This article describes the general steps of the re-domiciliation of foreign funds into Singapore. It gives the details of how to transfer a corporate registration from one jurisdiction to another.
Fund managers with assets in the offshore jurisdictions may wish to examine the possibility of re-domiciling such funds to Singapore (using the Singapore VCC route).
Examples of offshore structures which can be re-domiciled to a Singapore VCC are segregated portfolios in the Cayman Islands and Guernsey.
Changes to Singapore’s Companies Act
There are two main changes to the Singapore Companies Act that made it possible to re-domicile foreign corporates into Singapore.
The first change was the introduction of the inward re-domicile regime that took effect from 11 October 2017. The change in the Act permits the “inward” re-domiciliation of corporate entities to Singapore. There are requirements for the foreign entity to re-domicile to Singapore. For example, there is a size criterion, and the foreign entity must be authorized to transfer its incorporation under the law of its jurisdiction. These requirements have been waived in relation to investment funds.
The second change was when Singapore formally launched the Variable Capital Companies regime, which took effect from 15 January 2020. The VCC is a legal entity that is especially suited for investment funds. These two key developments have made it easier to re-domicile a foreign-based investment fund to Singapore.
These foreign-based investment funds can use the Variable Capital Company (“VCC”) structure as a fund vehicle across traditional and alternative strategies. The VCC structure may be open-ended or closed-end funds and allows flexible features and parameters.
Cost Considerations When Shifting to Singapore
Singapore is a leading global financial center and is recognized for its fund management expertise.
Companies that intend to re-domicile their existing investment funds from a foreign jurisdiction to Singapore may want to examine the additional benefit and the need to migrate vs. the cost of re-domiciliation.
Benefits vs. Cost of Re-Domiciliation
Some of the benefits of moving to Singapore is its Financial Action Task Force (FATF) status as a jurisdiction, the friendly tax regime, and the access to its wide variety of services for investment funds.
There are tax advantages for investment funds incorporated as a Singapore VCC. Singapore allows tax exemptions for VCC’s under the Onshore Fund Tax Incentive Scheme (13R) or the Enhanced-Tier Fund Tax Incentive Scheme (13X).
Singapore has the added advantage of 86 tax treaties in place.
Expenses and Effort Required
Cost considerations of moving to a Singapore VCC include the setup fees includes
- ACRA application fees
- VCC Setup charges and services by a corporate service provider
- Legal fees
- 13R or 13X tax exemption application (subject to meeting prescribed norms)
There are also ongoing fees to consider, and they include:
- Annual audit fees
- Fund management fees
- Fund admin fees
- Corporate services fee
- Custodian fees if necessary
Another cost to consider is the potential tax consequence triggered by the foreign investment fund’s movement from its jurisdiction to Singapore. It is recommended to consult a tax expert before moving the fund to Singapore.
Foreign fund managers should consider the various potential costs mentioned above. The effort required to enhance the fund’s economic substance should commensurate with the additional benefits of relocating permanently to Singapore.
The following are the illustrative preparatory steps when moving a foreign investment fund to Singapore. Before embarking on this journey, understand, assess, and prepare the steps and actions to be taken before seeking the requisite approval in Singapore and after the ACRA’s grant of re-domiciliation is approved.
Steps and Considerations to Re-Domicile Foreign Investment Fund to Singapore
- Examine whether the foreign jurisdiction permits outbound domiciliation. Prepare a comparative statement on regulatory regimes (a) applicable to the foreign fund in the foreign jurisdiction versus (b) applicability of Variable Capital Companies Act of Singapore and the associated regulations. This ensures the compatibility of both regulatory regimes (outward vs. inward) and smooth transition.
- Has the foreign investment fund completed at least one financial year in its current home jurisdiction?
- Document the rationale for the re-domiciliation of the investment fund.
- Determine if there are any “exit” tax consequences in the foreign jurisdiction on unrealized gains and whether those gains are potentially taxable in Singapore. The same tax point is relevant and should be determined for each jurisdiction in which the foreign fund has investment exposure. It is recommended to consult a tax expert and seek advance ruling before carrying out the re-domiciliation exercise.
- Prepare a compliance checklist and an overall basis and examine all requirements and formalities associated with the inward re-domiciliation regime in Singapore.
- Take steps to commence the preparation of the solvency statement of the foreign investment fund.
- Ensure all books and records, accounts, regulatory filings, and all matters relating to the foreign jurisdiction are current and up to date.
- Prepare a current list of all contingent liabilities of the investment fund to be migrated.
- Prepare a list of charges (if any) that will require registration in Singapore with ACRA. Some examples of the costs can be against liability or uncalled share capital of a company.
