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Developing A Retirement Exit Strategy That’s Right for You

Plan Your Retirement With Confidence

Find The Exit Strategy That Suits You Best

Are you ready to retire? Have you planned for your retirement exit strategy?

Many business owners don’t have a plan for what will happen when they retire and leave their businesses.

This can lead to difficulties in the transition and cause the business to fail.

Retirement planning is an integral part of any successful business.

This is why Business Succession Planning is so important.

A successful retirement exit strategy begins with developing a succession plan.

Several options are available for retirement exit strategies.

The best choice for you will depend on your business’s specific situation and personal goals.

Here are the 4 most common Business Succession Plans.

1. Selling Your Business To A Co-Owner

  • If you own your business together with your partners, then you should consider drafting a mutual agreement that sets out the terms and conditions for selling a deceased or disabled owner’s business interest.
  • This can help avoid future disputes and ensure a smooth transition for the business.
  • One key advantage of this plan is that it allows the co-owner to buy out the shares of the deceased or disabled owner without delay.
  • However, the critical drawback of this plan is that the co-owner requires much cash on hand since he would be prepared to buy out your shares theoretically at any time.
  • A buy-sell agreement structure is a great way to overcome a co-owned business’s key drawback since the funding mechanism for the buy-sell agreement structure is usually done by purchasing an insurance policy.

 

2. Passing Your Business To Your Heir

When choosing an heir to take over your business, there are a few things you’ll want to keep in mind.

  • First, is your heir ready and willing to take on the responsibility?
  • Second, is your heir capable of running the business?
  • Third, is your heir the right person for the job, both from a skill and character standpoint?

If you can answer yes to all of these questions, passing your business on to your heir is likely the best course of action for you and your family.

When making business decisions within a family,  keeping emotions in check is essential.

Unfortunately, this is easier said than done, especially after an untimely death or disability.

Studies show that second-generation businesses rarely survive the transition, as they’re often sold by the inheriting family member or fail outright.

 

3. Selling Your Business To A Key Employee

  • A key employee is a good option for a business succession plan since the employee is generally more reliable than an outside buyer and is more committed to continuing the business’s success.
  • In a perfect world, the owner of a company would have a clear succession plan that seamlessly transfers ownership to the most qualified and deserving employee.
  • But in the real world, many business owners don’t have plans.
  • Money is often the biggest hurdle when it comes to key employee succession.
  • Most employees aren’t financially able to buy the business they work for.
  • One solution to this problem is an employee stock ownership plan (ESOP).
  • An ESOP is a retirement plan allowing employees to own a piece of the business they work for. The company makes contributions to the ESOP, which are used to purchase the company’s shares.
  • Employees can then withdraw or cash the shares when they leave the company.

 

4. Selling Your Business To An Outside Party

  • You may have to sell your business to an outside party when there isnt’t an obvious successor.
  • Ideally, it would be best to get an updated valuation of your business to ensure that you get the best price.
  • When it is time to sell your business, you want to ensure everything goes as smoothly as possible.
  • But, unfortunately, you can’t predict precisely what the sales process will have in store.
  • For example, your business may not be as valuable as you have anticipated, there may be a lack of credible buyers, or your business may not be able to sell at all.
  • Therefore, weighing essential to weigh your options and considering the potential drawbacks before selling your business is essential.

 

No one ever plans to fail, but failure to plan leads to most business failures.

No one knows when their time will come, but having a good succession plan in place can ensure a smooth transition of your business when the time does come.

A succession plan can help transfer ownership of the company to another individual, maintain your lifestyle in retirement, provide for your heirs financially, and prepare the business to handle unexpected events.

If you don’t have a succession plan, it’s essential to start developing one now to ensure a smooth transition for you and your business.

You’ve spent your life building your business, but you’re not sure what will happen to it when you retire. Speak to us over video consultation via Lawyer Anywhere for advice on planning your retirement exit strategy.

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How To Review A Contract Like A Lawyer

Master the Art of Contract Review with Expert Tips

What is the first thing you do when someone hands you a contract?

Anxious business owners who want to get the deal done may scan the contract before signing it. Likewise, the more cautious business owners might want to read the contract before committing. But the thought of plugging through the agreement may be too daunting, so they shove it to the bottom of their work pile to read later.

Before committing, more cautious business owners may read the contract. However, ploughing through the agreement may be too daunting, so they push it to the bottom of their work pile to read later.

Does this sound familiar to you?

You may have done one of these things as a business owner at some point.

Regarding contracts, it is always better to be safe than sorry.

