EPC and secretary / employment requirements

[Seasoul]

Hi,

I've been reading through the forum, especially the big two threads on starting a business in Singapore, and they were extremely helpful so thanks to everyone who contributed.

I am a PEP holder, currently unemployed, and am planning to be hired as Director for a PTE LTD incorporated by my partner, who is Singaporean. In effect, I would be the only one actively working to take the company off the ground, my partner already has a job.
The company will be a frame for my freelance work and will start off with only me as employee, and if things go well, expend as work comes in. There will be no office, most of my work I do online or at the clients location (in SG, no work overseas).

I have a couple of questions, been reading the ACRA site and I am not yet too sure about the following:

- Are the only requirements for being an EPC, the $5M yearly revenue mark, number of shareholders and not having a corporation being a shareholder ? Does that mean that this PTE LTD I am referring to above, is in fact an EPC ? (The Singaporean will be the only shareholder)

- If this indeed falls under an EPC, ACRA says it wouldn't need an auditor to be hired. However, it is indicated that professional firms that are hired to do the Annual Return, will require auditing documents. Any advice regarding this point please ? Am I being unrealistic thinking I can do the annual return filing myself, hence will not need auditors at all ?

- Company secretary and address: Can I hire services of a firm to be the PTE LTD's company secretary and provide the business address as well ? What do you pay for these services (just to give me an idea) ? If I can take care (with my partner) of the incorporation process, and the employment process, why would I need the Company Secretary for, except to comply with the law ? I mean, I wouldn't need their services in the future, would I ?

- I have yet to read IRAS website on this, but if I am employed by my partner's PTE LTD, what are the taxes the company will have to pay ?

- I am planning on doing a PR request once this is all set up, and maybe once I am employed for a couple of months in this company. What will that change for the company, in terms of taxes, to employ me as a PR instead of a PEP holder ?

I am not sure how my PR request will be perceived, and my employment for that matter, as this is all clearly a way for me to start my own business in Singapore, without going the Entrepass route. The reason why I am not going the Entrepass route is mainly because I am afraid the Entrepass will be harder to get, and we both plan on working for this business once it's taking off but my partner is keeping the current job to limit risks and have at least one of us in a more stable situation. I am hoping this will take less time, and get me started faster.

I'll be interested in hearing opinions from experienced business owner who might have thought of this way or gone through it. Many thanks in advance for any help you can provide

[Strong Eagle]

I think you will have difficulty in getting government approval for your EP.

First, from the MOM website:

http://www.mom.gov.sg/foreign-manpower/ ... fault.aspx

* The following groups of foreigners are not eligible for the PEP:

(i) foreigners who are issued with an Employment Pass under the Sponsorship scheme. Under this scheme, their direct employers are overseas companies which do not have a Singapore-registered office/business entity;

(ii) foreigners who are working or intending to work on a free-lance basis without any direct employers in Singapore;

(iii) foreigners who are listed as Sole Proprietors, Partners or Directors in a business/company registered with ACRA and are shareholders of that business/company.

(iv) foreigners working as journalists, editors, sub-editors and producers.

Now, it seems reasonable that if these folks cannot get a PEP, then neither will the government look favorably upon allowing you to use your PEP for one of these activities. You need to be full time employed by a company.

Second, the reason the rules were tightened up is because of the abuse. People with no significant experience starting a business, and certainly not enough capital to sustain themselves to break even, used the Entrepass as a way to get in the back door into Singapore. That door has now been shut.

Some people have succeeded in forming a company with a local director and then applying for an EP. However, from what I've seen, most already had a successful business, had a good contract in hand, run a professional type business, immediately able to generate income, or are moving a successful consulting business to Singapore.

From what I see, you will freelance. With no contracts, no office, and no business plan, I don't see MOM granting you the pass. I've been wrong before, so who knows?

If you succeed, you need audited books. You need a secretary to create your annual report, directors resolutions, record of AGM/EGM's, and to file various government documents.

