MEMBER FIRM OF BAKER & MCKENZIE INTERNATIONAL Financial Services and Regulation Kuala Lumpur Client Alert July 2015 The SC Calls for VC and PE Funds to Register On 9 March 2015, the Securities Commission (“SC”) issued the Guidelines on the Registration of Venture Capital and Private Equity Corporations and Management Corporations ("VC/PE Guidelines"). The VC/PE Guidelines supersedes the Guidelines for the Registration of Venture Capital Corporations and Venture Capital Management Corporations and Guidelines and Best Practices on Islamic Venture Capital. The SC had sought, through the VC/PE Guidelines, to streamline the regulation of conventional and Islamic venture capital funds and corporations ("VC"), and also extend its regulatory purview to encompass private equity (“PE”) funds and corporations. The New Guidelines set out the requirements that must be observed for the purposes of making available unlisted capital market products (e.g. wholesale funds) to sophisticated investors in Malaysia. With the introduction of the New Guidelines, the SC repealed, amongst others, the Guidelines on Wholesale Funds. A fund or corporation that manages the investment in securities of venture corporations for the purposes of seed capital financing, start-up financing or early-stage financing, i.e., a VC fund, and a fund or corporation that manages the investment in securities of venture corporations for the purpose of providing medium to long-term capital investment in the venture corporation; or financing to fund growth, development, business improvement or buy-outs of the venture corporation, i.e., a PE fund, are required pursuant to the VC/PE Guidelines to be registered with the SC. The SC has however clarified that registration applies only in respect of corporations who acts as investment managers or co-investment managers of a VC or PE fund. A VC/PE fund with an in-house management team is required to be registered with the SC while a VC/PE fund set up without an in-house management team is not required to be registered with the SC (as there is no performance of any management activity). The revised guidelines applies to any body corporate formed or incorporated or existing within or outside Malaysia (subject to certain exceptions) and includes any entity established under the laws of Labuan and limited liability partnership. Foreign corporations are not required to register if the VC or PE activity is performed outside Malaysia or if the foreign firm undertakes a VC or PE activity as a result of a reverse inquiry. The VC/PE Guidelines contain enhanced registration procedures for VC/PE funds relating to minimum capital requirements, the appointment of a suitably qualified and fit and proper responsible person, and fulfilment of the criterion that approval of the applicant would be in the "best interest of Malaysia." Going forward, a registered VC or PE fund would have to comply with stringent on-going obligations. This is in line with the intent of the SC of promulgating the VC/PE Guidelines - to support the evolving VC and PE industries, with a focus on facilitating an orderly development of the industries as a whole. www.wongpartners.com For further information please contact: Brian Chia +603 2298 7999 firstname.lastname@example.org Sue Wan Wong +603 2298 7884 email@example.com Level 21, The Gardens South Tower, Mid Valley City, Lingkaran Syed Putra, 59200 Kuala Lumpur ©2015 Wong & Partners. All rights reserved. Wong & Partners is a member firm of Baker & McKenzie International, a Swiss Verein with member law firms around the world. In accordance with the common terminology used in professional service organizations, reference to a "partner" means a person who is a partner, or equivalent, in such a law firm. Similarly, reference to an "office" means an office of any such law firm.