Singapore ushers in new era of corporate regulation, while single-family offices prosper

The Corporate Service Providers (CSP) Act 2024, which was passed by the Singapore parliament last July, is scheduled to come into force on 9 June together with the Corporate Service Providers (CSP) Regulations 2025.

From that date, all business entities carrying on a business of providing corporate services in and from Singapore are required to register with the Accounting & Corporate Regulatory Authority (ACRA) as registered CSPs. Corporate services activities include:

• Forming of corporations on behalf of other persons.
• Acting or arranging for other persons to act as directors or nominee shareholders.
• Providing registered office or business addresses.
• Carrying out designated activities in relation to the provision of accounting services.
• Carrying out transactions with ACRA on behalf of other persons or as a secretary of a company by way of business.

All registered CSPs will need to comply with obligations under the CSP Act and CSP Regulations, including those on anti-money laundering, countering the financing of terrorism and countering the proliferation of weapons of mass destruction (AML / CFT / CPF).

Persons acting as nominee directors by way of business will need to be arranged by registered CSPs, after they have been assessed as fit and proper by the registered CSPs. Fines will also be introduced for breaches of AML/ CPF/ CFT obligations by registered CSPs and their senior management.

Previously, companies and other business entities acting as CSPs that did not file transactions on behalf of their customers with ACRA were not required to be registered as registered filing agents (RFAs) and consequently were not subject to AML/ CFT/ PF obligations.

The changes are designed to enhance the regulatory regime and level the playing field for all CSPs carrying on business in Singapore. They will also ensure Singapore’s continued compliance with the FATF’s March 2022 update of its standards on beneficial ownership that requires nominee directors and nominee shareholders to disclose the identity of their nominators to the Registrar and to publicly disclose their nominee status.

The Act prohibits persons from acting as nominee directors by way of business unless the appointments are arranged by registered CSPs and they have been assessed as fit and proper by the registered CSPs. This measure is designed to prevent the misuse of nominee directorship arrangements by CSPs who arrange for unqualified individuals to act as nominee directors for their customers.

In determining whether the person is a fit and proper person, the registered CSP must take reasonable steps to satisfy himself that the person is not disqualified from acting as a director of a company under any written law and consider other factors.

A person who breaches this requirement is guilty of an offence and will be liable on conviction to a fine not exceeding SGD10,000. A registered CSP which breaches this requirement is guilty of an offence and shall be liable on conviction to a fine not exceeding SGD100,000.

Sovereign welcomes this development. While nominee directorship arrangements are a legitimate service provided by many CSPs to help their overseas-based clients fulfil Singapore’s requirement for an ordinarily resident director to set up a company in Singapore, they were vulnerable to abuse.

Local resident directors in Singapore must be Singapore citizens, permanent residents or foreigners with Employment Passes (EPs). Sovereign maintains a list of experienced nominee directors, who have been selected in accordance with the regulations and are fully aware of their duties and responsibilities as directors. These persons are also strictly limited as to the number of directorships that they can hold concurrently.

Singapore, alongside Hong Kong, is regarded as one of the preeminent financial centres in South-East Asia and has gained in popularity as a base for family offices – privately held companies that manage the wealth of ultra-rich families.

Singapore enjoys a reputation as a well-governed and well-regulated financial centre that offers political stability and a pro-business environment, as well as the presence of local and global private banks, investment banks and other financial service providers and professionals.

The number of single-family offices (SFOs) in Singapore jumped by 43% in 2024, from 1,400 in place at end-2023, to exceed 2,000. Given that the Monetary Authority of Singapore (MAS) had awarded tax incentives to around 1,650 SFOs by the end of August 2024, it means the number of SFOs grew more than 21% in the last four months of 2024 alone.

Last October, MAS set out changes to the Offshore Fund Tax Incentive Scheme (Section 13D of the Income Tax Act), the Resident Fund Tax Incentive Scheme (Section 13O) and the Enhanced-tier Fund Tax Incentive Scheme (Section 13U), which are all will be extended by five years until 31 December 2029.

It also introduced a new Section 13OA, which extends the Resident Fund Tax Incentive Scheme to funds constituted as limited partnerships, while the Goods and Services Tax remission and withholding tax exemption for funds enjoying the Tax Incentive Schemes will continue to apply until 31 December 2029.

The assets under management (AUM) requirement applicable to 13U remains at SGD50 million, but this requirement must be satisfied not just at the time of application but at the end of each basis period. A 13O fund will be required to have AUM of SGD5 million at the end of each basis period.

As from 1 January 2025, the AUM of a fund will no longer be computed based on net asset value (NAV) but will be measured with reference to the value of investments held by the fund that qualify as designated investments (DI). Funds are no longer required to seek MAS approval for a change in investment strategy but must notify MAS of such changes.

The business spending requirement applicable to 13O, 13OA, and 13U award holders will be revised so that the amount applicable will vary between SGD200,000 and SGD500,000, depending upon the AUM.

A new closed-end fund election will be made available for 13O, 13OA, and 13U non-single family office (non-SFO) applicants which, subject to conditions, will provide AUM and business spending simplifications to better tailor the use of the incentives in closed-ended contexts.

These changes are positive and forward-looking. They are in line Singapore’s policy of incentivising funds, offering greater flexibility, particularly to smaller funds for which the qualifying conditions may have been challenging, and also ensuring substance in Singapore, which has been an area of focus in recent years.

Family offices can utilise the Variable Capital Company (VCC) structure, which can be set up as a standalone fund, or as an umbrella fund with two or more sub-funds. A VCC structure is regarded as a single company, with a single identity for tax purposes, removing the need for multiple tax returns.

Shares of a VCC are redeemable at the fund’s net asset value (NAV), and VCCs can pay dividends from the capital, which is not typically allowable in other forms of corporate vehicles. In addition, VCC shareholders register will not be publicly available, offering privacy to investors.

Sovereign Management Services can assist with the process of setting up a family office and a VCC in Singapore, applying for tax incentives and assisting with the regulatory process and ongoing accounting and taxation requirements. In partnership with Drew Napier, one of Singapore’s leading and largest full-service law firms, we can obtain legal opinions and support for obtaining the family office status.

In addition to our corporate and trust management services, Sovereign can provide clients in Singapore with the on-going administrative support that enables them to maximise opportunities and achieve long-term sustainability, from full back-office solutions to assistance with tax and regulatory compliance and filing fees and returns.

This includes in-house bookkeeping and accounting services, including the preparation of unaudited financial statements and handling complex consolidations, as well as human resources, pensions, insurance, trademark and intellectual property protection, obtaining local licences and permits, executive relocation and specialist tax advice.