SINGAPORE Law and Practice Contributed by: David He, Benjamin Teo, Kinnari Sahita and Binh Vong, Gunderson Dettmer Singapore LLP
other words, a fund managed by a VCFM may only invest up to 20% of committed capital in other unlisted business ventures (including sec - ondary investments and any investments in digi - tal assets). Therefore, a secondary fund manager or a Web 3.0 fund manager would have to obtain a full LFMC licence in Singapore. Securities Laws A VC fund raising capital from LPs will need to ensure that it is compliant with relevant securi - ties laws of the jurisdictions of such LPs. For example, a VC fund raising capital from US investors is required to comply with US securi - ties laws, typically by qualifying for one or more exemptions from the relevant securities acts. 2.4 Particularities Notable Trends in VC Funds In Singapore, Web 3.0 funds are becoming increasingly popular, while impact funds (which are often highly publicised but poorly capital - ised) have become less prevalent. Fund-of-funds remain actively involved in investing in VC funds in the region. Singapore government-backed funds such as GIC, Temasek and Pavilion Capi - tal are active LPs in the market. In addition to directly investing in promising start-ups, such funds may also support regional and overseas VC funds as an LP or anchor investor. Favourable Tax Incentives for Supporting Local Start-Ups VC funds that focus the deployment of their cap - ital commitments on Singapore-based start-ups may be eligible for Singapore income tax exemp - tions with relevant approval from certain govern - ment agencies, such as Enterprise Singapore (the government agency responsible for pro - moting enterprise development and supporting the growth of Singapore as a hub for start-ups). A number of other initiatives are undertaken by
the Singapore government to promote venture investment (see 4.3 Government Endorsement ). Extended Holding Periods To accommodate longer average holding periods for investments, GPs in Singapore may choose to extend the fund term. Any extension of the fund term would typically require the consent of the LPs and/or the advisory committee, and GPs usually forgo management fees during the extended period. Alternatively, if the fund is una - ble to extend its term or if a secondary purchaser is identified, GPs may raise a continuation fund. A continuation fund provides the capital neces - sary for a longer holding period without requiring any changes to the original fund term. The GP will also be able to charge management fees and carried interest on the continuation fund. 3. Investments in Venture Capital Portfolio Companies 3.1 Due Diligence Legal Due Diligence in VC Deals The scope of legal due diligence conducted by VCs depends on the stage of investment, and whether the investor is a new or existing inves - tor. Investors performing “high level” or “light touch” due diligence should, at minimum, review the ownership structure and capitalisation and understand the key terms of material contracts and past or pending acquisitions by the com - pany. Intellectual property and regulatory issues may also be important, depending on the nature of the business. Ownership Many start-ups with substantial operations in South-East Asia and India, among other regions, choose Singapore as their place of incorpora - tion, but record revenues, incur expenses, hire
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