The Companies (Amendment) Act 2014 was passed by the Singapore Parliament on 8 October 2014. The legislative amendments took place on 1 July 2015, 3 January 2016 and 20 April 2018 respectively.<\/p>\n
The Companies (Amendment) Act 2014 introduced the concept of \u201csmall companies\u201d and provided an audit exemption for such companies. The small company concept is applicable to existing as well as newly registered private limited companies in Singapore. This article will explain the small company concept and the qualifying conditions on the basis of which a company can be exempt from the need to perform an annual audit of its accounts.<\/p>\n
Prior to the Amendment Act 2014<\/strong><\/p>\n The Singapore Companies Act states that every company (unless exempted) must get its financial statements and accounting records audited by an auditor on an annual basis. The auditor examines these records and provides an independent opinion about the fairness of the accounts. This is a mandatory requirement that every company must follow.<\/p>\n Currently, a company is exempted from having its accounts audited if it is an \u201cexempt private company\u201d (a company that has less than 20 shareholders and no corporate shareholders) with an annual revenue of $5 million or less.<\/p>\n Pursuant to the Amendment, this approach is being replaced by a new \u201csmall company\u201d concept which will determine the exemption from statutory audit. Notably, a company no longer needs to be an exempt private company to be exempted from audit.<\/p>\n Audit exemption<\/strong><\/p>\n The audit exemption for a \u2018small company\u2019 is applicable for the financial years beginning on or after the change in the law on 1 July 2015.<\/p>\n A company is considered to be a small company if:<\/p>\n (1)\u00a0\u00a0 it is a private company in the financial year in question and<\/p>\n (2)\u00a0\u00a0 it meets any two of the three following quantitative criteria for the immediate past two consecutive financial years:<\/p>\n (a)\u00a0\u00a0 the total annual revenue of the company must not exceed S$10 million<\/p>\n (b)\u00a0\u00a0 the total annual assets of the company for the financial year end is less than or equal to S$10 million<\/p>\n (c)\u00a0\u00a0 the number of full-time employees at the end of the financial year is less than or equal to 50.<\/p>\n Group Company Audit Rule<\/strong><\/p>\n Besides private company, for a company which is part of a group (holding and subsidiary companies):<\/p>\n (1)\u00a0\u00a0 the company must qualify as a small company and<\/p>\n (2)\u00a0\u00a0 the entire group must be a ‘small group’<\/p>\n can also qualify for the audit exemption.<\/p>\n A group company is defined as a holding company and its subsidiaries that together form a group due to a common source of control.<\/p>\n A group company will be exempt from annual audit of its accounts if the holding and all subsidiary companies individually:<\/p>\n (1)\u00a0\u00a0 Fulfill at least 2 of the small company qualifying conditions and<\/p>\n (2)\u00a0\u00a0 Belong to a \u201csmall group\u201d<\/p>\n For a group to be a small group, it must meet at least two out of the three quantitative criteria on a consolidated basis for the immediate past two consecutive financial years.<\/p>\n (1)\u00a0\u00a0 The consolidated revenue must not exceed S$ 10 million;<\/p>\n (2)\u00a0\u00a0 The consolidated total assets must not exceed S$ 10 million;<\/p>\n (3)\u00a0\u00a0 The total number of employees of the group must not exceed 50.<\/p>\n In other words, this means that to qualify for the audit exemption, the individual subsidiary companies as well as the holding company, as a group, must fulfill the eligibility criteria of a small company.<\/p>\n Change in Company Status<\/strong><\/p>\n Where a company has qualified as a small company, it continues to be a small company for subsequent financial years until it is disqualified. A small company is disqualified if:<\/p>\n (1)\u00a0\u00a0 it ceases to be a private company at any time during a financial year or<\/p>\n (2)\u00a0\u00a0 it does not meet at least two of the three the quantitative criteria for the immediate past two consecutive financial years<\/p>\n Where a group has qualified as a small group, it continues to be a small group for the subsequent financial years until it does not meet at least two of the three quantitative criteria for the immediate past two consecutive financial years.<\/p>\n Transitional provisions for existing companies<\/strong><\/p>\n An existing company can qualify as a ‘small company’ if it is a private company and meets the quantitative criteria in the first or second financial year commencing on or after the date of commencement of the ‘small company’ criteria.<\/p>\n Specifically, a company incorporated before 1 July 2015 can qualify as a small company if:<\/p>\n (1)\u00a0\u00a0 it is a private company and<\/p>\n (2)\u00a0\u00a0 Meets the qualifying criteria either in the first or second financial year after the commencement of the small company criteria (i.e. 1 July 2015)<\/p>\n The following are examples to the transitional provisions (applicable only for the first two years from the change in this law):<\/p>\n The Companies (Amendment) Act 2014 was passed by the Singapore Parliament on 8 October 2014. The legislative amendments took place on 1 July 2015, 3 January 2016 and 20 April 2018 respectively. The Companies (Amendment) Act 2014 introduced the concept of \u201csmall companies\u201d and provided an audit exemption for such companies. The small company concept […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"nf_dc_page":"","_et_pb_use_builder":"","_et_pb_old_content":"","_et_gb_content_width":"","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[13,12,6],"tags":[],"class_list":["post-596","post","type-post","status-publish","format-standard","hentry","category-auditing","category-company-law","category-techupdates"],"jetpack_featured_media_url":"","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"http:\/\/ehluar.com\/main\/wp-json\/wp\/v2\/posts\/596","targetHints":{"allow":["GET"]}}],"collection":[{"href":"http:\/\/ehluar.com\/main\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/ehluar.com\/main\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"http:\/\/ehluar.com\/main\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"http:\/\/ehluar.com\/main\/wp-json\/wp\/v2\/comments?post=596"}],"version-history":[{"count":1,"href":"http:\/\/ehluar.com\/main\/wp-json\/wp\/v2\/posts\/596\/revisions"}],"predecessor-version":[{"id":597,"href":"http:\/\/ehluar.com\/main\/wp-json\/wp\/v2\/posts\/596\/revisions\/597"}],"wp:attachment":[{"href":"http:\/\/ehluar.com\/main\/wp-json\/wp\/v2\/media?parent=596"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/ehluar.com\/main\/wp-json\/wp\/v2\/categories?post=596"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/ehluar.com\/main\/wp-json\/wp\/v2\/tags?post=596"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}\n\n
\n Qualifying Criteria in the Financial Year (FY)<\/strong><\/td>\n Small Company<\/strong><\/td>\n<\/tr>\n \n The Company meets the Qualifying Criteria in FY 15 and FY 16<\/td>\n Company is a Small Company<\/td>\n<\/tr>\n \n The Company meets the Qualifying Criteria in FY 15 but not in FY 16<\/td>\n Company is a Small Company since the company meets the criteria in the first year after the introduction of the concept<\/td>\n<\/tr>\n \n The Company does not meet the Qualifying Criteria in FY 15 but does meet it in FY 16<\/td>\n Company is a Small Company since the company meets the criteria in the second year after the introduction of the concept<\/td>\n<\/tr>\n \n The Company does not meet the Qualifying Criteria in FY 15 or FY 16<\/td>\n Does not qualify as a small company since the company does not meet the criteria in the first and second year after the introduction of the concept.<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n","protected":false},"excerpt":{"rendered":"