,000 a year, a saving of up to S$21,250 at the 17% corporate rate.

A corporate investor does not, on its own, end eligibility, provided an individual still holds at least 10% directly. A 21st shareholder does end it. A holding structure can also cause problems. A Singapore holding company whose income is mainly dividends from an overseas operating company may be treated as an investment holding company, and so be excluded.

Case in point

The angel syndicate

A new technology company has 18 individual shareholders. Two founders each hold 30% directly. On S$200,000 of chargeable income, S$125,000 is exempt under the start-up tax exemption. That saves S$21,250. Twelve angels want to invest. Subscribing individually would take the company to 30 shareholders and end the exemption. The angels instead pool their money in a single special purpose vehicle. The company stops being an exempt private company when the vehicle’s shares are issued. It now has 19 shareholders. At least one individual still holds 10% or more directly. The company should therefore remain eligible. Eligibility is tested for each year of assessment. The 20-shareholder limit applies throughout each basis period of the first three years.

Audit. Exempt private company status no longer brings audit exemption. ACRA states that ‘you do not need to be an exempt private company to qualify for audit exemption’. Instead, a private company is exempt if it qualifies as a small company by meeting at least two of these three criteria.

• Total annual revenue of S$10 million or less.

• Total assets of S$10 million or less.

• 50 or fewer full-time employees at year end.

After the first two financial years, the test is applied to the two years immediately before. A company in a group qualifies only if the group as a whole, including foreign entities, also meets the test.

Common questions

Does one corporate shareholder end exempt private company status?

Yes. A company is an exempt private company only if no corporation holds a beneficial interest in its shares, directly or indirectly. One share held by a company ends the status. So does one share held by a nominee for a company.

How do I check whether my company is an exempt private company?

The “Company Type” field on the company’s ACRA business profile shows the status on ACRA’s record. The legal test is not more than 20 members and no corporate beneficial owner, direct or through a nominee. Where the two differ, the legal test decides.

Can a company become an exempt private company again?

Yes. The status follows from the statutory definition. A company that again has not more than 20 members and no corporate beneficial owner meets the definition again. This can happen after a corporate shareholder sells to individuals.

Is an exempt private company automatically exempt from audit?

No. Since 2015 audit exemption depends on the small company test. A private company qualifies if it meets at least two of three criteria. The criteria are revenue of S$10 million or less, total assets of S$10 million or less, and 50 or fewer employees. exempt status is not required.

Does a SAFE held by a venture fund end exempt private company status?

Not ordinarily before conversion. The holder has no shares and therefore no beneficial interest in shares. Conversion into shares held by a corporation ends the status. The position can differ where the instrument creates an interest in existing shares.

Can a company raise on unconverted SAFEs and apply for Enterprise Singapore grants without losing exempt status?

Yes, as far as exempt status is concerned. An unconverted SAFE gives the holder no shares, so a corporate SAFE holder does not end the status. exempt status is not a grant criterion either. Where a grant sets a local shareholding test, it looks at equity, determined by ultimate individual ownership. A SAFE becomes equity only on conversion. Conversion can change both exempt status and the local shareholding percentage. Since 30 September 2026 the EDGE Grant has replaced the Enterprise Development Grant. Enterprise Singapore publishes its criteria.

Auberique files annual returns and XBRL financial statements for companies on either side of exempt status. It also maintains their statutory registers. Clients track ACRA deadlines in the Auberique client portal.

About the author

Gavin McDaid is a practising solicitor (England and Wales) and former venture capitalist, with an LLM in Law and Technology from Queen’s University Belfast. He writes on company law, fundraising and governance in Singapore.