The Basics of Private Exempt Companies

In the realm of business and commerce, the concept of an Exempt Private Company (EPC)
stands as a unique and strategic structure that extends distinct advantages to certain

enterprises. Rooted in company law, the notion of an EPC revolves around a set of criteria

that, once met, opens the door to a range of benefits tailored for specific business

circumstances. By offering reduced regulatory obligations and financial reportin
. This article delves into the fundamental aspects of Exempt Private Companies,
shedding light on their qualifications, advantages, and the broader implications they hold within

the modern business landscape.

Advantages ‘Exempt Private Company’ status

EPCs enjoy significant advantages under the CA2016. They are exempt from the obligation to file comprehensive financial statements and reports with the ROC. Instead, EPCs only need
to submit two items to t
he ROC, a certificate signed by the company’s directors confirming its
EPC status and an audito
r’s statement affirming that the company maintains proper
accounting records and appears capable of meeting its liabilities as they come due.

Audit Exemption

Sections 260 and 261 of the CA2016, previously known as section 165A of the Companies
Act 1965, elaborate on the concept of audit exemption. While generally, all companies must

prepare and have their financial statements audited, the Registrar of Companies
has the authority to exempt specific categories of private companies from this requirement. The
following categories are exempted from the audit obligation:
a. Dormant companies
: Companies that are not actively engaged in business operations.
b. Zero
Revenue companies: Companies that generate no revenue.
c. Threshold
Qualified companies: Private companies that meet specific criteria set by the

Compliance and Obligations

Although certain private companies are exempt from undergoing an audit, they are still legally
obligated to maintain proper accounting records and prepare financial statements as

mandated by the Companies Act 2016
and lodge financial statements with the Registrar.
These statements must adhere to approved accounting standards. The absence of an audit

should not compromise the accuracy and reliability of financial statements. The Companies

Act 2016 underlines the imp
ortance of maintaining the integrity of financial reporting. This
requirement applies universally, regardless of whether a company qualifies for audit

exemption or not.

Legal Consequences of Fraudulent Reporting

It is essential to note that intentionally submitting fraudulent financial statements is a serious
offense under section 593 of the Companies Act 2016. Companies and directors found guilty

of lodging false or misleading statements with the Registrar can face prosecution.