- Ascertain if there are any outstanding share warrants or similar entitlements that are outstanding or potentially outstanding? These share warrants and any bearer shares issued before being re-domiciled to Singapore will be considered void.
- Complete a financial audit for the latest completed financial year, preferably by an audit firm based in Singapore. Using a Singapore auditor will make the process easier when transferring the company to Singapore.
- Obtain Certificate of Good Standing and Certificate of Incumbency from the home jurisdiction.
- Ensure there are no ongoing legal processes or issues against the foreign investment fund and its directors that may derail the process.
- Read and consider important contracts in terms of any clauses or covenants that may impact the company’s accounts when re-domiciliation.
- Hold an initial conversation with the regulator in the foreign jurisdiction on the proposed plan to undertake an outbound domiciliation to Singapore. Obtain in-principle approval to this effect (if possible), which may be subject to formalities to comply.
- If the foreign investment fund has taken leverage, hold an initial conversation with leverage providers. Obtain in-principle approval and a plan to shift any covenants to the Singapore entity.
- Understand and assess the record-keeping rules of the regulations in Singapore as applicable. A Singapore auditor will be able to advise on the relevant requirements.
- If there are underlying documents or supporting materials that are not in the English language, arrange for the translations of the documents to English. Arrange for all relevant documents to be certified-true-copy.
- Examine and compare the details in the current offer document of the foreign investment fund against the Singapore requirements. The offering document must make the proper disclosures and conform with Singapore’s requirements depending on investors’ type. For example, for retail investor funds, a retail fund prospectus with the appropriate disclosures. For restricted funds that are for accredited investors, then an information memorandum is required. However, an offering document may not be necessary if the investment fund is for a single-family office with no need for outside investors.
Initial Setup Steps for Singapore VCC
- Hold an initial conversation in Singapore with the relevant agencies, statutory boards, and ACRA, as appropriate.
- Determine if the intended name of the company is available from ACRA.
- Examine the need to carry out an interim audit for the current year by appointing Singapore based audit firm, if relevant and necessary.
- Prepare cash-flow projections for the next three years, including proposed operations in Singapore.
- Prepare solvency statement for adoption and approval by all directors. Be prudent and conservative while preparing the solvency statement.
- Provide ACRA with confirmations, undertakings, and specific disclosures as required. Use the Transfer of Registration Declaration form, which can be completed by a corporate secretarial service provider or a company director.
- Understand the Singapore Standard Industrial Classification (SSIC) codes available for the application with ACRA.
- Obtain consent letters from directors and various professional parties, including finalization of letter of appointment for each professional party. An example includes consent from the licensed fund manager if applicable.
- Prepare soft copies of all relevant documents and certified true copies in PDF format. The recommended file size per document should NOT exceed the prescribed limit (5MB).
- Review the internal corporate governance framework and board conduct procedures of the incoming investment fund entity to reflect Singapore’s compliance requirements.
- Seek shareholder or investor approvals and leverage providers’ consent for the re-domiciliation to Singapore if applicable.
Obtaining Fund Registration in Singapore
- Submit an application to ACRA using the prescribed form (Transfer of Registration TOR1), together with fees and all annexures required.
- If applicable, take steps to register the charges against the company with ACRA within 30 days from the ACRA registration date. Registration of the charge against the company can be reported using the relevant Registration of Charge form, which is found on the ACRA website.
- Subject to applicable regulations in the Constitution, issue share certificate and debenture certificates to investors within 60 days from the ACRA date of registration.
- Notify all relevant parties of all operational changes and other matters arising from re-domiciliation. Changes include change of address, office opening hours, and bank account numbers.
- Concurrently close and complete all formalities of the company in its former location. Arrange for the document evidencing de-registered in its previous place of incorporation and submit it to ACRA within 60 days (or as may be prescribed) from the date of issuance of the notice of transfer of registration.
- Complete all pending formalities in Singapore and convene the first board meeting in Singapore upon completing registration with ACRA.
we are happy to assist you in moving your family office or foreign-based investment fund to Singapore. We work with our strategic partners to assist in the smooth transfer of your assets. Contact us at firstname.lastname@example.org or via the contact form below.
Note: This is NOT an exhaustive list of action points. This note is to enable preliminary discussion only. The information contained in this article should NOT be construed as professional advice.
The original article was written by Benoy Philip, who is a Singapore based Structuring & Compliance Consulting Professional. Mr. Philip has worked in various business segments (mutual fund, capital markets, corporate finance, legal industry, SGX-Catalist Continuing Sponsor, investment management, and corporate services), has gained significant insights into the structuring of Singapore entities, identifying issues and compliance requirements,
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