Singapore, located at the heart of Southeast Asia, is one of the world’s leading financial centres. While it may be a small state, Singapore offers immense opportunities to fund managers and investors worldwide who want to set up investments here, thanks to its competitive tax systems and the government’s support for innovation and businesses through grants and tax breaks.
Other than these, Singapore has more advantages for business owners, fund managers and investors: a highly educated and diverse workforce, minimal bureaucratic regulatory processes, low levels of corruption, unrestricted currency and 100% foreign ownership.
In this article, we’ll provide an overview of the different fund structures available in Singapore. A more comprehensive explanation of the various entities and fund structures in Singapore is available in our guides below.
Singapore fund structures: the common types and key features
A Singapore Limited Partnership (LP) is a vehicle to do business in the state. It does not have a separate legal entity from at least two partners: one general partner and one limited partner. The partners may be individuals or corporations. Additionally, because the LP is not independent of the partners, the vehicle cannot own a property in its name, sue or be sued.
Like in most limited partnerships, Singapore LP general partners are liable for the obligations of the vehicle, while the limited partner is limited to their agreed investment to the company as long as they do not manage the LP.
There is no limit to the number of partners in a Singapore LP, which must also appoint a local manager, who is at least 18 years old, if the GP is not a resident of Singapore.
Variable Capital Companies
Singapore’s Variable Capital Company (VCC) is a relatively new type of fund structure. It was proposed by the Monetary Authority of Singapore and launched in January 2020. The VCC is a corporate structure that is explicitly used to set up funds through a corporate entity.
The primary benefit of setting up a Singapore VCC is the operational flexibility it offers to fund managers. Through a VCC, there is more flexibility in shares issuance and redemptions; dividends can be distributed out of capital instead of paying out of profits, effectively reducing operational costs.
In a previous blog, we further discuss setting up a VCC and its other key features.
Private Limited Company
A Private Limited Company (Pte Ltd.) in Singapore is a vehicle which can also be used to set up a fund in line with the regulations under the Companies Act. This limited liability company has fewer than 50 shareholders (individuals or corporate entities). The shares are not available to the general public.
This type of company has a separate legal personality from the shareholders and directors, which means it can own property and enter into contracts under its name. In Singapore, it can also sue or be sued. In terms of raising capital, the entity can issue more shares to existing shareholders, easing the process.
A unit trust in Singapore, or a collective investment scheme, is set up specifically for long-term investors whose money is pooled and managed by a licensed fund manager. With the collective investments, the fund manager invests in various, sometimes international, assets that individual investors may not have direct access to. Additionally, because the investments are spread over multiple assets, the risks are also spread out, which means, overall, an investor’s investment may not be significantly affected if one asset does not perform too well. Plus, the more investors there are in a CIS, the less transaction cost.
To ensure transparency, fund managers handling unit trusts may need to send out annual accounts and auditor’s reports regarding the investment performance, three months after the financial year-end of the unit trust. In some cases, fund managers distribute these reports to the investors more regularly – semi-annually or quarterly.
Managing fund structures in Singapore: who is involved?
In setting up the abovementioned fund structures in Singapore, there are several professionals who play key roles in successful entity formation and fund domiciliation. First, the fund manager.
Fund structures in Singapore, particularly VCCs, must be managed by a MAS-licensed fund manager or fund management company. The fund manager oversees all the legal and accounting requirements of the fund. For VCCs, only the fund manager can apply for the 13O/13U tax exemptions.
Fund administrators in Singapore, like Bolder Group, are also crucial in ensuring the fund’s success. Administrators provide middle- and back-office solutions. They are in charge of periodic NAV calculations, fund transaction processing, administration and accounting. Part of their services also includes investor relations, where they answer the investors’ queries and collect important KYC/AML documents, among others.
Other service providers needed to run a fund are legal and tax advisers, corporate secretaries responsible for filing annual accounts to the relevant authorities, and auditors.
Setting up funds in Singapore: The Bolder Way
While the regulatory framework of Singapore makes it easy for investors and managers to start a business or launch a fund, assistance from our fund administration and corporate services team can streamline the process further, maximising your time and money.
Bolder – Singapore is one of the leading firms in the city-state which provides solutions to set up funds, specifically variable capital companies (VCC). We also have a team of Singapore-based experts to assist clients with company formation — from market entry to financial accounting and compliance.
Contact our Singapore office today so we can discuss your needs.
Revisiting Singapore’s Potential: A Discussion in Bangkok
Let’s rediscover Asia’s #WealthManagement Hub: Singapore!
Join us on 19 October 2023 at the Hotel Muse Bangkok for a panel discussion on Singapore’s thriving financial services industry. Learn from our speakers:
Gain valuable insights and connect with industry peers during the networking session.
For more information about this event, contact us today! Or register through this page: https://resources.boldergroup.com/singapore-asia-fund-hub-bkk-event
See you there!