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Investment Funds in Singapore
Source: | Author:SiennaCorp | Publish time: 2020-04-14 | 39 Views | Share:

I.       Fund Structures

Legal Form
Characteristic
Applicable Funds
Unit Trust


  • unincorporated mutual fund structure;
  • operate in accordance with the trust deed;
  • mandatory to appoint a licensed Collective Investment Scheme (“CIS”) trustee;
  • managed by a Monetary Authority of Singapore (“MAS”) regulated fund manager


  • preferred structure for retail funds
Limited Partnership


  • unincorporated mutual fund structure under the Limited Partnerships Act;
  • operate with two or more partners – general partner(s) and limited partner(s);
  • managed by a MAS regulated fund manager


  • close-ended funds
Standalone Company


  • incorporated mutual fund structure under the Companies Act;
  • mandatory to appoint a MAS regulated fund manager



  • open-ended funds
  • close-ended funds


Variable Capital Company (“VCC”)


  • incorporated mutual fund structure under the Variable Capital Companies Act;
  • operate as a standalone VCC or an umbrella VCC with multiple sub-funds;
  • segregated assets and liabilities of each sub-fund;
  • it is permissible to have open-ended and close-ended sub-funds within an umbrella;
  • mandatory to appoint a MAS regulated fund manager;
  • must have sufficient mandatory Singapore substance (i.e. Singapore registered office, Singapore resident company secretary and auditor, and at least one resident director);
  • at least one director must be a director or registered representative of the Fund Management Company (“FMC”);
  • can dispense with annual general meetings of its shareholders and maintain only a private register of shareholders; and
  • foreign corporate funds may redomicile to a VCC



  • open-ended funds
  • close-ended funds


  •    Limited Partnership (GP/LP):
  •    Standalone Company:
  •    Variable Capital Company (“VCC”):

II.      Investment Manager

A.     Licensing and Registration of Fund Managers

Any person conducting fund management activity in Singapore must hold a Capital Markets Services (“CMS”) licence for fund management, register with the MAS or be otherwise exempted from the requirements to hold a CMS license or under the Securities and Futures Act (“SFA”).

The general categories of FMCs in Singapore are:

(a).      licensed fund management companies (“LFMCs”), which are subdivided into three categories, namely:

(i).       LFMCs carrying on business in respect of all types of investors including retail investors (“Retail LFMCs”);

(ii).      LFMCs generally restricted to carrying on business in respect of “qualified investors”[1] only (“A/I LFMCs”); and

(iii).     LFMCs who only manage Venture Capital Funds[2] (“VC LFMCs”); and

(b).      registered fund management companies (“RFMCs”)[3].

The key requirements and restrictions applicable to Retail LFMCs, A/I LFMCs, VC LFMCs and RFMCs are set out below.

Type of Manager
Retail LFMC
A/I LFMC
VC LFMC
RFMC
Investor Class Restriction
no restriction
Accredited Investors and Institutional Investors
Accredited Investors and Institutional Investors
Accredited Investors and Institutional Investors
Number of Investors
no restriction
no restriction
no restriction
no more than 30 qualified investors (of which no more than 15 may be funds or limited partnership fund structures)
Assets under Management Restriction
no restriction
no restriction
no restriction
no more than S$250,000
Minimum Base Capital Requirement
either S$500,000 (non-CIS) $1 million (CIS)
S$250,000
none
S$250,000
Risk-Based Capital Requirement
financial resources are at least 120% of the operational risk requirement
financial resources are at least 120% of the operational risk requirement
none
none
Professional Indemnity Insurance (PII)
Mandatory
Not mandatory, but recommend
Not mandatory, but recommend
Not mandatory, but recommend
Directorship
at least 2 directors with more than 5 years of relevant experience, of which at least 1 has more than 10 years of relevant experience, is an executive director and full-time resident in Singapore
at least 2 directors with more than 5 years of relevant experience, of which at least 1 is an executive director and full-time resident in Singapore
at least 2 directors with no minimum experience required, of which at least 1 is an executive director and full-time resident in Singapore
at least 2 directors with more than 5 years of relevant experience, of which at least 1 is an executive director and full-time resident in Singapore
Relevant Professionals (Inclusive of Directors, CEO and Representatives)
at least 3 with at least 5 years of relevant experience and full-time resident of Singapore
at least 2 with at least 5 years of relevant experience and full-time resident of Singapore
at least 2 with no minimum experience required and full-time resident of Singapore
at least 2 with at least 5 years of relevant experience and full-time resident of Singapore
Representatives
at least 2 representatives and full-time residents of Singapore
at least 2 representatives and full-time residents of Singapore
at least 2 representatives and full-time residents of Singapore
at least 2 representatives and full-time residents of Singapore

B.     Characteristics of Investment Fund Legal Entity:


Mutual Fund
Hedge Fund
Private Fund
Real Estate Fund (Private)
Venture Capital
Applicable Legal Entity

Unit Trust;

VCC

Unit Trust;

LP;

Company;

VCC

LP;

Company;

VCC

LP;

Company;

VCC

LP;

Company;

VCC
Fund Manager (Singapore Regulated)
Retail LFMC

A/I LFMC;

RFMC

A/I LFMC;

RFMC

A/I LFMC;

RFMC

VC LFMC;

A/I LFMC;

RFMC

III.    Marketing the Fund

Under the SFA, unless exempted, before an offer of units in a CIS is offered to investors in Singapore, (i) the CIS must be authorised (onshore fund) or recognised (offshore fund) by the MAS and (ii) the offer of units in a CIS must be made in or accompanied by a MAS-registered prospectus and product highlights sheet.

