Simplified VC manager rules a boost for start-ups

The simplified rules are part of the MAS' initiatives to boost financing options for small and medium-sized enterprises (SMEs).
The simplified rules are part of the MAS' initiatives to boost financing options for small and medium-sized enterprises (SMEs).PHOTO: ST FILE

They shorten authorisation process and ensure better access to capital for SMEs

Simplified rules for managers of venture capital funds - also known as VC managers - aimed at boosting start-ups' access to capital will take effect immediately, the Monetary Authority of Singapore (MAS) announced yesterday.

This follows a public consultation on the proposed new rules, which simplify and shorten the authorisation process for VC managers.

The simplified rules are part of the MAS' initiatives to boost financing options for small and medium-sized enterprises (SMEs).

They could also expand the venture capital fund presence here, which could both benefit local start-ups and give Singapore a shot at becoming a regional hub for venture capital.

The new rules say that VC managers are no longer required to have directors and representatives with at least five years of experience in fund management.

VC managers are also not subject to the capital requirements and business conduct rules that apply to other fund managers.

But the MAS noted that in admitting and supervising VC managers, it will focus mainly on anti-money laundering safeguards under the Securities and Futures Act. "These safeguards remain important to upholding high standards of integrity in the industry," it said.

The authority will also retain regulatory powers to deal with errant VC managers.

The simplified rules also take into account the extent of contractual safeguards already present in typical contracts negotiated by VC managers' sophisticated investor client base.

Under the new rules, a VC manager can manage only funds that meet certain characteristics.

It can invest funds in business ventures that are not listed on a securities exchange; it can invest at least 80 per cent of committed capital in securities directly issued by start-ups no more than 10 years old; and units of the funds are not available for new subscription after the close of fund-raising and can be redeemed only at the end of the fund life. The units can be offered only to accredited and/or institutional investors.

MAS assistant managing director (capital markets) Lee Boon Ngiap said: "The simplified VC manager regime recognises the lower risks posed by VC managers, given their business model and sophisticated investor base. It will enhance the operating environment for VC managers to play a greater role in supporting start-up and growth stage businesses."

A version of this article appeared in the print edition of The Straits Times on October 21, 2017, with the headline 'Simplified VC manager rules a boost for start-ups'. Print Edition | Subscribe