You need to read the IRAS website because the tax laws are generous for start ups and cannot be answered in one line. Do note however, that if you structure your pay/company profits/dividends in such a way that neither you nor your company pay tax, even though legal, will be looked upon unfavorable come renewal time.

But, as I noted, your big problem is getting approval for your scheme, and if I were taking bets, I'd say it won't happen.

[ausinsg]

I thought the OP meant he already has a visa, in which case he just needs to nominate his new employment on a notification form to MOM.

Most of his queries seem focused on the company secretarial duties. I recall reading that a foreigner needs to use a secretarial company to set up a company, whereas a local can just submit online to ACRA. So the OP's partner could do that, but as SE points out the OP needs someone down as the company secretary to draft resolutions and minutes of the meetings, where supposedly all of the business decisions were made.

[Strong Eagle]

I thought the OP meant he already has a visa, in which case he just needs to nominate his new employment on a notification form to MOM.

Most of his queries seem focused on the company secretarial duties. I recall reading that a foreigner needs to use a secretarial company to set up a company, whereas a local can just submit online to ACRA. So the OP's partner could do that, but as SE points out the OP needs someone down as the company secretary to draft resolutions and minutes of the meetings, where supposedly all of the business decisions were made.

He is not a foreigner... he has a FIN and right of abode. He could form a company and does not need a secretarial service.

I can't find the reference and he will not be able to simply nominate a start up company. He has to have a minimum guaranteed salary, and I recall that MOM is not interested in allowing PEP's to stay in the country this way after losing regular employment.

[ausinsg]

If you do manage to find the reference, I'd be interested to see what was said.

Currently they changed the minimum fixed annual salary for a PEP to $34,000 over FY 2011.

There are a couple of restrictions that you agree to, that would fit this case, that is to do with starting your own business or engaging in entrepreneurial activities.

The first you could argue technicality in having your partner start the business, though it could put you on a shit list if you were trying to do other things with the govt. But sometimes Singapore seems happy to turn a blind eye if you fit the rules regardless of intent.

The second is quite grey. Is being a business development manager/consultant at a new business, an entrepreneurial activity? Or is it your job as per your employment contract?

The big thing would be having enough capital so that a regular salary could be paid until the consulting revenue comes in. Also renting an office space/desk would go some way to establishing the legitimacy of the business rather than just working from home, I would think.

SE would the govt view this as foul intent and try to kick you out? Or would a blind eye be turned if you were generating revenue, meeting salary requirements, and supporting yourself here?

Conditions of validity

Maximum Unemployment Period: This cannot exceed six continuous months at any point. This applies to PEP holders working in Singapore as well as PEP holders working on overseas stints assigned by their employers in Singapore. PEP holders who intend to leave Singapore and work for employers overseas should cancel their PEPs.

Minimum Annual Salary: PEP holders must earn an annual fixed salary of at least $34,000 for each calendar year of the PEP.

Requisite Notifications to MOM: PEP holders and their employers will need to keep MOM informed of each change in the PEP holders' employment status (e.g. commencement or cessation of employment) and agree to make available to MOM information on their annual fixed salary. PEP holders will also need to notify MOM of any changes in their contact details viz. local contact person and address.
Duration

The PEP will be issued only once. It is valid for five years, and is non-renewable.

Note: The PEP holder is not allowed to start his/her own business or engage in any entrepreneurial activities. The holder must apply for an EntrePass if he/she intends to do so.

http://www.mom.gov.sg/foreign-manpower/ ... fault.aspx

[Strong Eagle]

ausinsg, no one knows the exact rules, nor the decision making process of any government body. Any information posted here regarding passes is gleaned from the past experience of others, the observations of government behavior, and the intent behind that behavior.