A.     Authorisation and Recognition Requirement

    •    Authorisation – Onshore Fund:

-       The fund manager must hold a CMS licence for fund management or be exempted from holding one or be a public company in certain cases.

-       The trustee must be approved to act as such for the CIS if the CIS is constituted as a trust.

    •    Recognition – Offshore Fund:

-       The fund manager must be licensed or regulated in the jurisdiction of its principal place of business and be fit and proper.

-       Laws and practices of the jurisdiction in which the CIS is constituted should afford investors in Singapore protections at least equivalent to that provided by the SFA.

-       There must be a Singapore representative to act as a liaison between investors and the foreign manager.

B.     Prospectus Registration Requirement

Generally, an SFA-compliant prospectus is required to be registered with the MAS for offers of securities to investors in Singapore with disclosure requirements set out in the SFA and CIS Code unless the offer is one which is specifically exempted from the prospectus registration requirements under the SFA.

C.     Exemptions

Authorisation and recognition of a CIS and prospectus registration requirements do not apply to certain offers of units in a CIS. These exemptions include:

-   “50-offerees” private placement exemption (“Section 302C Exemption”) that offers are made to no more than 50 persons in any 12-month period;

-   exemption for offers made only to institutional investors (as defined under the SFA) (“Section 304 Exemption”); and

-   exemption for offers made to accredited investors and certain other relevant persons (as defined under the SFA) pursuant to Section 305 of the SFA (“Section 305 Exemption”).

IV.    Documentation

We offer legal services including providing the key fund documentation as the following (this list is not exclusive):

-   Shareholders Agreement/Limited Partnership Agreement

Where the fund is structured as a company or a limited partnership, this agreement is needed to set out the rights and obligations of each shareholder or partner.

-   Constitution

Where the fund is structured as a company, the constitution is needed to outline the objectives of the company and the manner in which the company is governed.

-   Private Placement Memorandum (“PPM”)

The PPM will disclose the fund’s investment objectives and restrictions, the structure of the fund, the service providers of the fund including the manager, the subscription and withdrawal terms of the fund, the fees and expenses payable by investors of the fund, risk factors associated with an investment in the fund and other material terms of the fund.

-   Subscription Agreement

The subscription agreement will set out the terms of agreement pursuant o which an investor agrees to make a capital commitment to the fund.

-   Management Agreement

The management agreement will outline the terms upon which the investment manager will be appointed by the fund to manage its assets.



[1] “Qualified investors” include:

(a).    an accredited investor (which means an individual (i) whose net personal assets exceed in value S$2 million (or its equivalent in a foreign currency), subject to the condition that the value of the individual’s primary residence can only account for up to S$1 million, (ii) whose financial assets (net of any related liabilities) exceed in value S$1million (or its equivalent in a foreign currency) or (iii) whose income in the preceding 12 months is not less than S$300,000 (or its equivalent in a foreign currency); and a corporation with net assets exceeding S$10 million in value (or its equivalent in a foreign currency));

(b).    an institutional investor (including, but not limited to, the central government in Singapore or other countries, an entity that is wholly and beneficially owned by a central government, a multilateral agency, an international organisation, a bank, a company licensed under the Insurance Act, a company licensed under the Trust Companies Act, a holder of CMS licence, an approved exchange, an approved or recognised clearing house a depository, a pension fund), other than a collective investment scheme;

(c).    a collective investment scheme or closed-end fund, the units of which are the subject of an offer or invitation for subscription or purchase made only to accredited investors (as defined under the SFA), or investors in an equivalent class under the laws of the country or territory in which the offer or invitation is made, or institutional investors (as defined under the SFA), or both; and

(d).    a limited partnership, where the limited partners comprise solely of accredited investors (as defined under the SFA) or investors in an equivalent class under the laws of the country or territory in which the partnership is formed, or institutional investors (as defined under the SFA), or both.

[2] “Venture Capital Funds" are funds that:

(a).    invest at least 80% of committed capital in securities that are directly issued by unlisted business ventures that have each been incorporated for no more than 10 years at the time of initial investment;

(b).    invest up to 20% of committed capital in other unlisted business ventures that do not meet the requirements in item (a) above (i.e. they have each been incorporated for more than 10 years at the time of the initial investment, and/or the investment is made through acquisitions from other investors in the secondary market);

(c).    must not be continuously available for subscription, and must not be redeemable at the discretion of the investor; and

(d).    are offered to accredited investors and/or institutional investors (each as defined under the SFA).

[3] Where a fund manager conducts fund management and the assets under management is not more than S$250 million and the investors are not more than 30 qualified investors(i.e. institutional and accredited investors of which no more than 15 may be funds or limited partnership fund structures offered to accredited or institutional investors), the manager may register with the MAS as an RFMC instead of applying for a CMS licence.

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