Setting up a Single Family Office in Singapore
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How is an SFO (Single Family Office) set-up in Singapore?
An SFO is set up to the needs of a single family. An often-integral function of the family office is to manage the assets of the family in order to fund the needs of the family.
Considerations when setting up a Family Office
Depending on the amount of assets of the family and the needs of the family, the set-up of every family office is usually different.
Some considerations when considering whether and what to include in a single-family office set-up include (non-exhaustive):
- Types of assets – whether they are listed or private companies, or whether the assets need maintenance
- Tax needs and planning of the assets and family members/beneficiaries
- Immigration needs of family members
- Needs of the family, e.g whether they need medical support services
- Overall investment strategy
- What expertise is needed and whether the professionals need to be in-house
- Oversight of the running of the family office
- Whether generational transfer considerations are needed
- Whether a governance charter is needed
*Running a family office typically costs 1% to 2% of a family's total active assets (e.g. investment portfolios and trust assets), or more.
How many entities are there in a Family Office Structure?
For the purposes of an SFO seeking or requiring a Section 13(O)/Section 13(U) tax incentive schemes, usually, there are at least 2 different entities in the structure.
The SFO is the entity that meets the needs of the family, usually including the management of the assets of the family whereas the fund entity is structured to hold the assets for the family. The SFO will therefore manage the assets of the fund entity.
In Singapore, a typical SFO is set up as a private limited company. This is a private company limited by shares. The shares can be owned by the holding company of the family office or common shareholders with the family fund entity or by a family trust.
The company can be set up by contacting your professional company secretary, a lawyer, trustee, or accountant.
How are Multi family offices regulated in Singapore?
A Multi-Family Office (MFO) usually provides fund management and financial advisory services to more than 1 family office, therefore the licensing exemptions from the SFA and the FAA will not be applicable.
The MFO will have to apply to the MAS for a Capital Market Services Licence.
Capital Market Services License (CMS)
A company must hold a capital markets services (CMS) licence to conduct activities regulated under the Securities and Futures Act. Individuals representing CMS licensees or exempt financial institutions need to be appointed as representatives.
Who needs to apply?
If your company wishes to conduct regulated activities under the Securities and Futures Act (SFA) , it must hold a CMS licence. Individuals conducting regulated activities on behalf of CMS licensees or exempt CMS entities (such as banks) need to be appointed as representatives.
These regulated activities are:
- Dealing in capital markets products
- Advising on corporate finance
- Fund management
- Real estate investment trust management
- Product financing
- Providing credit rating services
- Providing custodial services for securities
Capital markets products include securities, units in a collective investment scheme (CIS), over-the-counter (OTC) derivatives, exchange-traded derivatives and spot foreign exchange for the purposes of leveraged foreign exchange trading.
Companies which may be required to hold a CMS licence include broker-dealers, corporate finance advisers, credit rating agencies, real estate investment trust (REIT) managers, fund managers and securities-based crowdfunding (SCF) operators.
How does the Family Office manage their Investment Assets?
Generally, depending on the type of Investment assets of the family, the setting up of an entity is not enough to manage the assets. The family will have to consider needs such as investment advice, custody, execution of trades, custody, settlement, recording of trades, valuation of investment assets, legal issues, preparing of financial records and financial position of the family.
Who are the common advisors required for a Family Office?
Why do some SFOs use private banks?
Some SFOs work with private banks as the banks will offer custodian, brokerage and credit facilities. They have research capabilities and broad market and sector coverage teams. Some banks will have an investment banking arm for the purposes of corporate finance with deal making expertise.
Why use a VCC structure?
The restrictions under the Companies Act in relation to the return of capital, public access to identities of shareholders and the ability to declare dividends only if there is profit are removed under the VCC structure. This provides freedom for investors to invest into a fund or redeem their investments.
The VCC structure also complements the Family Office, wherein rather than setting up an individual family office structure, which may be costly and time consuming and families may lack requirements to obtain tax incentives. They can invest via a VCC and hire a fund manager to manage family funds.
What is the role of the Lawyer in the Family Office set up?
The role of the experienced Lawyer in setting up the family office cannot be understated. The Lawyer would take the time to understand the needs of the family, and would suggest an appropriate structure for the set-up. Usually, the lawyers would work with tax advisors and accountants when coming up with the appropriate structure. The advice you receive is only as good as the experience and technical expertise of your advisors.
The lawyer is able to set up and the also advise the Family Office on its commercial obligations and legal issues on an ongoing basis. The experienced lawyer’s role is also critical when doing a merger acquisition or disposal of an investment.
What is the role of the Tax Advisor in the Family Office set up?
To make sure the family office complies with tax laws and regulations in the jurisdiction it is situated, and to minimise the potential incidences of being taxed more than once, it is important for family offices to hire experienced tax advisors.
Among other matters, the tax advisor can advise on the:
- Advantages and considerations of various jurisdiction
- Availability and suitability of tax incentives, where appropriate
- Comment on the tax laws in relation to the creation of the family fund vehicle
- Comment on the tax impact for investment opportunities at the vehicle level
- Comment on the tax impact when the returns are distributed to the beneficiaries
- Comment and supervise on tax compliance