Understanding Exempt Private Companies in Malaysia
An Exempt Private Company (EPC) in Malaysia is a specific category of private company defined under the Companies Act 2016. To qualify as an EPC, the company must meet two key conditions:
- It must be privately owned with no more than 20 shareholders, and
- None of its shares are held by corporations.
Because of these characteristics, EPCs are popular for company registration in Malaysia, especially among small businesses, family enterprises, startups, and foreigners. This classification offers distinct advantages, particularly in terms of financial reporting and compliance requirements.
Key Features of Exempt Private Companies
Exempt Private Companies (EPCs) in Malaysia form a unique category of private entities, defined by specific ownership rules and simplified compliance obligations.
Shareholding Structure:
An EPC must be fully privately owned, with its shares held only by individual shareholders. Corporate entities are not permitted to hold shares in this company type.
Maximum Shareholders:
The company may have no more than 20 shareholders, ensuring it remains a closely held and privately managed business.
Financial Reporting:
EPCs benefit from reduced regulatory requirements. If they meet the qualifying conditions under Malaysian corporate law, they are exempt from filing financial statements with the Companies Commission of Malaysia (SSM).
Advantages of Exempt Private Companies
The designation of an EPC offers several benefits that make it an attractive option for small businesses and family-run enterprises. These include:
- Confidentiality: Since EPCs are not required to disclose financial statements publicly, they maintain greater privacy over financial data.
- Simplified Compliance: Compliance requirements are reduced compared to other private companies, saving time and administrative effort.
- Lower Costs: With fewer reporting obligations, the cost of running an EPC is typically lower, making it ideal for smaller companies.
Compliance Requirements for Exempt Private Companies
Although EPCs enjoy reduced obligations, they must still adhere to several regulatory requirements to maintain their status. These include:
- Annual Returns: Filing of annual returns with SSM remains mandatory to keep the company’s registration active.
- Director Duties: Directors must fulfil their fiduciary duties and ensure the company complies with relevant laws and regulations.
- Private Status: The company must ensure that none of its shares are transferred to corporations, as this would revoke its exempt status.
Audit Exemption for Exempt Private Companies in Malaysia
Audit exemption is another significant advantage for businesses considering company registration in Malaysia, including EPCs, Sdn Bhd entities, and foreigners. While the exemption is not automatic, many EPCs qualify if they meet the conditions outlined by the Companies Commission of Malaysia (SSM) through its Practice Directives.
Exemption Criteria
An EPC may be eligible for audit exemption if it meets all the criteria specified by the SSM. These requirements help streamline compliance for smaller companies and support entrepreneurs starting a business in Malaysia with lower operational costs.
Current Criteria (Phase 1 – For Financial Years Starting On or After 1 January 2025)
To qualify, a company must meet all of the following thresholds:
- Turnover: Not exceeding RM1,000,000
- Total Assets: Not exceeding RM1,000,000
- Number of Employees: Not more than 10
These conditions make audit exemption particularly beneficial for small EPCs, startups, and foreign-owned companies in Malaysia seeking simpler compliance during their early growth stages.
Significance of Exempt Private Companies
EPCs play an essential role in Malaysia’s business ecosystem by supporting small and medium-sized enterprises. They encourage entrepreneurship by providing a flexible and cost-effective corporate structure. Furthermore, the confidentiality offered by EPC status makes it particularly appealing to family-run businesses that prefer not to disclose financial details publicly.
For detailed guidelines, visit the official website of Suruhanjaya Syarikat Malaysia (SSM) or consult a licensed company secretary in Malaysia to ensure smooth and compliant incorporation.