What constitutes a Labuan Mutual Fund?
A Labuan Mutual Fund, commonly referred to as a fund, can adopt various structures such as a Labuan company, partnership, protected cell company (PCC), foundation, or trust to pool and raise funds for investment purposes. Additionally, investors can establish a Labuan Islamic Mutual Fund, which must adhere to Shariah principles.
There are two primary types of Labuan Funds: Labuan Public Fund and Labuan Private Fund.
Activities of a Mutual Fund
- Collects and pools funds from multiple investors for collective investment with the aim of diversifying investment risk.
- Issues interests or units to investors, entitling them to redeem investments according to predetermined terms, and receive a proportional share of the net assets of the respective entities.
- May be structured as an umbrella fund, comprising various classes of funds or sub-funds, allowing participants to exchange rights in one segment for rights in another, enhancing flexibility in investment strategies.
What is a Labuan Public Fund?
A Labuan Public Fund refers to a fund that offers its shares or securities for subscription to the general public.
Before commencing operations, a Labuan Public Fund must be registered with Labuan FSA. The fund can be structured as a Labuan company, partnership, protected cell company (PCC), foundation, or trust. With the approval from Labuan FSA, the public investors are assured that the crowdfunding investment is from a legitimate and reliable entity.
Why Choose Labuan
Strategic location to tap into the Asia Pacific market
Shared time zone with major Asian cities for seamless interaction
Excellent infrastructure and regulations within the Labuan IBFC
OECD whitelist jurisdiction status
Recognised by prominent exchanges for entity listing (such as Hong Kong, Singapore, Malaysia, Australia, and Dubai Exchanges)
100% foreign ownership with a minimum requirement of 1 shareholder and 2 directors
Low corporate tax rate of 3%
Absence of withholding tax, stamp duty, GST, import duty, sales or service tax, capital gains tax, inheritance tax
Void of tax on dividends to shareholders
Void of tax on director fees for foreign directors
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Regulatory & Operational Requirements of a Labuan Public Fund
- Appoint a Labuan fund manager, trustee, administrator, or custodian, who are independent of each other and approved by Labuan FSA.
- If the fund is managed by a non-Labuan licensed fund manager, at least one service provider must be approved by Labuan FSA.
- Establish a registered office in Labuan with the appointment of a Trust Company acting as Resident Secretary.
- All subscriptions shall be reimbursed immediately if the minimum level of subscription required is not met within the stipulated time frame.
- Transact only with authorized Malaysian dealers approved by the Malaysian Exchange Control.
- Conduct business with due diligence and sound principles with all Board Members who are deemed as fit and proper persons.
- Maintain proper accounting and other records of each transaction with clear identification (name and registration number) on official documents.
- The financial position has to be in line with the Directive on Accounts and Record-Keeping requirement issued by Labuan FSA. These records are to be indicated clearly on its letterhead, stationery, and other documents.
- Appoint an approved external auditor in Labuan.
- Provide half-yearly reports to investors, which includes a portfolio valuation report showing portfolio mix, the net asset value of the investment with an independent verification for the existence of the fund assets, and the fund performance.
- Notify Labuan FSA within 30 days of any amendments to its constituent documents and business plan.
- Ensure compliance with the Anti-Money Laundering and Anti-Terrorism Financing Act and guidelines provided by Labuan FSA.
- Ensure proper policies and procedures are in place, coupled with a sound compliance framework to safeguard investors’ interests.
The condition of the Prospectus of a Labuan Public Fund should provide full, accurate and transparent disclosure of all pertinent facts and circumstances. This comprehensive disclosure enables prospective investors to make informed decisions regarding subscription to the public fund. Key information that must be disclosed in the prospectus includes:-
- Description of the fund (the date of issuance, mandate/objective, legal form and structure, tenure, target fund size, and geographical focus).
- The prospectus must be in the national language of Bahasa Malaysia or English.
- Information on the full details of the experience, the terms of appointment and termination of the Board members, key personnel, managers, custodian and trustee of the fund, whichever applicable.
