Singapore – The Emerging favorable Investment Fund Market in ASIA

Singapore is ranked among the top asset management destinations in the Asian continent having as at the close of 2015 a sun of 2.6 trillion worth of assets being administered. There is a constant evolution of the funds market and adjustment of legal structures to meet the demands of the sector. Investment funds are vehicles that facilitate several distinct investors, a cluster of individuals or companies, to put their resources together to realize profits. The pooling of resources gives the investors the advantages of sharing costs, and diversification hence spreading the risks.

Presently, investment funds in Singapore can take three forms as may be dictated by the needs of the fund’s investors. The forms are unit trusts, limited liability companies and limited partnerships. If the investors choose the limited liability company method, they may need professional guidance on how to open a company in Singapore so as to meet all the legal requirements.

Why is Singapore a preferred destination to set up a company?

There are a number of factors that make Singapore one of the most preferred places in the world to set up a business and especially a company. In fact the World Bank has lauded Singapore as one of the best places to do business globally. The factors include very low taxes, great government support, effective business regulations and a straightforward company incorporation procedure. Other advantages of the island state as a business hub is the availability of reliable labor, the country’s innovativeness, its strategic location at the heart of Asia-Pacific, and the tolerance of many cultures.

What is the need to have the suggested Singapore Variable Capital Company (S-VACC)?

The regulator of the financial sector in Singapore, the Monetary Authority of Singapore has proposed the formation of a Singapore Variable Capital Company (S-VACC) through an announcement on 23rd March 2017 for public consultation on the matter. This an entirely different corporate arrangement for investment funds. The S-VACC can apply to fixed period and open-ended investment funds of an individual or collective entities with several sub-funds. It offers more flexibility and savings on taxation and takes care of the demerits of the currently existing forms of entities.

The rigidity and the strict procedures pertaining to the capital, sharing of profits or gains on invested capital and the accounting treatment among other issues as far as corporates are concerned cause hindrance to redemption, free subscription and distribution of profits. The S-VACC would practically make it possible to grow the investment pooling activities in the South-East Asia economic hub.

What are the key features of a Singapore Variable Capital Company S-VACC?

The following are some key features of the proposed S-VACC:

  • Free entry and exit of investors at the fund’s net asset value.
  • Not mandatory to publicize shareholders information.
  • No requirement to have the financial statements accessible to the general public.
  • Redemption/repayment of capital can be done without first declaring solvency.
  • Ability to distribute and payback from its residual assets or capital.
  • No effect on solvency by classification of the S-VACC shares as a liability

The hopes are high that the proposed arrangement for the investment funds would greatly enhance things and make Singapore more competitive alongside other long-established global players in the sector such as British Virgin Islands (BVI) and the Cayman Islands.

Singapore enjoys a great advantage over other players in funds investment market from its ratification of double taxation agreements with more than 70 countries. A greater advantage is that dividends will be exempted from tax.