Seychelles: Offshore Business Sectors
Investment Fund Management
The Government has created a mutual funds sector in the Seychelles, with the enabling legislation put in place in 1997. The regulations made under the Act provide for a modern regulatory system aimed at attracting international mutual funds promoters from around the world.
Funds may be established either as investment companies or unit trusts. In the case of investment companies, a wide choice of vehicles are available. All funds must have a registered office and a licensed administrator in Seychelles.
The Act provides for a licensing regime for mutual funds and mutual fund administrators under the Central Bank (this has since passed to the Non-Bank Financial Services Authority - see below). Licensed banks, insurance companies and International Business Companies are excluded from the operation of the Act. Applicants for licenses would need to be companies incorporated under the Companies Act 1972 or foreign companies which have registered under the Companies Act, or unit trusts.
An overseas mutual fund needs to have a local managing agent, or in the case of a unit trust, a resident trustee. The Act imposes prudential responsibilities on the Bank, and lays down some general principles for offering documents. A private mutual fund must have minimum paid-up capital of US$5m held by not more than 50 investors; a public fund needs authorised share capital of at least US$2m of which at least US$1m is paid-up (or issued and fully-paid in the case of a unit trust), or it can be listed on a recognised exchange.
Licensed mutual funds and fund administrators are exempt from taxes, including social security taxes.
In 2008, new legislation was introduced, in the form of the Mutual Funds and Hedge Funds Act 2008. For more information on this, see Law of Offshore.
Seeking to build on the success of the financial services industry, Seychelles’ Mutual Fund Act was redrafted in 2008 to plug gaps in the previous legislation. The redraft extended the powers of the regulator, introducing additional rights to request periodical audits, request information for inspection and grant powers to enter, search and take copies of any licensed operations and guaranteeing compatibility with international standards enforced by FATF, IMF, International Organisation of Securities Commission and Offshore Group of Insurance Supervisors.
“As with all areas of the financial services industry it is essential that we, as the regulator of the jurisdiction, achieve the appropriate balance in the legislation between providing local firms with the competitive advantage they require, at the same time as ensuring that it is a well regulated industry which conforms to the international standards required to maintain investors’ confidence,” explained Conrad Benoiton, the Director General of the Central Bank’s recently created Securities and Financial Markets division, which is responsible for the registration as well as regulating and supervising of non-bank business activities.
The redrawn legislation also allows expatriate employment levels of up to 50%, replicating existing regulations for the offshore sector, which have not negatively impacted upon the local labour market. The newly drafted legislation is also intended to bolster banking and legal services necessary for mutual fund operations.