- The Board members and key personnel must include the following particulars:
- Any shares held by them in the fund
- Any borrowings are given by them to the fund
- Any other obligations of the fund to them
- Profile of the qualified person as its Shariah adviser for Labuan Islamic Public Fund
- The capital and income distribution policy of the fund.
- The prospectus has to contain this statement: “Labuan FSA takes no responsibility for the contents of this prospectus, makes no representations as to its accuracy or completeness and expressly disclaims any liability whatsoever for any loss howsoever arising from or in reliance upon any part of the contents of this prospectus. An investor is advised to clearly understand the risk(s) of the investment, seek professional consultancy, if necessary, and request for sufficient information to enable them to make a reasonable evaluation of the investment.”
- Investment strategy should include the investment policies and objectives and types of securities which the fund intends to invest.
- The names of all underwriters and amount proposed to be underwritten by each underwriter.
- Name the key features of the public fund to facilitate an investor in considering and comparing any similar investments on offer with the following information:
- Issued price of the shares
- Types of expenses to be incurred by the fund
- Potential risks for fund investment
- The extent of listing the potential derivatives and unlisted securities to be invested. If it is intended for the fund not to invest in any of such investments, the prospectus must include an appropriate statement to that effect.
- The investment and borrowing limitations of the fund. This should include a comprehensive analysis of the risks by its nature including the risks of the country and region where the fund intends to invest, if applicable. If any of the limits on investment and borrowing is breached, the Board of the public fund or fund manager must take necessary steps within a reasonable time frame to remedy the situation, protecting the interests of all investors.
- Financial results and projections with cash flow and profit based on its fund nature, investment policies and objectives, the proposed minimum subscription proceeds net of costs including the underwriting fees. Must have a clear policy on submission of financial reports including interim results and annual financial statements of the fund to its subscribers.
- Asset Valuation Policy including the financial reporting standards used for the preparation of financial statements and the methods on valuing all assets.
- Investor Care Framework to cover the following areas:-
- Rights of investors as stipulated in Section 36 of LFSSA or section 41 of LIFSSA guidelines
- All fees and costs that will be borne by all the investors
- Disclosure policy on conflict of interest for investor protection
- Complaint handling process
- Related party transaction policy including its disclosure policy
- Redemption policy includes information of procedure for redemption, timing, events where redemption right is suspended and pricing redemption or subscription of unit/shares of the fund.
- Material changes that affect any of the matters required to be disclosed in the prospectus and the fund manager shall within 30 days incorporate such changes to the prospectus and provide a copy of the supplementary / amended prospectus to each of investors and Labuan FSA.
Note: For Labuan Islamic Public Funds, the description must state that the fund shall only participate in operations, administrations, investments and all other activities in compliance with Shariah principles. The details of taxes or zakat levied on income and/or capital of the fund and any deductions from shareholder distributions must be disclosed.
- Consultation on eligibility and procedural guidance tailored to your profile, fundraising objective, plans and investment strategies.
- Profiling, due diligence and guidance on documentation preparation.
- Preparation of Business Plan, Financial Forecast and Operation Manuals.
- Provision of Trustee and Custodian service.
- Submission and supervision of the application process until approval.
- Acting as your liaison and contact point with LFSA, arranging for interviews (if any).
- Tracking the license approval and handling all queries from LFSA.
- Advisory services on the appropriate company structure post-approval.
- Assistance in setting up onshore and offshore bank accounts.
- Assistance in establishing operational and marketing or co-located offices.
- Staff provision and office space rental.
- Internal audit and compliance advisory.
About FAA Advisory Limited
Comprising a team of seasoned professionals well-versed in Labuan's business landscape, FAA Advisory Limited extends a comprehensive suite of services covering corporate services, private wealth management, and licensing compliance administration, all tailored to meet the unique needs of our clients.
At FAA Advisory Limited, our expertise lies in delivering Labuan insights that facilitate business expansion, simplifying intricate processes, and offering valuable information to guide you through various facets of your journey.
Choose FAA Advisory as your trusted partner in navigating the dynamic business landscape of Asia. With our commitment, we are your gateway to success in Labuan and beyond.
Email: advisory@finarkasia.com | Phone number: +6010-931 6678