  • Reading through a contract before signing is essential to understand what you agree to.
  • By signing a contract without reading it, you have essentially agreed to all the terms and conditions listed in the contract without understanding.
  • This can be a risky move, as you may not be aware of all of the potential consequences of signing the contract.
  • If you encounter any problems or issues after signing a contract, it cannot be easy to get out of the agreement.

So, before you sign anything, please read through it carefully.

Have you ever wondered how lawyers can review the lengthiest contracts at lightning speed?

  • Well, it’s no secret that we routinely use checklists when reviewing contracts.
  • In our experience, checklists are essential when reviewing contracts for the first time, as it can be easy to overlook critical items.
  • Using a list, we can ensure that every detail is noticed.
  • You, too, can review your contract in 10 minutes.

 

5 Tips to Review Your Contract

  • Note the specific requirements in the contract.
  • Compare the requirements in the contract to the project specifications.
  • Ensure that all the required information is included in the contract, such as contact information, payment terms, and delivery dates.
  • Review the contract’s terms and conditions, and ensure they are acceptable.
  • Ask any questions about the contract, and ensure your queries are answered.

 

What To Look for During a Contract Review

Contracts can be tricky, and crocodiles are always lurking in the dark. You need to know where to look for these crocodiles.

Here are some places where you can find crocodiles during a contract review.

 

1. Key Clauses & Terms
  • Confidentiality clauses protect sensitive company information.
  • Indemnification clauses protect the company from being held liable for any damages or legal costs.
  • Termination clauses outline the conditions under which the contract can be ended.
  • Dispute resolution clauses specify how any disputes will be resolved.
  • Such clauses are all critical sections in an agreement.
  • Therefore, they should be given extra attention to ensure the wordings are acceptable.

 

2. Termination & Renewal Terms
  • Key clauses to look for include automatic renewal language and opt-out windows.
  • Automatic renewals clauses usually mean that the contract will generally renew automatically at the end of the current term.
  • While the clause usually allows for cancellation within a set notice period, many business owners forget to cancel before the deadline. They are then stuck in a contract they no longer want or need.

 

3. Clear, Unambiguous Language

  • One issue that often arises when reviewing a contract is ambiguous language.
  • This is when the wording of a sentence needs to be clarified.
  • This can lead to different interpretations by the parties involved.
  • Vague or unclear terms can lead to conflict. It is, best to revise the wording to be more precise.

 

4. Default Terms

  • Default clauses set out the terms which would apply where one party fails to meet their obligations.
  • Knowing the potential consequences can help prevent unpleasant surprises down the road.

 

When reviewing a contract, it is essential to remember to focus on your top 5 concerns and to be on the lookout for any potential crocodiles hidden in the agreement.
 

By using this simple 10-minute review system, you can ensure that your contract will enforce your business deal and protect your interests.

Need help reviewing your contract? We offer video consultation via Lawyer Anywhere so that you can get the help you need. Contact us today to get started.

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Disguising Your Employees As Independent Contractors?

The Dangers of Employee Misclassification

Many of Singapore’s Small & Medium Enterprises have, as a cost-cutting measure, turned to the services of freelance contractors to meet their workforce needs instead of hiring employees.

While the use of freelance contractors does provide cost savings, business owners must have a clear understanding of who qualifies as freelance contractors.

In recent years, the Singapore Courts have come down hard on companies who hire “temps” or freelance contractors to avoid paying for employee benefits.

The Courts may disagree that your hired hand is not an “employee” but a “freelance contractor” based on your declaration.

Why Does the Difference Matter?

  • When you misclassify workers as “freelance contractors” who are your employees, you expose your business to several significant legal liabilities.
  • These can include fines and penalties for violating labour laws, such as the Workmen’s Compensation Act, the Employment Act, and the Central Provident Fund Act.
  • In addition, not complying with your statutory obligations to your employees can cause significant damage to your business.

Factors In Determining Employer-Employee Relationship

  • The Court looks at various factors to determine if an employer-employee relationship exists.
  • These include the actual mechanices of the relationship, as well as economic considerations.
  • For example, the Court will look at how the workers are paid, whether they provide benefits, and how much control the employer has over their work.
  • Additionally, the Court will examine the parties’ intent and the work’s nature.
  • Ultimately, the Court will consider all the facts and circumstances to decide.

Degree of Control

  • One important consideration is the degree of control over the worker’s activities.
  • In a classic employer-employee relationship, the employee is generally obligated to follow the employer’s instructions in all tasks that lead up to the final work output.
  • Whereas in the case of a freelance contractor, the hirer’s control is often limited to the scope of the project and its deliverables while having little say over how the worker should perform each of the tasks that make up the project.
  • The freelance contractor’s obligations to the hirer are to complete the project/task.
  • In contrast, the execution of tasks involved in the deliverables is left to the freelance contractor.
  • The higher the control over the worker’s activities, the more likely the “employer-employee” relationship exists. This is because the employer is in a better position to dictate the terms and conditions of the work, and the worker is in a less advantageous position to negotiate. As a result, the worker is more likely to be considered an employee, and the employer is more likely to be considered the employer.

