A Singapore private company can raise money from investors without a prospectus, but only if the offer fits an exemption in Part 13 of the Securities and Futures Act 2001 (SFA). The main routes are personal offers raising no more than S$5 million in any 12 months (section 272A), private placements to no more than 50 offerees in any 12 months (section 272B), and offers to institutional or accredited investors (sections 274 and 275). Each route bans advertising the offer. Get the route wrong and the company may have made an illegal public offer.
Why does a small company need to think about prospectus rules at all?
Founders often assume that prospectus rules only matter for an IPO. They do not. Under section 240 of the SFA, an offer of shares or debentures must be made in, or accompanied by, a prospectus registered with the Monetary Authority of Singapore (MAS), unless an exemption applies. “Securities” here covers shares and debentures of any company, including a two-person private limited company. A convertible note is generally a debenture. A SAFE, warrant or option over shares should also be treated as within the offer rules unless your lawyer confirms otherwise.
In practice, almost every private fundraising is structured to fall within an exemption. The real questions are which one, and whether the company can prove it complied.
A second limit sits in company law. Under section 18 of the Companies Act 1967, a private company’s constitution must restrict share transfers and limit its members to 50, not counting certain current and former employees. A fundraising that pushes the register past 50 members creates a separate problem, explained in our guide on what happens when a private company reaches 50 shareholders.
Which prospectus exemption fits your round?
The table below compares the exemptions most private companies use. MAS summarises the same routes on its page on offers of securities. The statutory conditions are detailed, so treat this as a map, not a substitute for checking the Act.
| Exemption | Who you can offer to | Main limit | Typical use |
|---|---|---|---|
| Small offers, SFA s 272A | Persons with a previous contact or professional or other connection with the offeror, or who previously indicated interest in offers of that kind | Total raised of S$5 million or less in any 12 months, aggregated with closely related offers; no advertising | Family, business associates, existing angels, a seed round from known contacts |
| Private placement, SFA s 272B | Any person, but no more than 50 offerees | 50 persons offered in any 12 months (counts people offered, not people who accept); no advertising | A targeted round where the amount may exceed S$5 million |
| Institutional investors, SFA s 274 | Institutional investors such as banks, insurers and licensed fund managers | Must genuinely be institutional investors | Venture debt, fund or corporate investors that qualify |
| Accredited investors and relevant persons, SFA s 275 | Accredited investors and certain other “relevant persons” | No advertising; conditions and resale restrictions apply | Rounds led by high-net-worth angels or family offices |
| Large-ticket offers, SFA s 275(1A) | Any person | Minimum consideration of S$200,000 per transaction (as summarised by MAS); no advertising | A small number of large cheques |
How does the S$5 million small offers exemption work?
Section 272A covers “personal offers”. MAS’s Guidelines on Personal Offers explain that a personal offer is directed at a pre-identified individual or entity, made personally by the offeror or someone acting for it, and can be accepted only by the person to whom it is made. It should be made discreetly, without mass solicitation, advertising or canvassing.
The person must be likely to be interested in the offer because of previous contact, a previous professional or other connection, or a previous indication of interest in offers of that kind. MAS gives family members, controlling shareholders, directors, management and business associates as examples of qualifying connections. People with only social or casual relationships with the offeror or its directors do not qualify, because they are unlikely to know the business well enough to invest without a prospectus.
The S$5 million cap is measured on funds raised within any rolling 12-month period. Under section 272A(5), the company must aggregate amounts raised under the small offers exemption from offers of the same entity’s securities and from closely related offers. Splitting one round into two “tranches” a few months apart does not reset the count.
How does the 50-person private placement exemption work?
Section 272B has no dollar cap. Instead, the company may make offers to no more than 50 persons in any 12 months. MAS’s guidelines on aggregation stress that the limit is on offerees, not on the investors who accept. If you send a term sheet to 60 people and only 12 invest, you have made offers to 60 people and you are outside the exemption. Closely related offers must also be counted together.
Informal fundraising goes wrong here: a deck circulated to a chat group or mailing list can reach far more offerees than the founder realises.
Who counts as an accredited or institutional investor?
Institutional investors under section 274 are entities such as banks, insurers, licensed capital markets firms and certain government bodies. Most private angels are not institutional investors.
For an individual, accredited investor status under section 4A of the SFA broadly turns on one of three tests: net personal assets exceeding S$2 million (with the primary residence counted only up to S$1 million after deducting any loan secured on it), net financial assets exceeding S$1 million, or income in the preceding 12 months of not less than S$300,000. Corporate accredited investor tests are different. Do not accept an investor’s own description of themselves as “accredited” without evidence. Ask for a signed declaration and supporting information, and keep it on file.
What counts as advertising the offer?
All of the exemptions above are lost if the offer is accompanied by an advertisement making the offer or calling attention to it. MAS’s Guidelines on the Advertising Restrictions in Sections 272A, 272B and 275 make several practical points:
- Communications should go only to persons who qualify under the exemption being used, and be confined to factual information about the securities and the business.
- A letter or email to qualified persons containing factual information does not breach the restriction by itself.
- Statements of opinion such as “an outstanding opportunity” or promises of multiples on your money are not factual information.
- Posting on social media, a public website or an open forum that a company is raising funds is likely to call attention to the offer, even if the details sit elsewhere.
