New rules will encourage venture capitalists to set up in Singapore, says expert

Out-Law News | 23 Oct 2017 | 11:44 am | 1 min. read

Venture capitalists will be more encouraged to set up in Singapore as a result of a regulatory changes made in the city state, an expert has said.

The Monetary Authority of Singapore (MAS) announced on Friday that managers of venture capital funds would be subject to more "simplified" regulation than has been the case previously. The reforms have immediate effect.

Venture capital law expert Bryan Tan of Pinsent Masons MPillay, the Singapore joint venture partner of Pinsent Masons, the law firm behind, said: "The industry has been eagerly awaiting the formalising of these rules, and we are confident that we will now see new venture capitalists setting up in Singapore."

Under the new regulatory framework, managers of venture capital (VC) funds will no longer have to ensure that their directors and representatives have at least five years of relevant experience in fund management. However, "fitness and propriety screening" will continue to apply to the chief executives, directors, shareholders and representatives of the firms, MAS said. The regulator also "retain[s] existing regulatory powers to deal with errant managers", it said.

MAS had consulted with industry on changing rules for managers of VC funds and confirmed the changes it has introduced in a document containing its response to the feedback it received (64-page / 499KB DOC).

The regulator confirmed that managers of VC funds in Singapore would not be subject to "competency, capital and ongoing business conduct requirements" at this time. However, it said it was open to investors to "negotiate these requirements on the VC manager that they invest with". It said the VC managers will "be required to disclose to investors that they are not subject to all of the regulatory requirements imposed on other fund management companies" too.

VC managers in Singapore will also remain subject to anti-money laundering regulations, MAS said.

Lee Boon Ngiap, assistant managing director of capital markets at MAS, said: "The simplified VC manager regime recognises the lower risks posed by VC managers given their business model and sophisticated investor base. It will enhance the operating environment for VC managers to play a greater role in supporting start-up and growth stage businesses."