Factors of Production

  • Another critical consideration in determining whether an employer-employee relationship exists is the ownership of factors of production.
  • For example, who provides the tools and equipment necessary for the job, as well as the place of work?
  • If the hirer provides these, it is more likely that an employer-employee relationship exists. Again, this is because the hirer has more control over the worker in this situation.

Financial Control

  • The third important consideration when determining the nature of the working relationship is the degree of financial control for services rendered.
  • For example, is the payment for services made upon completion of the project/task or on a regular periodic basis?
  • Suppose payment is made upon completion of the project/task. In that case, it is more likely to be viewed as a freelance contractor relationship.
  • On the other hand, if payment is made regularly, it is more likely to be considered an employer-employee relationship.

Other Factors

  • The Courts have considered several other factors when determining whether or not an employer-employee relationship exists.
  • For example, the Courts will look at the terms of the agreement between the parties, such as how long the agreement is for, the nature of the job or services to be performed, etc.

What Can I Do To Minimise My Liability?

  • While some business owners have avoided legal liability through mis-characterisation, others have paid a high price for disgusing their employees as freelance contractors.
  • The rule of thumb is “If you treat the worker as an employee, so will the authorities.”
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FMC, SFO, MFO Are So Popular! Are They The Same?

FMC, SFO, MFO - Unveiling the Differences

Despite the rapid development of the Chinese family office scene, the family office concept remains confusing to many Chinese.

In China, the lines between family business offices and trusts are only beginning to be developed.

Due to China’s strict regulations, the “family offices” of China’s ultra-wealthy investors take the form of investment firms to manage their wealth.

Some of the more notable examples include Yunfeng Capital (located in Shanghai) which manages the fortunes of Jack Ma and David Yu, Wu Capital (located in Beijing) which controls the wealth of real estate tycoon Wu Yajun and Blue Pool Capital Ltd. (located in Hong Kong) which manages the fortunes of Jack Ma and Joe Tsai.

These investors are establishing their own investment firms to have more control over their investments and a more significant say in managing their money.

To many Chinese, the terms “fund management”, “single-family office”, and “multi-family office” all mean the same thing – raising and management of funds for investments.

Suppose your Chinese clients have approached you to start a family office for raising and managing investment funds.

This article will help you better understand these 3 different types of fund management companies in Singapore.

Fund Management Companies In Singapore

  • The fund management company (FMC) is the most general term. It refers to any company that manages money for other people or organisations.
  • A single-family office (SFO) is a type of FMC expressly set up to serve a single-family.
  • A multi-family office (MFO) is a company that provides services to multiple families.

What Is A FMC?

  • Any company that manages money for other people or organisations is called a fund management company.
  • The role of FMCs, in general, is to manage a large pool of funds for investment.
  • Individuals or corporations can contribute to the pooled funds by “buying into” an investment product.
  • The FMC would typically charge a fee for such investment advice.

What Is A SFO?

  • The concept of a family office has been around for a long time in the West.
  • The nature and function of the family office are generally established by its founder with a specific purpose in mind. They may change over time as the family grows, or their needs change across generations.
  • A SFO is a collection of staff who provides dedicated personal and professional services to a family.
  • A family office’s services are highly personalised and tailored to one family’s specific needs and preferences.
  • Wealth management, tax planning and compliance, investment management, and estate planning are some of the most common services provided by each family of offices.

What Is A MFO?

  • An MFO is a wealth management company that offers ultra-high-net-worth (UHNW) clients customised services.
  • A MFO typically employs a small team of experts in various fields, such as investment management, financial planning, tax planning, and estate planning.
  • MFOs provide a comprehensive wealth management approach that assists clients in preserving and growing their wealth over time.
  • The MFO as a business model arose due to rapid technological advancements in the financial markets, which necessitated greater sophistication and skill in financial advisers.
  • By providing a wide range of services and typically overseeing their clients’ entire financial portfolio, the MFO helps defray the high cost of maintaining an SFO.
  • MFO professionals can also provide specialised knowledge on income taxation, estate planning, and investments.
Each of these types of fund management companies comes with its advantages and disadvantages.
  • For example, a SFO is an excellent choice for families with a large amount of investable assets because they can provide various services tailored specifically to the family’s needs.
  • A MFO is ideal for families with fewer assets because it provides a broader range of services at a lower cost than a SFO.
Ultimately, the family’s specific needs and investable assets determine the best type of fund management company.