I think that the government will not look favorably at a PEP who has lost his/her full time job and is attempting to stay in Singapore by creating a business and them working for it, no matter the job title and/or function, for the following reasons.

a) The PEP was created to allow skilled professionals an easier way to migrate to Singapore to work for established companies here. Why? To ensure that companies have the talent pool available to stay and grow in Singapore. The PEP is about making life easier for established companies, particularly MNC's, not fulfilling someone's career desires. Allowing a PEP to leave and start a business does not meet the goal.

a) Rules for Entrepass were severely tightened up after it became apparent that people with no business experience and insufficient capital were starting businesses as a way to back door themselves into Singapore. It doesn't seem reasonable then, to simply allow a PEP (or anyone, for that matter) to form a company with no business plan, no experience, and no capital, and then get an EP from that company.

I could see this working under one specific circumstance. If an employee were to leave an employer, and have the ability to immediately start a company with a confirmed contract, then this might work. For example, an MNC decides it wants to use contract project managers only. They guarantee a one year contract. The employee could use this as part of the rationale to be granted an EP in her/his own company.

As I have noted elsewhere, I have seen and heard of people in professions like consulting, PM, forex, trading, etc form a company and get and EP, based upon the fact that they were experienced, had a successful track record, and had a going business that needed a home in Singapore.

I've not seen a single instance of a person posting on this board successfully doing what the OP is proposing... freelancing out of the house, with no fixed income, no apparent contracts in place, and no business track record.

If I am wrong, I sincerely hope the OP will tell us about it, as then I can realign my understanding of how the government works.

[Seasoul]

Many thanks for all the replies and the above discussion, it's very useful.

I didn't think of reading the PEP's requirements to obtain it, didn't think of that, I was looking at what can and can't be done when you have a PEP and it doesn't say you can't be a Company's Director or Soleproprietor. So that was an eye opener, thanks a lot for that !

I'm not sure what kind of image I am sending with my first post, but this venture is not to give me some sort of get out of jail free card, or to trick the system into allowing me to stay here longer. It is a serious endeavor to start my own business and I have made SG my home for 4 years now. After working the same field for companies for many years I am now willing to provide the same services but as a contractor. A bit like what was mentioned in one of the posts above.

But one has to always think of how it will be perceived so it's interesting to see it from another perspective. There is a capital, a business plan and a solid strategy behind this project, and the idea is to avoid cancelling the PEP to ask for an Entrepass if there is a simpler way of doing things.

In the end, this is what we are looking at now: Create a Pte Ltd with a shareholder and 2 Directors. All SG citizens or PRs. And that company will employ me, just as any other company would with my PEP. I won't be a Director or one of the subscribers, but just a normal employee. And the Paid up capital is more than the required annual income for a PEP holder, just to show good faith and the company's ability to cover the PEP requirement.

As for my question regarding taxes, I've found all my answers on the guidemesingapore website. (not sure if a link is authorized here?)

I am still unsure on the following:

.1. ACRA says the company secretary must be appointed within 6 months of incorporating, however, some sites mention that the company Secretary particulars are needed for the registration, can someone clarify that please ?

.2. ACRA's site isn't too clear about EPC and Company Secretary: on one hand it says all PTE LTD must have a company secretary, on the other, it says some companies don't need a company secretary per say but someone who has "secretarial skills". And I've read on other forums that for EPCs you actually do not need a company secretary. I'll give ACRA a ring, but maybe one of the readers here has the answer and can explain whether indeed an EPC doesn't need to appoint a secretary or not.

.3. Is there a particular step to take to turn a PTE LTD into an EPC, or does it become an EPC by default just as long as the EPC requirements are met ?

I really appreciate the time and effort given to reply to my post, it has been tremendously helpful, thanks again !

[kevin_al]

PEP is not applicable for your case. PTE LTD & EPC are concepts apply in different context, don't messy them together.

Many thanks for all the replies and the above discussion, it's very useful.

I didn't think of reading the PEP's requirements to obtain it, didn't think of that, I was looking at what can and can't be done when you have a PEP and it doesn't say you can't be a Company's Director or Soleproprietor. So that was an eye opener, thanks a lot for that !

I'm not sure what kind of image I am sending with my first post, but this venture is not to give me some sort of get out of jail free card, or to trick the system into allowing me to stay here longer. It is a serious endeavor to start my own business and I have made SG my home for 4 years now. After working the same field for companies for many years I am now willing to provide the same services but as a contractor. A bit like what was mentioned in one of the posts above.

