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Labuan Mutual Funds

LABUAN MUTUAL FUND: MUTUAL BENEFITS

If you’re considering setting up a Labuan Mutual Fund, you should consider working with us. In addition to being experienced and knowledgeable about all the legal, practical and key elements of funds, we offer a personal touch – so a Mutual Fund established with us will truly have your interests at heart.

A Mutual Fund always has a collective purpose, with funds gathered from a number of investors so an investment can be made in assets such as bonds, stocks, and equities. A fund manager oversees the fund, and will invest the money to generate capital gains and income for all the Mutual Fund’s investors. The structure and operation of the fund should reflect the original purpose and investment goals. And Labuan Borneo Trustees Limited will ensure this is realised for you.

WHAT IS A LABUAN MUTUAL FUND?

According to the Labuan Financial Services and Securities Act 2010 (LFSSA)  a ‘mutual fund’ or ‘fund’ is a Labuan company, a corporation incorporated under the laws of any recognised country or jurisdiction, a protected cell company, a partnership,  a foundation, or a unit trust which:

  • collects and pools funds for the purpose of collective investment with the aim of spreading investment risk
  • issues interests in a mutual fund which entitles the holder to redeem his investments as agreed upon by the other investors, and
  • allows him to receive an amount which is calculated by the value of a proportionate interest in the whole or part of the net assets

CONCEPT OF A LABUAN MUTUAL FUND

BENEFITS OF SETTING UP A MUTUAL FUND IN LABUAN

Tax and business incentives: A mutual fund business which is a non trading activity for the period of assessment will not be charged tax for that year.

No withholding tax: Withholding taxes are not imposed on the income distribution to the beneficial owner.

No exchange control imposed: The Exchange Control Act 1953 does not apply to a Labuan Company because of its non-resident status (ECM 15).

Strategic location with skilled work force: Labuan operates on the same time zone as a number of large Asian cities, making it ideal for business dealings. Labuan IBFC is just a short flight from Kuala Lumpur and Kota Kinabalu and there are plenty of flights daily. Additionally, Labuan has a highly skilled and talented workforce that is very familiar with international financial business protocol.

Strict confidentiality legislations: a comprehensive regulatory framework ensures that Labuan complies with international standards of service, performance and confidentiality. In addition to this Labuan is a ‘white listed’ jurisdiction and endorses the bilateral exchange of tax information with foreign authorities.

TYPES OF MUTUAL FUND THAT CAN BE ESTABLISHED IN LABUAN

A. PRIVATE FUND

In a private fund, shares are offered to private members or a limited number of investors who have their own particular investment strategy and who wish to invest in specific securities. 

According to the LFSSA, a private fund is:

  • A mutual fund with no more than 50 investors. Each investment should be worth no less than MYR 250,000 (or the equivalent in any foreign currency) or any other sum that may be prescribed by the Authority
  • OR a mutual with any number of investors where the initial investment of each investor is not less than MYR 500,000 (or the equivalent in any foreign currency) or any other sum that may be prescribed by the Authority
  • OR any fund designated by the Act that falls under this category.

A private fund does not need to be registered with the Labuan Financial Services Authority (Labuan FSA). However, in order to set one up, notice must be made in writing by or on behalf of the applicant to the Labuan FSA.

This notice should be accompanied by the Memorandum or the fund’s prospectus, outlining the intended business and affairs of the fund. This information will need to be submitted through a trust company or other licenced entity who is satisfied that:

  • The information in the Memorandum refers to a private fund
  • The private fund has not been established fraudulently or for fraudulent purposes

B. PUBLIC FUND

Any member of the public may hold shares in a public fund. According to the LFSSA, a public fund must not operate or arrange or administer its affairs until it has been registered or granted provisional approval by the Labuan FSA.

A public fund that has been registered under laws recognised by another country or jurisdiction does not have to be registered as a public fund in Labuan. However, the caveat to this is that the fund must be administered in Labuan by a fund administrator, trustees, custodian, or fund manager who is licenced, registered or eligible under the LFSSA.

REGISTRATION REQUIREMENTS FOR SETTING UP A LABUAN PUBLIC FUND

An application should be made in writing by or on behalf of the applicant to the Labuan FSA. It must be accompanied by, but not limited to, the following documents, statements and information:

  • A Statement outlining the scope and nature of the business to be carried out by the applicant in or from within Labuan
  • The instrument by which the applicant is constituted or proof that the applicant is lawfully constituted under the laws of Malaysia relating to Labuan, or under the laws of any recognised jurisdiction or country
  • A Statement including the following:

    • The address of the applicant’s place of business and its address for service relating to Labuan
    • The name and address of a person in Labuan who is authorised to represent the applicant and to accept service on its behalf
    • The address of the applicant’s place of business outside Labuan
    • The names, addresses and relevant experience of the directors of the fund
  • A declaration by the directors of the proposed fund with regard to confidentiality and secrecy
  • A copy of the prospectus (either in draft or final form) of the public fund, when available. No registered public fund, in or outside Labuan, may invest in securities unless it has been registered by the Labuan FSA.

OPERATIONAL REQUIREMENTS FOR SETTING UP A LABUAN PUBLIC FUND

  • All public funds must appoint a fund manager, trustee, administrator and custodian and these appointments must be approved by the Labuan FSA
  • The proposed fund must have a registered office in Labuan. If the fund manager is from a recognised country or jurisdiction other than Labuan, at least one of the fund-related businesses such as custodian, trustee or fund administration must be based in Labuan
  • The applicant fund must notify Labuan FSA of any amendment or alteration to any of its constituent documents
  • The applicant fund shall conduct business in foreign currency only and not in ringgit except when administrative and statutory expenses need to be paid
  • The account must be audited and submitted to the Labuan FSA within six months of the financial year end
  • Statistics and information required in relation to prudential regulation and business operation will need to be submitted to the Labuan FSA from time to time.

SETTING UP PROCEDURE

Upon receiving the duly completed and signed documents, we will proceed with the application to the authority as follows:

WHY WE ARE THE RIGHT PEOPLE TO HELP YOU SET UP A LABUAN MUTUAL FUND BUSINESS

We are a fully licenced trust company with a highly experienced team of dedicated professionals. We can help you plan, establish and structure a Labuan Mutual Fund business ensuring you get a bespoke service that meets your particular business needs and that your company fulfils all the necessary requirements lay out by the Labuan FSA. We also offer some of the most competitive prices in the industry.

To find out more about how we can help you set up your Labuan Mutual Fund business, contact us on our live support or email us at info@labuanborneotrustees.com