When managing your finances, it’s crucial to get the right advice. If you’re unsure whether you need to appoint a fund management company, MFO or even set up your own SFO, speak to us over video consultation via Lawyer AnywhereWe can discuss your needs and recommend the best solution for you.

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Refinancing : A Full Breakdown Of How You Can Really Save Money

Refinancing: Put Money Back in Your Pocket

Suppose you are interested in saving money on your mortgage. In that case, this article aims to help you better understand how refinancing or repricing your mortgage can help you do that.

What exactly is the “refinancing/repricing” business all about?

Refinancing means replacing your current housing loan with another – one with a much lower interest rate.

Most of us in Singapore are proud owners of our homes, and we would have taken up a housing loan when we purchased our homes.

  • “When was the last time you took a good look at your housing loan statement?”
  • “Are you still enjoying the promotional rates offered by the bank?”

Being all excited to be proud owners, we are occupied with ideas of how to renovate & decorate our new home.

The 10-page letter of offer filled with legal jargon provided to us by the bank officer would be signed and sealed with little thinking.

We are the least bit affected by the bank officer’s notification that the loan period is for 25 years.

Little do we realise that for most of us, our current housing loan is secured by a mortgage based on the promotional rates offered by the bank at the time of the loan.

These promotional rates would only be low for the first couple of years (maximum 3 years); the rates would have gotten progressively higher.

 

Benefits Of Refinancing

  • Refinancing is one of the best ways to save money on your mortgage to refinance your mortgage at a lower interest rate.
  • In addition, you can reduce your monthly mortgage payments by refinancing your mortgage.
  • Another benefit of refinancing your mortgage is getting a longer loan term. This may allow you to keep your monthly payments low.

If you are interested in refinancing your mortgage, it is essential to compare the interest rates of several lenders to find the best interest rate.

Can we save money by refinancing?

What are the actual savings?

Generally, we can save money by refinancing!

 

Illustration Of Actual Savings

CURRENT SITUATION – Loan Amount $800,000/- @ 5.5% p.a.

Year

Current Rates

Current Instalment

Total Payment Per Year

1

5.50%

$4,642.31

$55,707.72

2

5.50%

$4,642.31

$55,707.72

3

5.50%

$4,642.31

$55,707.72

4

5.50%

$4,642.31

$55,707.72

5

5.50%

$4,642.31

$55,707.72

NEW PROMOTIONAL RATES OFFERED BY BANKS Loan Amount $800,000/- @ 1.25% (1st year); @ 1.35% (2nd year) & @ 1.45% (3rd year)

Year

Current Rates

Current Instalment

Total Payment Per Year

REAL SAVINGS!!

1

1.25%

$2,766.01

$33,192.12

$22,515.60

2

1.35%

$2,803.75

$33,645.00

$22,062.72

3

1.45%

$2,841.81

$34,101.72

$21,606.00

4

$4,642.31

$55,707.72

$ –

5

5.50%

$4,642.31

$55,707.72

$ –

TOTAL ACTUAL SAVINGS FOR 3 YEARS

$66,184.32

But before you take the plunge, you should factor in the cost of refinancing.

You need to check if you are still within the “lock-in” period, i.e. would any penalty be imposed (usually 0.5% to 1% of the outstanding loan amount) if you terminate the existing housing loan early.

Final Tip:

You should check with your current bank to review your loan rates.

Most banks would allow customers to convert to the “new package”.

That way, you will enjoy the promotional interest rates without hassle and trouble.

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Do You Know How Much Your Business Is Worth?

Discover What Your Business is Really Worth

As a business owner, you should know your company’s value. This will help you make informed decisions about your business, whether you’re looking to sell, seeking investment, or planning for succession. Of course, your circumstances will determine the best way to assess your company’s worth.

We’ll explore different methods of valuing a company and how to choose the best one.

What is Business Valuation?

  • Business valuation is figuring out how much a business or company is worth in terms of money.
  • Most businesses are valued based on their financial health, market share and future development prospects.

Purpose of Business Valuation

  • A business valuation can be used for various purposes, including the sale of the business, the merger or acquisition of another business, taxation, buy-sell agreements and estate planning.
  • However, the most common reason for business valuation is to support the sale or transfer of business ownership.

Business Valuation Approaches

  • The next thing you need to consider is the value itself.
  • There are 3 basic approaches to determining value:
    • the market approach,
    • the income approach, and
    • the asset approach.
  • Choose the method that works best for your business and situation.
  • Once you have selected your method, it is time to gather data.
  • This data can include financial statements, market research, and appraisals of tangible assets.
  • Collecting positive and negative data is necessary, as this will help you create a realistic model.
  • After gathering the data, establish and measure the business’s qualities or weightings to establish a model that reflects the business’s value.

