Fund Raising Law in Singapore : All fund raising in Singapore whether large or small is governed by the Securities and Futures Act 2001 (the “Act”). The Act is a very long and complex piece of legislation and most businessmen do not understand the implications of their fund raising activities until it is too late. Please note that the Act is not the only piece of legislation in relation to fund raising so you should always check with a Singapore corporate lawyer if you have any fund raising /lending related transactions.
This article will highlight two cases that have gone before the courts in Singapore for breaches of the Act. We hope that you learn from some of these cases when fund raising for your companies. If you are in doubt, please contact a Singapore Corporate lawyer to advise you on this.
Given that this is a highly technical area of law, we will explain some key concepts in this area via case studies.
CASE STUDY #1 – Fund Raising Law in Singapore
A director of the Brandz Group[1] Tay Chee Meng was jailed for 15 months for obtaining convertible loans as investments for a company which he claimed was going for a potential listing on the Australian Stock Exchange. He managed to raise 2.8 million for this funding round but failed to disclose to his investors that most of the money was to repay existing debt.
What the director did not know or did not pay to get Singapore legal advice was that under the Securities and Futures Act 2001 of Singapore, there is a requirement that a prospectus be issued and the judge ruled that if such a prospectus were issued, it would be clear that the use of proceeds was to be used by the company for repayment of existing debt rather than for expansion or growth or for IPO expenses.
CASE STUDY #2 – Fund Raising Law in Singapore
Doris Tan Stephenson raised funds on behalf of a US scheme and 29 people who invested more than 1 million with her, lost 70 percent of this amount. She was jailed 12 weeks for offences under the Securities and Futures Act 2001 of Singapore[2].
Doris was a director of CTL Group and CTL Global which involved people buying properties in bulk and earning returns through resale or rent collection. The company collected $1.05 million from 29 investors under the scheme that year. But when they did not get the returns, they filed 10 police reports here against CTL Group.
Here she failed to offer a collective investment scheme without authorisation, recognition and an approved prospectus. For running the business without a capital markets services licence, Tan could have been jailed for up to three years, or fined up to $150,000, or both.
The learning lesson here is that fund raising without legal advice can land you in deep trouble especially by breaching the provisions of the Securities and Futures Act 2001 of Singapore.
In conclusion, Fund Raising Law in Singapore is complex and involves several pieces of legislation (including but not limited to the Securities and Futures Act 2001 of Singapore) is a. When in doubt, do engage a corporate lawyer early in your fund raising journey for the next step of your entrepreneurial journey.
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[1] https://www.straitstimes.com/business/banking/businessman-gets-15-months-jail-for-raising-funds-without-a-prospectus
[2] https://tnp.straitstimes.com/news/singapore/woman-jailed-offering-investment-scheme-without-licence
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