Set Up Private Equity Funds in Singapore: Brief Overview

Singapore, widely recognized as a leading financial hub in the Asia-Pacific region, has garnered significant interest from global investors looking to establish private equity funds. Strategically located at the heart of Southeast Asia, the city-state offers a compelling combination of regulatory stability, robust financial infrastructure, and a pro-business environment that makes it an ideal domicile for private equity ventures. 

In this guide, we’ll explore the steps to set up private equity funds in Singapore, capitalizing on the benefits this jurisdiction offers.

Why Choose to Set Up Private Equity Funds in Singapore?

There is a reason why Singapore has drawn in such a large number of international private equity players.

Numerous pillars support the country’s strong credentials, including:

• Strategic Location: Singapore’s geographical position makes it the gateway to Asia. Its proximity to major emerging markets such as China, India, and the ASEAN countries facilitates swift market penetration and access to a vast investor and consumer base.
• Robust Regulatory Framework: The Monetary Authority of Singapore (MAS) has developed a reputation for its rigorous yet supportive regulatory structure. The clear guidelines and proactive approach of MAS not only offer protection but also create an environment where businesses can thrive.
• Tax Incentives: Singapore’s tax regime is among the most competitive globally. With its range of tax incentives, rebates, and treaties, the country stands out as a haven for businesses looking to optimize their tax strategies.
• World-Class Infrastructure: The nation boasts top-tier financial infrastructure, sophisticated banking services, and state-of-the-art technology, making fund operations seamless.
• Talented Workforce: Singapore’s education system, combined with its policy of attracting global talent, means businesses can tap into a pool of skilled professionals across sectors.

Determining the Fund Structure

Your fund structure is pivotal. It affects not only operational ease but also taxation, liability, and regulatory oversight.

In Singapore, there are primarily three structures that fund managers can consider:

Limited Partnership (LP):

Pros

It offers flexibility in terms of profit-sharing and operations. Limited partners have limited liability, ensuring they are not personally responsible for the fund’s debts beyond their investment.

Cons

General partners carry unlimited liability, which can be a concern if things don’t go as planned.

Private Limited Company:

Pros

A more straightforward structure with shareholders having limited liability up to their share capital. Easier to understand for those familiar with corporate structures.

Cons

Might not offer the same level of flexibility as LPs, especially in terms of profit distribution and internal agreements.

Unit Trust:

Pros

Suitable for funds aiming to attract a broad spectrum of investors, including retail. The trust structure can offer tax advantages in certain scenarios.

Cons

A trustee must be appointed, adding another layer of oversight and potential complexity.

Each structure has its own set of implications, so it’s crucial to weigh the pros and cons in the context of your fund’s objectives and your investors’ needs.

Registration of private equity fund with MAS

Registering with the Monetary Authority of Singapore is non-negotiable if you want to run a private equity fund in the country.

Here’s a more detailed process:

• Engage a Legal Advisor: Start by hiring a legal expert specializing in Singapore’s financial regulations. They will guide you on documentation, compliance, and potential pitfalls. You can speak with experts from OnDemand International.

• Prepare Documentation: MAS requires detailed documentation about the fund’s strategy, profiles of the fund managers, key personnel, track records, and more. Ensure these are well-documented and transparent.
• File an Application: Once your documents are in order, submit your application. It’s a thorough process where MAS will evaluate your fund’s feasibility, its alignment with regulations, and its potential risks.
• Licensing: Depending on your fund’s nature, you might need a Capital Markets Services (CMS) license or be enrolled as a Registered Fund Management Company (RFMC).
• Await Approval: Applications are normally reviewed by MAS in a 2-month period. It can take longer if there are contradictions or further explanations are required.

Engage a Fund Administrator

For smooth operations, consider engaging a fund administrator to handle tasks like investor reporting, compliance, and fund accounting. In addition to ensuring accuracy, this increases investor confidence.

Taxation and Incentives

One of Singapore’s main attractions is its competitive tax system.

Among the important points are:

• Exemptions: Qualifying funds are excluded from paying taxes on specific income received from specific investments.
• GST Remission: Funds can enjoy a remission of Goods and Services Tax (GST) on their expenses.
• Double Taxation Agreements: Singapore has DTAs with over 80 countries, preventing double taxation of income.

Compliance and Reporting

Compliance is key. Ensure you meet all MAS reporting requirements and stay updated on any regulatory changes. This protects your fund’s reputation and avoids potential penalties.

Conclusion

Setting up a private equity fund in Singapore might seem daunting, but with the right guidance and a clear understanding of the landscape, you can harness the myriad opportunities the country offers. As one of the world’s leading financial hubs, Singapore’s blend of regulatory clarity, tax benefits, and strategic positioning make it an unbeatable choice for ambitious PE fund managers.

If you’re considering launching a private equity fund in Singapore, our professionals are well-equipped to guide you every step of the way. Feel free to reach out to us for dedicated,  tailored advice or support. Your journey to setting up in Singapore can be both smooth and successful with OnDemand International by your side.