1. The Market Approach

  • The market approach looks at your business and compares it to recent sales of similar businesses.
  • This is a good way to get a general idea of what your business is worth.
  • To get started, gather information on similar businesses that have been sold recently.
  • This can be done by searching online, talking to industry experts, or hiring a business appraiser.
  • Once you have this information, you can understand what your business is worth.
  • The market approach is a great way to get a general idea of your business’s value.
  • Still, it’s important to remember that every business is unique. Your business may have aspects that make it more or less valuable than the businesses described in the information you gathered.

2. The Income Approach

  • Like the market approach, the income approach looks at your business based on cash flows.
  • But this method compares your business’s net income to the net income of similar businesses that have been sold.
  • This approach is useful because it excludes the price paid and focuses purely on the business’s ability to generate cash.
  • To use the income approach, you must gather your business’s gross and net income over a three-to-five-year period.
  • You must divide this number by the price received in similar sales to determine a percentage.
  • This percentage can then be used to determine the value of your business.

3. The Asset Approach

  • The asset approach focuses on the value of the business’s physical and intangible assets.
  • This approach compares the value of the assets to the value of similar businesses that have been sold.
  • It’s important to remember that the asset approach to valuing a business can be used differently.
  • For example, some firms include operating and non-operating (or inventory) assets, while others only include operating assets.
  • To establish your business’s fair market worth, add all its assets and deduct any liabilities.
  • This gives your company’s net asset worth a decent starting point for evaluating fair market value.
  • Using the asset approach to value your business requires a few considerations.
    • First, to only include assets owned by the business.
    • Second, some assets may be evaluated at their current market value, while others are determined using historical costs (initial depreciation).

 

A good accountant can advise you on the best method to use.

The most important thing to remember when valuing your business is that there is no one-size-fits-all answer.

Every business is unique, and there are a variety of factors that can affect its value.

However, by understanding the different valuation methods and using them to assist in your decision-making, you can arrive at a fair and accurate estimate of your business’s worth.

Every business is different, and as such, the difficulties that you face will vary. We offer video consultation via Lawyer Anywhere and can help you navigate the ups and downs of running your own company.

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Singapore Capital Markets Services (CMS) Licence Made Easy

Sail Through Singapore's Capital Markets with Ease

Singapore is the only Asian country with a “AAA” rating from all 3 major credit rating agencies – Standard & Poor’s, Moody’s and Fitch.

This strong credit rating has enabled Singapore to become an international financial centre and one of the leading global financial hubs, with a whole of international banks setting up head offices and regional headquarters in Singapore.

The key to Singapore’s success is the robust regulatory framework in place for the financial services industry.

The industry’s primary regulator is the Monetary Authority Singapore (MAS).

All financial institutions operating in Singapore, including banks, insurance companies, stockbrokers, and fund managers, must be licenced by the MAS.

Businesses wishing to conduct regulated services under the Securities and Futures Act (SFA) must obtain a Capital Markets Services Licence (CMS licence).

The regulated activities are:

  • Dealing in Capital Markets Products
  • Advising on Corporate Finance
  • Fund Management
  • Real Estate Investment Trust Management
  • Product Financing
  • Providing Credit Rating Services
  • Providing Custodial Services for Securities

To obtain a CMS licence, you must fulfil the following requirements.

1. Services Provided / Target Clientele

When you are planning to start a business in the financial industry, there are 3 main issues you must consider.

  • First, you must determine which markets (regulated activity) your business falls under.
  • Second, you must evaluate the expected assets under management (AUM).
  • Third, you will need to determine who are your target clientele.

2. Company Structure and Office Space

  • Your business entity must be structured as a company incorporated under the laws of Singapore.
  • You should ensure that the business entity must have a permanent physical office in Singapore that is dedicated, secure and accessible only to your directors and staff. 

3. Company Personnel

  • To protect and safeguard the interest of investors, the MAS requires that key personnel in the company, such as the shareholders, CEO, directors, and employees are “fit and proper” and possess the experience and track record to carry out the regulated activity.
  • It should be noted that the experience of investing one’s own money is not relevant. 

4. Company Financial Standing

  • To ensure that the company is committed to the long-term sustainability of the business, the MAS requires the company to meet specific financial requirements, namely base capital and risk-based capital requirements.
  • Accordingly, any CMS licence holder company should have a reasonable amount of additional capital buffer it needs, bearing in mind the scale and scope of its operations.