But one has to always think of how it will be perceived so it's interesting to see it from another perspective. There is a capital, a business plan and a solid strategy behind this project, and the idea is to avoid cancelling the PEP to ask for an Entrepass if there is a simpler way of doing things.

In the end, this is what we are looking at now: Create a Pte Ltd with a shareholder and 2 Directors. All SG citizens or PRs. And that company will employ me, just as any other company would with my PEP. I won't be a Director or one of the subscribers, but just a normal employee. And the Paid up capital is more than the required annual income for a PEP holder, just to show good faith and the company's ability to cover the PEP requirement.

As for my question regarding taxes, I've found all my answers on the guidemesingapore website. (not sure if a link is authorized here?)

I am still unsure on the following:

.1. ACRA says the company secretary must be appointed within 6 months of incorporating, however, some sites mention that the company Secretary particulars are needed for the registration, can someone clarify that please ?

.2. ACRA's site isn't too clear about EPC and Company Secretary: on one hand it says all PTE LTD must have a company secretary, on the other, it says some companies don't need a company secretary per say but someone who has "secretarial skills". And I've read on other forums that for EPCs you actually do not need a company secretary. I'll give ACRA a ring, but maybe one of the readers here has the answer and can explain whether indeed an EPC doesn't need to appoint a secretary or not.

.3. Is there a particular step to take to turn a PTE LTD into an EPC, or does it become an EPC by default just as long as the EPC requirements are met ?

I really appreciate the time and effort given to reply to my post, it has been tremendously helpful, thanks again !

[Seasoul]

PEP is not applicable for your case. PTE LTD & EPC are concepts apply in different context, don't messy them together.

I'm not sure I understand what you mean by PEP is not applicable ? I already have a PEP...so I don't get what you meant.

As for PTE LTD and EPC, from what I read on the ACRA website:

Private Company limited by shares

Private Company

This is a locally incorporated company where the maximum number of shareholders is limited to 50.

Exempt Private Company

This is a private company:

which has not more than 20 shareholders, and none of the shareholders is a corporation or
that is wholly owned by the Government and which the Minister, in national interest, declares by notification in the Gazette to be an exempt private company.

So the EPC is a private company, and it seems from the above that it is a PTE LTD that meets one of the two requirements listed above. Isn't that right or am I missing something ?

[sundaymorningstaple]

PEP is not applicable for your case. PTE LTD & EPC are concepts apply in different context, don't messy them together.

I'm not sure I understand what you mean by PEP is not applicable ? I already have a PEP...so I don't get what you meant.

As for PTE LTD and EPC, from what I read on the ACRA website:

Private Company limited by shares

Private Company

This is a locally incorporated company where the maximum number of shareholders is limited to 50.

Exempt Private Company

This is a private company:

which has not more than 20 shareholders, and none of the shareholders is a corporation or
that is wholly owned by the Government and which the Minister, in national interest, declares by notification in the Gazette to be an exempt private company.

So the EPC is a private company, and it seems from the above that it is a PTE LTD that meets one of the two requirements listed above. Isn't that right or am I missing something ?

Maybe I'm missing out. Where is the "OR" in the requirements? I ask as you indicate it has to meet one of two requirements. The way I read it, it has to meet both of the requirements, e.g., less than 20 qualified shareholders AND is declared by notification in the Gazette, by a Minister, to be in the national interest. Can't find any "or" anywhere.

[Seasoul]

Hey SMS, you indeed missed the "or", it's at the very end of the first requirement
I was looking at Bizfile's website registration pages, and you can actually pick EPC as a choice for the type of company you want to register, right from the beginning when you pick the company name, so that answers my question number 3 !

[sundaymorningstaple]

So you are saying you already have a Minister who has gazetted the company in the national interest?

I believe it does "give you a choice" when applying, but I think you will find that you will not get the EPC unless the later requirement have already been met.

