There are a number of issues that should be considered when structuring a deal.
- Should it be a simple tiered structure?
- Should you establish an off-shore holding?
- How about investing through an SPV or using an equity or convertible loan investment?
- Are there regulatory restrictions?
Thailand is experiencing a significant increase in investments made by the corporate venture capital (CVC) arms of leading Thai companies. These companies operate in various sectors including financial institutions, telecommunications, real estate and petrochemicals. Many are large conglomerates.
The dominance of CVCs does not mean that there are no pure venture capital (VC) firms in Thailand. The Thai Venture Capital Association was established in 1994 to support the development of the VC ecosystem in Thailand. Currently, there are a handful of VC firms that are very active in the markets and their investments play an important role in growing Thailand’s VC industry. Aside from investment opportunities and market awareness that drive the growth of the sector, legal and regulatory development (or the lack of it) is also a key deal driver.
On March 1, 2016, amendments to the regulations on certain partnership-type funds in Japan, known as Special Exempted Business for Qualified Institutional Investors, etc. (“SEB” or Tekikaku Kikan Toushika Tou Tokurei Gyoumu), became effective. The amendments apply the Japanese suitability doctrine to previously exempt SEBs, limit target investors to sophisticated investors only and contain more onerous continuous disclosure and filing obligations, including an annual report.
Before the amendments, the SEB was a convenient option to target Japanese investors without requiring a securities business license to conduct business in Japan. Following the amendments the procedure to register the SEB is now similar to the more burdensome procedure for obtaining a financial instruments and exchange business license in Japan. The amendments also require existing SEBs to submit a new notification and attachment documents to the Japanese Financial Services Agency. As a result, existing SEBs must decide whether to abolish their business in Japan (i.e., stop marketing activities to Japanese investors and providing with investment management service to Japanese investors) or re-register under the new regulations. Many foreign fund managers previously relying on the SEB structure have chosen to abolish their business set up under the previous regulations.
On January 29, 2016, the amendments to the new regulations in relation to certain partnership-type funds in Japan, known as Special Exempted Business for Qualified Institutional Investors, etc. (SEB or Tekikaku Kikan Toushika Tou Tokurei Gyoumu) were approved at a cabinet meeting of the Japanese government.
The new rule for the SEB will be stringent. The amendments include transitional measures, under which entities utilizing the SEB before the effective date of the amendments will be required to submit certain documents and comply with certain disclosure and reporting obligations. The amendments will come into effect on March 1, 2016.
Under the amendments, certain obligations and business conduct restrictions (such as the suitability doctrine) applicable to a registered financial instruments exchange business operator will also be applicable to entities under the SEB. Target investors will be limited to certain sophisticated investors. However, certain obligations and business conduct restrictions will not be applicable to activities in relation to professional investors (tokutei toushika), including qualified institutional investors.