5. Company Compliance Arrangements

  • The key objective of the MAS regulatory framework is to ensure that financial institutions conduct their business with integrity and prudence and are appropriately supervised to minimise the risk of harm they may pose to the financial system and the economy.
  • The MAS also ensures that financial institutions offer high consumer protection and service.
  • To ensure that the CMS licence holder companies conform with regulatory requirements, the MAS requires them to implement a compliance structure appropriate for their operations’ size, complexity, and nature and a practical framework for managing risks.
  • The CMS licence holder companies also need to have in place a robust internal audit and an anti-money laundering framework to discover, assess, comprehend, and manage its money laundering and terrorism funding threats.

6. Internal Audits

  • The MAS expects all CMS licence holders to undergo adequate internal audits.
  • The definition of “adequate internal audits” takes into account the scale, nature, and complexity of the licence holder’s operations.

7. Independent Annual Audits

  • Where applicable, CMS licence holders are subjected to annual audit requirements.
  • Such audit arrangements should commensurate with its operations’ scale, nature and complexity. 

CMS Licence Application Timeline

  • Stringent requirements must be met before any company can be granted a CMS license in Singapore. 
  • The business model determines the MAS’s timeline for reviewing, processing, and approving any CMS licence application.
  • For example, it would take at most 4 months for straightforward cases where the applicant meets all required criteria and the documents submitted are in order.
  • The CMS licence has an indefinite validity period as long as the holders comply with ongoing obligations such as payment of annual licence fees and continued compliance with conditions, rules, and directions set out by the MAS. Any non-compliance can result in the CMS licence being suspended or revoked.
  • The list of all CMS licence holders in Singapore can be found in the Financial Institution Directory on the MAS website.
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What Is A Family Office & Why It’s Smart To Have One

Family Offices : Why You Need One

The family office market is one of the fastest-growing segments in the wealth management services industry. However, despite the growth, the industry is often misunderstood, with many people believing it to be either a small niche business or a differentiating factor for the ultra-high-net-worth.

The idea of a family office is nothing new. Royal families have been establishing them for decades to manage the financial affairs of the royal household and their real estate holdings.

Meanwhile, billionaires have also been setting up family offices to handle the operation and management of their financial assets.

But more recently, affluent individuals, far from being billionaires, are also establishing them.

1. What Is A Family Office?

The definition of a family office varies, but Forbes says it’s “a private office that handles the financial and personal affairs of high-net-worth families.” Additionally, the family office tends to be private and insulated from public relations. It’s typically mission-based, highly confidential, and takes on personal tasks that ensure the wealthy family would not be exposed to public scrutiny.

 

2. What Are The Purposes Of A Family Office?

As the responsibilities of a family office vary from one to another, it’s safe to state that there is no standard set of duties. A family office typically takes care of:

– Ensures tax efficiency of the estate by planning distributions from inherited investment

– Consolidates and integrates financial activities of the family members

Rather than letting each family member manage their wealth, a family office can consolidate all the related activities and businesses. This includes investment management, accounting, tax planning, insurance, and philanthropy. Of course, the family office might still work with external advisers for some related activities, but the family office coordinates all the activities.

 

– Helps to insulate the family from inappropriate business and personal entanglements

The family office can be involved in all the financial and business transactions of the family. As a result, it can prevent unwanted deals by screening them beforehand.

– Provides professional management of family commercial and real estate holdings

A family office can oversee the management of dairy farms or vineyards. It can also be involved in the day-to-day operations of a luxury hotel. A family office can also manage non-family-owned companies (e.g. corporate startups) or even charities.

– Provides a central location for coordinating family information

Family members who delegate their business and personal affairs to a full-time family office will enjoy having a one-stop shop for their many requirements. This can include managing emails and maintaining confidentiality regarding their matters.

– Provides security and safety for the family

This includes providing safekeeping for valuables and precious documents, as well as monitoring the health of family members.

– Offers complete infrastructure and basic human needs for family members  

This includes providing health insurance, managing travel, arranging educational opportunities for children, and so forth.

 

3. Why Create a Family Office?

Family offices are excellent for managing wealth and holding it within a family circle.

They are not meant to serve the entire spectrum of personal, discretionary, and non-discretionary affairs.

Those who need comprehensive estate-planning services should look for a full-fledged office suite consisting of a lawyer, accountant, and broker-dealer.

 

4. Key Roles of a Family Office

Trustee
  • Discretionary trusts are those wherein beneficiaries can petition the trust maker for funds—for any purpose.
  • However, non-discretionary trusts are set up so that the beneficiaries are only entitled to receive funds upon the trust maker’s death.
  • This is where a family office comes in handy.
  • Since families tend to be protective of their wealth, they can ensure that subjects don’t have access to the trust funds until they are proven worthy.
  • Family offices act as trustees of discretionary trusts for external stakeholders.

