Examining the Legal Structures for Establishing a Fund Management Entity (FME) in IFSC
Forming a Fund Management Entity (FME) within the International Financial Services Centres (IFSC) is a complex process, considering the multitude of legal structures available. Understanding these available structures is instrumental in ensuring successful establishment and operation of your FME. To facilitate this, we dive deep into the unique legal forms available for setting up an FME in IFSC.
Formation Options for FMEs excluding Registered FMEs (Retail)
Fund management entities, excluding the Registered FMEs (Retail), have a host of structures they can adopt. Let’s take a closer look at these options.
Structuring as a Company
One of the forms an FME can take is that of a company. In this setup, the entity enjoys distinct legal existence and the liability of its stakeholders is limited. This legal structure is often favored for its robust legal framework, clearly defined operating procedures, and a distinct corporate identity.
Establishing as a Limited Liability Partnership (LLP)
Another structuring option for an FME is to be established as a Limited Liability Partnership (LLP). This structure provides operational flexibility alongside limited liability, making it an attractive choice for many entities.
Formation as a Branch of another Entity
In certain cases, an FME can also operate as a branch of another entity. Provided the parent entity is already registered and regulated by a financial sector regulator in India or any foreign jurisdiction, this form allows an FME to leverage the parent company’s credentials and operational guidelines.
Other Forms Approved by IFSCA
Additional forms may be permissible through approval by the IFSCA, providing unique and innovative options for structuring an FME.
Legal Structures for Registered FMEs (Retail)
Registered FMEs (Retail) can take one of several forms, each with its own implications and benefits.
Company Form
Just like its non-retail counterparts, a Registered FME (Retail) can also take on the structure of a company, ensuring a well-defined legal, liability and operational framework.
Branch Structure
A Registered FME (Retail) has the option to operate as a branch of a parent company. It reaps the benefits of pre-established credibility, relationships and protocols of the parent company.
Other Forms Approved by IFSCA
The IFSCA opens the possibility for a Registered FME (Retail) to assume other forms as permitted by its guidelines.
Can a FME launch multiple schemes
Yes. A FME may launch multiple schemes subject to filing of placement memorandum/ draft offer document along with the requisite fees with the IFSCA
Specific Regulations for Branch Structures
It’s important to note that the branch structure is allowed only for FMEs already registered and/or regulated by a financial sector regulator in India or overseas for conducting similar activities. These entities, if they operate under a branch structure, have to comply with specific prescribed conditions as detailed under Regulation 5 (2).
In summary, understanding the various legal structures available for establishing an FME is an important first step in the journey to successful formation and operation within IFSC. Whether moulding into the form of a company, an LLP, a branch of another entity or something yet undefined, the choices are plentiful. Making an informed decision that best suits your business model is essential to ensure seamless operation and compliance with the IFSCA’s requirements.
