Should I Set Up a Family Office in Singapore?

The recent pandemic underscored the urgency for affluent families to re-evaluate and strengthen their financial management strategies to counter unforeseen challenges. Against this backdrop, more high net worth (HNW) individuals across the globe are setting up family offices in Singapore as a way to manage wealth. In fact, recent government estimates revealed that the number of single-family offices set up in Singapore by super-rich families has nearly doubled from the figures in end-2020. But what is a family office?

What is a Family Office?

A family office is an entity established to manage the assets of a particular family and is owned by the family members themselves. They oversee various responsibilities, from tax strategising and investment oversight to wealth organisation. To efficiently handle these multifaceted tasks, family offices in Singapore often collaborate with external experts, including trust consultants, lawyers, tax advisors, and investment professionals.

With an understanding of its functions, you may then wonder what makes Singapore the preferred destination for family offices over other global financial hubs.

Why Establish a Family Office in Singapore?

Singapore emerges as a top choice for several compelling reasons:

• Robust Financial Hub: Singapore’s reputation in financial and wealth management inspires trust and reliability.
• Stability: With a stable political and regulatory landscape coupled with a skilled workforce, the nation offers the assurance of secure asset management.
• Gateway to Asia: The country’s strategic geographical position enables families to stay close to their investments in the region.
• Government Initiatives: Singapore also offers special tax incentives for family offices and has introduced collaborative platforms like the Global-Asia Family Office Circle network, enabling HNW individuals to obtain the support they need.

How to Set Up a Family Office in Singapore

When setting up a family office in Singapore, your entity will either be a single or multi-family office.

1. Determine the Type of Family Office

Single-family offices (SFO) serve the needs of one family. They often reflect the unique qualities or ambitions of the family it represents and might also handle philanthropic endeavours, assist with family moves, manage personal wealth transitions, and take care of various lifestyle-related needs. Meanwhile, a multi-family office (MFO) serves several families that may not be related.

2. Choosing an Entity Structure

After determining the type of family office to establish, you will also have to decide on the structure of your entity. At the foundation of this structure is a holding company that owns and controls two assets:

• Investment Fund: This entity safeguards your family’s assets. It will normally adopt the form of a private limited company. This company can avail itself with the tax incentives that are provided to SFO’s in Singapore.
• Family Office Entity: The family office operates similarly to a private limited company and functions as the fund’s manager.

In Singapore, this holding company can be either a private limited company by shares or a trust.

i. Private Limited Company by Shares

The private limited company structure is popular among foreigners setting up family offices in Singapore as this type of company can be fully owned by foreigners, either as individuals or businesses. It can also serve as a regional branch or a subsidiary of a foreign parent company. The requirements for establishing this structure include:

• • Company Name: Your chosen company name should be approved by ACRA (Accounting and Corporate Regulatory Authority).
  • Company Address: You need a local commercial address indicating where your firm will operate.

• Picking Your Team:

• • Director: You need at least one director over 18 with a clean professional record who is either a Singapore citizen, a permanent resident, or holds specific work passes.
  • Auditor: You must appoint one within three months unless your company doesn’t need to be audited.
  • Secretary: You must appoint a company secretary within six months of starting your company.
  • Shareholders: You need to issue at least S$1 worth of shares to start.

If you need help finding the right individuals for your company, Segovia offers directorship services in Singapore to simplify the process and ensure you meet all regulatory requirements seamlessly.

ii. Trust 

If you choose to set up a trust for your family office’s holding company in Singapore, the benefits are also significant. For starters, there are tax exemptions on your capital gains and inheritances, and you’ll enjoy exemptions from estate duties, among other provisions. Singaporean trusts also provide protection from mandatory inheritance claims and offer you the flexibility to delegate the oversight of trustees to another individual.

When it comes to trust, the requirements for creating one include:

• Decide the Trust’s Form: Trusts can originate from wills, declarations, or deeds. They must clearly state what’s in the trust (the assets) and who benefits (the beneficiaries). A beneficiary could even be another trust, company, or charity.
• Select a Trustee: This person or entity responsible for overseeing the trust should be a Singaporean citizen or a company incorporated locally.
• Draft the Trust Deed: Both the person creating the trust (the settlor) and the trustee need to draft a document that outlines the trust’s rules. This deed should adhere to Singapore’s trust-related laws.
• Move Assets into the Trust: The settlor should then place their assets into the trust’s care.

iii. VCC

For MFO’s, clients can consider setting up a variable capital company (VCC) to act as the Investment Fund. The VCC is a new corporate structure in Singapore under which a number of sub funds can be gathered under the umbrella of a single corporate entity yet remain ring-fenced from each other. , A VCC should have a locally registered office and must meet the following criteria:

• Director: At least one director should reside in Singapore, with one being a representative from the fund manager.
• Fund Manager: Must be Singapore-licensed and regulated unless exempted
• Compliance: The VCC should adhere to the Securities and Futures Act (SFA) guidelines for investment funds.
• Secretary: This individual should be Singapore-based.
• Auditing: This must be performed by a local auditor.

Licensing Requirements

While SFOs, which manage the finances of just one family, are traditionally allowed to request specific licensing exemptions from MAS. However, to strengthen measures against money laundering, MAS has proposed a new framework outlining the criteria for exemption from licensing requirements under Singapore’s Securities and Futures Act. These include the following:

• Your company must be locally incorporated, which Segovia can assist with via our incorporation service in Singapore.
• The office must be entirely owned by members of a single family, defined as direct descendants from a shared ancestor.
• The fund management should be conducted for:
  • The family, including any trusts or companies they own completely and/or
  • Charities funded by the family.
• Work with at least one financial institution overseen by MAS.
• Always have a designated local contact for interactions between the SFO and MAS.

On the other hand, MFOs must adhere to the SFA’s licensing and regulations and they must apply for one of the capital market service licenses.

Before starting operations in Singapore, new SFOs must inform the MAS within a week, proving they meet certain criteria and provide the required documents. As for yearly requirements, SFOs must also report to MAS about their total managed assets and their partnerships with MAS-regulated financial institutions for that past year within the first two weeks of each new year.

Set Up Your Office with Segovia’s Help

Singapore’s business-friendly climate is perfect for family office structures. However, the intricate legal requirements can make setting up a family office appear daunting. This is where Segovia Financial Services steps in to provide the required support with our comprehensive offerings ranging from accounting and banking to secretarial services in Singapore.

With over two decades of industry experience, Segovia’s profound expertise, reinforced by our rich industry networks and the team’s strong legal and accounting background, assures you’re in good hands. Curious how we can bring synergy to your plans? Connect with us today, and let us help you navigate this journey with confidence.