Investment Agent

  • Certain families feel brokers and financial advisers are not catering to their needs. 
  • Some want to invest in obscure funds or markets that are off-limits to the general public.
  • Others want to hold onto certain assets.
  • Family offices act as investment agents for the assets in question in these cases.

Directional Guidance

  • Even though heirs are legally entitled to receive the trust funds at the time of the trust maker’s death, discretion can be used in guiding them.
  • For example, the contingent-inheritance scheme may dismiss children from previous marriages.
  • Similarly, the family office may approve or reject future spouses (by Will).
  • This allows them to approve or reject future beneficiaries quasi-judicially.

 

Business Owner Shielding

  • Some high-net-worth families use family offices to shield their business assets from future entrepreneurs looking to claim them.
  • Children are not savvy enough to run a profitable business, so the family office assists in vetting.
  • This allows families to choose the entrepreneurs who will run the companies in question in the event of the trustee’s death.

 

Families come in all shapes and sizes, just like family offices.

As such, there can be no template for family office structures since they are tailored to the priorities and facts of each family.

The creation of a family office usually takes place when a considerable amount of wealth has been created.

The nature and function of the family office are generally set out by its founder with a specific purpose in mind.  The services of the family office can change over time, as the family grows in size or as the family’s needs change over generations.

The key function of the family office never changes – it is there to preserve the family’s wealth. 

The best family office is the one that achieves the family’s objectives and visions.

When protecting your family, it’s vital to get the right advice. If you’re not sure whether you need to appoint a fund management company or MFO or even to set up your own SFO, speak to us over video consultation via Lawyer AnywhereWe can discuss your needs and recommend the best solution for you.

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Home-Based Businesses Need Contracts Too!

Essential Legal Advice for Home-Based Businesses

With the development of technology, it is now possible to have a home office that is just as functional as a traditional office.

There are several benefits to working from home, including lower overhead costs, greater flexibility, and less stress. In addition, a home office can be a great way to get some work done while caring for children or pets.

If you are a business owner who operates out of your home, you need contracts too!

Need For Contracts

  • Working from home doesn’t mean you don’t need contracts.
  • On the contrary, you may need them even more because of the lack of formal structure. 
  • A contract can help protect both the business and the client.
  • A contract also helps to establish clear expectations and guidelines for the work to be done.

Need For Systems

  • A well-run business is systematic.
  • The formal agreements will help you systematise your business.
  • However, many home-based business owners need help to develop dependable systems for running their businesses. They may think they can wing it because they are away from an office. But that’s not how a business should be run.
  • A well-run business has systems in place for every aspect of its operation. This includes marketing and sales, customer service, and financial management.
  • With these systems in place, you can depend on your business to run smoothly, no matter the challenges.

Need For Formal Agreements

  • This begins with formal agreements with your employees, customers, and other key stakeholders.
  • By putting these agreements in writing, you are setting the stage for a more successful business.
  • The formal agreements help avoid costly lawsuits.
  • The correct contracts can help you collect what you’re owed.
  • So, what are these legal agreements?

Must Have Agreements For Home Based Business

There are a variety of different contracts that you may need for your home-based business.

However, the MUST-HAVE agreements for home-based businesses are as follows:-

Service Contracts

Service Contracts ensure that the service provider and recipient understand what is expected of each party. This can help to avoid misunderstandings and disputes.

Key details to be included in Services Contracts are:

    1.   the services to be provided,
    2.   the price, the payment schedule,
    3.   the cancellation policy, 
    4.   the dispute resolution process.

Sales Contracts

Sales Contracts set expectations for both the buyer and the seller, and document the purchase or sale of goods or services.

Key details to be included in a Sales Contract are:

    1. The names and addresses of the parties to the contract.
    2.   The date of the contract.
    3.   A statement of the parties’ intent to enter into a contract.
    4.   The subject matter of the contract.
    5.   The price and terms of payment.
    6.   The delivery date and method of delivery.

Employment Agreement

  • No business succeeds without help from loyal and dedicated employees. 
  • An Employment Agreement aims to set out the terms and conditions of an employee’s relationship with their employer.
  • This includes an outline of the compensation that the employee will receive, as well as any benefits that they are entitled to.
  • In addition, the employment agreement can provide a non-competition clause that prevents the threat of direct competition by a departing employee.
  • Having an employment agreement in place is essential, as it can help clarify the expectations and roles of both the employee and the employer.

