Do You Know the Shareholder Requirements for Audit Exemption in Singapore?

How Much Do You Know About Singapore’s Audit Exemption Requirements for Shareholders?

In recent years, as the global business environment continues to evolve, countries are actively adjusting their policies to attract foreign investment and promote enterprise development. As a key financial and business hub in Asia, Singapore has long been known for its efficient, transparent, and flexible regulatory framework. Notably, starting in 2025, Singapore implemented an audit exemption policy that offers significant benefits to eligible small and medium-sized enterprises SMEs, substantially reducing their compliance costs.

The core purpose of the audit exemption policy is to reduce the burden on SMEs, enabling them to allocate more resources toward business expansion and innovation. However, the policy does not apply universally-it sets clear thresholds related to company type, shareholder structure, and asset size. This article will focus on the shareholder-related requirements under Singapore’s audit exemption policy, helping investors who are planning to establish or operate a business in Singapore better understand the implications of the policy.

Background of the Audit Exemption Policy

According to amendments to the Companies Act in Singapore, starting from July 1, 2025, private limited companies that meet specific criteria are exempt from submitting audited financial statements. This policy aims to streamline corporate compliance procedures, especially for SMEs, by reducing administrative and financial burdens.

The audit exemption applies mainly to the following three categories of companies

1. Small Private Companies

2. Small Non-Private Companies

3. Group Companies under a Qualifying Holding Company

Among these conditions, the shareholder structure and ownership details are key factors in determining eligibility for audit exemption.

Shareholder Requirements Who Qualifies for the Exemption?

To qualify for audit exemption, a company must meet the definition of a small company, with shareholder requirements being one of the core criteria.

1. Private Limited Company with All Natural Person Shareholders

A company that is a private limited company Pte Ltd and has only natural persons not corporate entities or other institutions as shareholders is more likely to meet the definition of a small company. In such cases, the company can apply for audit exemption if it meets at least one of the following two financial criteria in each of the past two financial years

Annual revenue does not exceed S$10 million

Total assets do not exceed S$10 million

Number of employees does not exceed 50

2. Presence of Corporate Shareholders within a Small Group

If a company is part of a corporate group, both the parent company and its subsidiaries may qualify for audit exemption as long as the entire group meets the small group criteria. Even if there are corporate shareholders in the parent or subsidiary company, the group can still apply for exemption if it meets at least two of the three financial thresholds mentioned above.

3. Exclusion of Public Companies and Regulated Entities

It is important to note that public companies or companies regulated by authorities such as the Monetary Authority of Singapore MAS-including licensed financial institutions-are not eligible for audit exemption, even if they meet the financial criteria for small companies. These entities must continue to undergo annual audits under existing regulations.

Impact of Shareholder Structure Changes on Exemption Eligibility

Changes in the shareholder structure can affect a company’s ongoing eligibility for audit exemption. For example, if a company previously owned entirely by natural persons introduces a corporate shareholder-such as another company or a private equity fund-it may no longer meet the definition of a small private company and thus lose its audit exemption status.

Similarly, the presence of non-resident shareholders or a shareholder count exceeding 50 may impact the company’s status as a private limited company, thereby affecting its eligibility for the exemption. Companies benefiting from audit exemption should closely monitor changes in their shareholder structure to ensure ongoing compliance.

Real-World Examples How Audit Exemption Helps Business Growth

According to the 2025 annual report released by the Accounting and Corporate Regulatory Authority ACRA, more than 40,000 SMEs have benefited from the audit exemption policy since its implementation. The policy has not only reduced financial reporting costs but also improved overall operational efficiency.

For example, a tech startup with only three natural person shareholders and annual revenue under S$5 million qualified for audit exemption. By avoiding the need for annual financial statement audits, the company saved between S$15,000 and S$20,000 annually, which was reinvested into product development and market expansion-laying a solid foundation for future funding rounds.

Another example involves a family-owned business with two subsidiaries. By qualifying for group-level audit exemption, both the parent and subsidiary companies were exempt from individual audits, saving time and costs while simplifying internal management.

Future Outlook Policy Refinement and Strategic Adaptation

Singapore continues to refine its business environment, and the audit exemption policy is a significant part of this effort. As the digital economy and startup ecosystem grow rapidly, further policy refinements are expected to accommodate the compliance needs of various types of businesses.

However, while the audit exemption brings convenience, companies should still strengthen internal financial management and compliance awareness. Even without the requirement for an audit, companies must submit financial statements in accordance with regulations and ensure their accuracy and completeness. Failure to do so may result in investigations or penalties from ACRA.

Moreover, companies planning to raise capital, go public, or engage in cross-border partnerships may still be required to provide audited financial statements by investors or partners, even if they qualify for exemption. Businesses should assess whether to apply for the exemption based on their stage of development and strategic objectives.

Conclusion

Singapore’s audit exemption policy offers greater flexibility, particularly for companies with a clear shareholder structure and moderate size, effectively reducing operational costs and enhancing management efficiency. For businesses planning to establish or expand operations in Singapore, understanding and strategically utilizing this policy can provide a competitive edge in a dynamic market environment.