Easier for venture capital funds in Singapore

Singapore is making it easier for VCs and start-ups in a recent move. Managers of venture capital funds (VC managers) are subject to the same regulatory and compliance framework as other fund managers. In February 2017, the Monetary Authority of Singapore (MAS) published a consultation paper proposing a simplified regulatory regime for VC managers.

The paper reflects the MAS’ assessment of the lower market and business conduct risks of VC managers, compared to other fund managers. The MAS considered the fact that VC managers typically do not trade on public markets or use leverage, and typically serve only accredited and/or institutional investors. The proposed changes under the VC manager regime expedite the application process and lowering ongoing compliance burden for VC managers.

QUALIFYING UNDER THE REGIME

To be eligible, VC managers must only manage funds fulfilling the following criteria:

(1) The funds invest in unlisted business ventures that have been established or incorporated for no more than five years at the time of the initial investment;

(2) The funds must be closed-end (i.e., the fund must not be continuously available for subscription and must be non-redeemable at the discretion of the investor); and

(3) Investors of such funds must be accredited investors or institutional investors.

Under the proposal, VC managers will no longer be required to have directors and representatives with at least five years of relevant experience in fund management. Additionally, representatives will no longer be required to satisfy stipulated academic and examination requirements.

Instead, the MAS now focuses primarily on whether the VC managers and their shareholders, directors, representatives and employees fulfil the proper criteria requirements. The MAS has said that the applicants may expect a more expeditious authorisation process under the VC manager regime.

WONG YING CHUNG and LISA LIM are both associates at Central Chambers Law Corporation