Partnership Agreement

  • A Partnership Agreement is a MUST-HAVE document if you run your business with your partners.
  • The most common dispute between partners is when a partner wants to “exit” the company.
  • The Partnership Agreement establishes the rules and procedures for partners to exit the business.
  • By having a Partnership Agreement in place, both partners and the business can operate with a clear understanding of the rules governing such exit.
  • This can help to avoid disputes and disagreements between shareholders.
Home-based businesses can be a great way to gain more control over your life.

Still, it’s essential to realise that much work goes into running a successful business from home.

Having a home-based business is a lot like having any other business. It needs to be systematic to be successful.

The formal agreements with customers and suppliers can help you systematise your business and make it more successful.

With the proper planning and execution, your home-based business can be a great success.

Need assistance on how to draft contracts for your Home-Based Business? Skip the hassle of waiting to make an appointment with a lawyer. We offer video consultation via Lawyer Anywhere so that you can get the help you need. Contact us today to get started.

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EAMs – A New Breed of Wealth Professionals

EAMs: Meet the New Breed of Wealth Professionals

Before the global financial crisis in 2008, external asset managers (EAMs) were virtually unheard of in Singapore, despite being well established in Europe.

With the growth in wealth in Asia and the decrease in trust from the big banks due to the financial crisis, the ultra-high-net-worth (UHNW) clients realised that they needed someone:-

  • whom they could trust;
  • who understood the bank;
  • who would protect their interests;
  • who would work with no conflict of interest; and
  • who are independent and transparent in their dealings.

Given the demand of these UHNW clients who need alternative solutions for managing their monies, EAMs quickly emerged and eventually became ubiquitous.

Who Are EAMs & What Do They Do?

EAMs are usually

  • small and tight-knit organisations
  • staffed by experienced ex-private bankers (with a long tenure and proven track record)
  • who generally moved because they were tired of pushing non-sustainable products to their clients or were looking for a better work-life balance. 

As a result, EAMs operate differently from private banks; they tend to be leaner and more agile and are more competitive on pricing.

 

Custody of Assets

People might hesitate to entrust their assets to an EAM because they are concerned about safeguarding their assets. They are worried about whether their assets will be safe in an emergency.

The most significant advantage of an EAM is that:

    • EAMs do not and cannot hold assets in custody like a bank. 
    • As such, the clients do not have to deal with the hassle of moving their assets from their current bank. 
    • They are assured that their assets stay safe and that all asset management is handled by the EAM exclusively.

Independent Advisers

  • EAMs are not employed by banks but are employed by their clients.
  • They are independent of the bank and are not pressured to meet product sales targets. 
  • They offer flexibility and personalised client services. 
  • They are not pressured to meet targets for selling “the bank’s products”. 
  • They can provide products and services from a wide range of service providers and propose a more flexible investment plan that fits their client’s portfolios.

Bespoke Service

  • EAMs provide more than just investment advice.
  • They provide bespoke services based on their client’s profiles and demographics. 
  • UHNW clients seek for more than investment advice; they want to be treated as individuals with unique needs and demands.
  • Many EAMs also offer tax consultations, legacy planning and real estate planning.

Collaboration With Private Banks

  • While the EAMs can pivot faster to changing market conditions than the private banks, they are not a substitute for private banks.
  • Instead, the EAMs are intermediaries between the wealth holder and investment avenues.
  • The EAMs rely on the banks’ expertise and resources to act as custodians, the relationship between the EAMs and the private banks is more collaborative than competitive.

Growth Of EAM Industry

 

The robust regulatory framework for the financial services industry is the key to Singapore’s placement as one of the leading global financial hubs. The regulatory framework in Singapore is designed to protect investors and consumers and consists of three main pillars:

(1) a robust legal framework,

(2) solid regulatory institutions, and

(3) an effective enforcement regime.

As such, while the EAMs do not have to comply with stringent regulations like the banks, they are also subject to similar ever-changing laws.

In 2009, around 80 asset managers in Singapore had assets under management of S$864 billion.

In 2015, the Monetary Authority of Singapore (MAS) reported 625 registered & licensed assets managers in Singapore, collectively managing around S$2.6 trillion.

Despite the COVID-19 pandemic, in 2022, the number of registered & licensed asset managers in Singapore grew to 1,313, and the assets under management (AUM) grew to S$4.7 trillion.

The financial crisis has opened the door to a whole new era of specialists who are knowledgeable and experienced in their field.

Now individuals and organisations can fully believe in the flourishing external management sphere.

The growth does not end here.

We should expect at least another decade of expansion for the external management sphere.

Setting up an EAM can be a daunting task. We offer video consultation via Lawyer Anywhere so that you can get the help you need. We can walk you through the process and answer any questions. Contact us today to get started.