SINGAPORE Law and Practice Contributed by: Woon Hum Tan, Shook Lin & Bok LLP
2.6 Non-Traditional Assets Alternative funds can adopt any investment strategy and theme and invest in any asset class so long as it is not against public policy or investing in any asset class that is prohibited. However, if the fund is apply - ing for fund tax incentives, certain asset classes will not qualify for the tax incentives. These include digital assets, physical assets, immovable property situated in Singapore, exotic assets (eg, wine, art, cars, yachts, planes, and precious metals). See 2.4 Tax Regime for Funds . Cannabis is illegal in Singapore. Possession, con - sumption, trafficking, import, and export of cannabis are offences and carry severe penalties under local laws. Even though there is no express guidance on funds investing in cannabis, it would be against public policy. Litigation funding is legal in Singapore but there are restrictions and limited applications. Litigation funding is permissible for arbitrations, proceedings in the Sin - gapore International Commercial Court, certain types of mediations, and insolvency matters. The current framework imposes certain conditions that funds hav - ing litigation funding strategies must comply with. 2.7 Use of Subsidiaries for Investment Purposes Alternative funds can invest directly into the asset classes or indirectly through special purpose vehicles (SPVs), including using a private corporation, a trust or a limited partnership. SPVs are commonly used if the alternative fund wishes to segregate investment strat - egies, performance, risks and rewards, and/or groups of investors. SPVs are also used when there may be regulatory or commercial restrictions, or where the use of SPVs provides greater tax efficiency. Special purpose corporations may also be used to enjoy tax saving benefits under double tax agreements. 2.8 Local/Presence Requirements for Funds Fund managers can be of any nationality and domi - cile but a local presence and licence are required to launch and manage a VCC fund or if the alternative fund is applying for a tax incentive that reduces the local corporate income tax rate applicable to the alter - native fund.
Typically, alternative fund managers in Singapore will render fund management services (as defined in the SFA) to the funds that they manage. In the ordinary course of business, the alternative fund managers will also provide financial advisory services (as defined in the Financial Advisers Act 2001 (FAA)) to such funds. In such cases, there is no need for a sepa - rate investment manager. However, it is possible for funds to appoint investment advisers, sub-advisers and/or sub-managers as the investment strategy or fund structure requires. For such structures, there is no local requirement for the investment adviser, sub- adviser and/or sub-manager to have a local presence provided the investment adviser, sub-adviser and/or sub-manager (as the case may be) (i) has the requi - site licence or exemption in the jurisdiction in which they operate and (ii) does not conduct any activity in Singapore that requires a licence under the SFA and/ or the FAA. For non-local managers that manage alternative Sin - gapore funds but do not otherwise carry out business activities or have a physical presence in Singapore, the licensing requirements would depend on whether the relevant activities are deemed to be conducted in Singapore pursuant to the SFA, which has certain extraterritorial provisions (namely Section 339). Where such relevant activities are deemed to be conducted in Singapore, the non-local managers must apply to the MAS to be a Licensed FM, unless other statutory exemptions are available. See 3.3 Regulatory Regime for Mangers . Alternative funds established as a Singapore private limited company or a VCC must have at least one Singapore resident director, a Singapore registered office, a Singapore company secretary and Singapore auditor. In addition, the VCC must appoint a Licensed FM (or a financial institution which is licensed in Singa - pore that can manage the VCC), and have at least one director who is a director or qualified representative of the fund manager. The VCC is subject to AML/CFT requirements and must appoint a money laundering reporting officer. For a Singapore LP fund, a foreign general partner is permissible but the LP fund may be required to
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