The way I see it is much the same as the EP application. You can also tick a box asking them to consider you for an S pass should you not be qualified for the EP that you are applying for. e.g., they are not rejecting you out of hand but allowing you to operate with a lesser leeway.

Let us know when you find out. It will be interesting to note.

[Seasoul]

I meant, there are 2 ways a company can be an EPC:

has not more than 20 shareholders, and none of the shareholders is a corporation or that is wholly owned by the Government and which the Minister, in national interest, declares by notification in the Gazette to be an exempt private company.

Agreed the form doesn't guarantee the approval, but it's good to note the option to pick EPC is there when registering a private company.

Will definitely update this thread with the results I got from the registration.

[Seasoul]

Update as promised: Company registration went smoothly, and we were given the option to choose "EPC" on the ACRA website when registering.
All endorsements have been made, and the registration approved.

Now on to the second step, the employment. Will update again once that phase is over.

Just a clarification, in case others are willing to follow the same path : I do have proven track record of working in SG and overseas doing what this company will hire me to do, and the company has a paid up capital that will cover my first year of employment. So there will be a fixed income, there are documents and a history supporting my experience and competences in this field.

It really helped me to read opinions and shared experiences on this forum to prepare for this, and go about it always keeping in mind that I have to convince not only with capital and a plan, but also with competences and a history that backs up this new orientation of mine. I would not have done it so thoroughly if it wasn't for the criticism and frank advices/feedback I read here.

While researching this and working on it I have met quite a few foreigners with the same goal, but often not really prepared or equipped to convince and reassure with their plan, you might think you'll figure it out when you apply or that it's all figured out, but you actually need to build your case before starting any filing or registration.

[Seasoul]

In case this can help others, I went over my first posts questions to answer them, now that I have a better understanding of how to do all this and what is required.
Reading the ACRA, BizFile and IRAS websites several times will clarify things for you even more, as these are just from my experience and apply to my case.

- Are the only requirements for being an EPC, the $5M yearly revenue mark, number of shareholders and not having a corporation being a shareholder ? Does that mean that this PTE LTD I am referring to above, is in fact an EPC ? (The Singaporean will be the only shareholder)

Yes, if the above requirements are met, one can register their PTE LTD as an EPC on the ACRA website.

- If this indeed falls under an EPC, ACRA says it wouldn't need an auditor to be hired. However, it is indicated that professional firms that are hired to do the Annual Return, will require auditing documents. Any advice regarding this point please ? Am I being unrealistic thinking I can do the annual return filing myself, hence will not need auditors at all ?

It all depends on the amount of revenue generated. It is always best to do the auditing, but in this case it's not required the first year. But the company could be selected to provide auditing documents or to run an audit so we decided to do it anyway.

- Company secretary and address: Can I hire services of a firm to be the PTE LTD's company secretary and provide the business address as well ?

Yes

What do you pay for these services (just to give me an idea) ?

Prices range from 100-200 SGD per year for an address and 400-800 SGD per year for secretarial services. There are firms that charge more than this, and provide additional accounting, regisration, phone/email forwarding services and then some..

If I can take care (with my partner) of the incorporation process, and the employment process, why would I need the Company Secretary for, except to comply with the law ? I mean, I wouldn't need their services in the future, would I ?

Only to do the few required annual minuting of assembly, and be the company's point of contact with government bodies for reminders and other administrative communications. You have 6 months to appoint the company secretary after the company is registered.

- I have yet to read IRAS website on this, but if I am employed by my partner's PTE LTD, what are the taxes the company will have to pay ?

It follows the normal tax rates. In case of an EPC the first $100,000 are not taxable, and the subsequent $200,000 are given a preferential tax rate. Above that $300,000 mark, tax rate is 17%. Everything is well explained on the IRAS website, for each type of business structure and range of profits/revenue.

- I am planning on doing a PR request once this is all set up, and maybe once I am employed for a couple of months in this company. What will that change for the company, in terms of taxes, to employ me as a PR instead of a PEP holder ?

CPF is what will change. Everything else remains the same.