Business

Singapore sets itself up to be the global hub for family offices

Singapore is poised to offer single-family offices access to uniquely-flexible administrative frameworks in a determined bid to become a global financial hub for the sector.

The go-ahead has not been given as yet, but it is eagerly awaited because families could use this Variable Capital Company structure to sweep away complex trust arrangements,  retrieve their own capital and empower family members to run their own businesses under a single umbrella.

Singapore is able to tick plenty of boxes including the range of structures, quality of advisers and a strong pool of talent to create a fertile ecosystem for family offices

VCCs were first made available at the start of 2020 to asset managers including private equity firms, hedge funds and multi-family offices. They form part of Singapore’s determined bid to develop its $2.5 trillion financial centre which is steadily sucking in business from across the world.

Singapore’s competitive position has improved following recent upheaval in Hong Kong. The blacklisting of the Cayman Islands as an offshore location by the European Union is another worry for family offices. 

Singapore is bolstered by a comprehensive regulatory regime and more than 80 double taxation agreements. It is viewed as a stable country, reinforced by its neutrality, keen to facilitate requests for tax status.

This has persuaded 229 businesses to register as family offices since the start of 2020, as revealed by Family Capital.

Western entrepreneurs moving across would include Sir James Dyson, Google’s Sergey Brin and Bridgewater’s Ray Dalio, although Chinese investors are more frequent arrivals.

Daniel Yong, a partner at law firm Withers Khattar Wong, said VCCs are popular with asset managers. He believes the Monetary Authority of Singapore will allow single-family offices to use VCCs in due course.

“The authorities have been quite open about the fact they are looking at it. I am confident that one day they will allow SFOs to participate but it is a wait and see situation.”  Yong did not rule out a statement by the authorities this year. 

Over the summer, Fumin Fang, a deputy director at MAS, confirmed: “There are some single-family offices who have expressed interest to set up a VCC directly.” 

If they wish, SFOs can seek VCC status by registering as asset managers, as long as they are prepared to take on new business and hire professional staff in Singapore. They could seek the status as a Singapore business, or through a multi-family office. But it may be simpler for them to wait. 

Rather than using separate trusts to handle the interests of different family members, a VCC creates sub-funds, so that each family member can run their own assets. 

MAS has stressed assets and liabilities must be segregated within each sub-fund, to protect beneficiaries.

If the next gen wanted to set up their own venture capital business they could use a sub-fund, which could be collapsed later, if they so wished. 

SFO beneficiaries using sub-funds can save fees by sharing access to professional advisers, such as asset managers and accountants. A VCC can also eliminate the need for offshore service providers.

According to Yong: “Previously families might have come to manage offshore funds. Now they have a more compelling proposition.”

A single board of directors supervises VCCs taking account of family agreements, rather than trust boards. They can make distributions from net assets or capital rather than relying on profits to pay dividends, as required by company legislation.  The VCC structure also allows the switching of interests without the need for trustee agreement.

Daniel Yong believes the VCC structure adds to the attractions of Singapore. It would encourage entrepreneurs to relocate their SFO, as well as their business: “It would move the needle tremendously.”

According to Catherine Grum, UK head of family offices at advisory firm BDO: “Singapore is able to tick plenty of boxes including the range of structures, quality of advisers and a strong pool of talent to create a fertile ecosystem for family offices. We are seeing increasing interest from families looking to establish single-family offices in Singapore, representing Asian and global families. The VCC offers another valuable tool in the toolbox.” 

She said the rapid growth of Asian economies added to Singapore’s allure. 

Overall, commentary from leading banks and custodians, such as State Street and BNP Paribas has been equally positive. 

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