A founder can still talk publicly about the business. What the founder must avoid is publicly signalling that shares or notes are available to buy.
Can you raise through a crowdfunding platform instead?
Securities-based crowdfunding platforms that intermediate offers of shares or debentures must be licensed by MAS, typically as capital markets services licence holders. Offers on these platforms usually still rely on the small offers, private placement or accredited investor exemptions. MAS’s advertising guidelines explain that an unrestricted platform, where anyone can see live deals, does not comply with the advertising restriction, while a restricted platform that shows deals only to logged-in qualified persons can comply if it provides factual information only. A platform may publicise its own services and completed deals, but not a deal that is still open.
Before using any platform, check that it appears on the MAS Financial Institutions Directory. If someone offers to market your round to the public for a success fee without a licence, walk away. Our article on being placed on the MAS Investor Alert List explains why regulatory attention is hard to undo.
What should founders do before sending a term sheet?
- Choose the exemption first. Decide whether the round is a small offer, a private placement, an accredited investor round or a combination, and record the decision in a board paper.
- Build an offeree log. Record every person who receives a term sheet, deck with terms, or subscription agreement, with the date and the exemption relied on. Include offers made in the previous 12 months.
- Check each investor’s eligibility. For small offers, note the prior connection or indication of interest. For accredited investors, obtain declarations and evidence.
- Control communications. Keep the deck factual, mark it as confidential and addressed to named recipients, and stop any public posts about the raise.
- Check company law limits. Count members after the round against the 50-member limit, and check pre-emption rights and reserved matters in your constitution and any shareholders’ agreement veto rights.
- Get the corporate approvals. Shares can be issued only with shareholder approval under section 161 of the Companies Act, followed by a board resolution and a return of allotment lodged with ACRA.
- Keep the file. Retain the offeree log, eligibility evidence and every version of the offer documents. If MAS or a disappointed investor asks questions later, this file is your evidence.
Documents checklist for an exempt fundraising
- Board paper recording the exemption relied on and the reasons
- Offeree log covering the current offer and any offers in the previous 12 months
- Investor eligibility declarations (and accredited investor evidence where relevant)
- Factual information memorandum or deck, with version control
- Term sheet, subscription agreement or convertible note or SAFE agreement
- Shareholders’ resolution under section 161 and board resolution to allot
- Updated register of members, share certificates and the ACRA return of allotment
- Updated register of registrable controllers if any investor becomes a controller
For the secretarial steps when notes or SAFEs convert, see our checklist on closing a convertible note or SAFE round. Incoming investors may also follow our practical checklist for a new shareholder.
Example: a seed round that nearly broke the rules
Example: A food-technology company with three founder shareholders wants S$1.2 million. The founders plan to email their deck, which states the share price and calls the round “a rare chance to get in early”, to 120 contacts from a startup event, and to post on LinkedIn that “our seed round is open”.
Under the small offers exemption, many of those 120 contacts may have only casual relationships with the founders, so offers to them may not qualify as personal offers. Under the private placement exemption, 120 offerees is far above 50. The LinkedIn post and the promotional language risk breaching the advertising restriction under every route.
The founders instead identify 35 people with genuine prior business connections or a recorded interest in early-stage investments, plus four investors who provide accredited investor evidence. They rewrite the deck to factual content, send it individually, delete the post and keep an offeree log. The amount stays within S$5 million and the offeree count stays well within 50, so the company can rely on either exemption with a documented basis.
What happens if a company gets it wrong?
Making an offer that requires a prospectus without one is a criminal offence under section 240(1) of the SFA. The Singapore Police Force has described the offence, read with section 331(1), as carrying imprisonment of up to two years, a fine of up to S$150,000, or both. Officers can also be liable personally. In Public Prosecutor v Tan Seo Whatt Albert [2019] SGHC 156, a manager of a limited liability partnership that sold investment “memberships” without a prospectus was prosecuted for consenting to the offers. Investors who feel misled may also bring claims against the company and the people involved, and a botched raise often surfaces later during due diligence for the next round, when lawyers ask how earlier investors came in.
If you realise mid-raise that the offer may be outside an exemption, stop sending offer documents, preserve your records and take legal advice before accepting further money. Never backdate documents or reclassify investors after the event.
Frequently asked questions
Can I use both the small offers and private placement exemptions in the same round?
Different investors can come in under different exemptions, but each offer must fully satisfy the conditions of the exemption relied on. Aggregation applies within each exemption, so keep separate records showing which investors were offered under which route.
Do employees receiving shares count?
The SFA has a separate exemption for offers under employee share schemes, with its own conditions, so staff equity is usually not run through the fundraising exemptions. Section 18 of the Companies Act excludes certain employees and former employees from the 50-member count. Check both points separately before issuing shares to staff.
Is a pitch at a demo day an advertisement?
Describing the business is usually fine. Stating publicly that shares are available, at what price, or how to subscribe risks calling attention to the offer. Keep the specific terms for individual follow-up with qualifying persons.
Can a friend who invested under the small offers exemption sell the shares on?
A resale is itself an offer, so it needs its own exemption. MAS guidance explains that a buyer who acquired securities under the small offers exemption can use that exemption for a resale only after six months, unless another exemption applies. Your constitution’s transfer restrictions also apply.
Need help with raising money from investors?
If your company, or you as a director or shareholder, is dealing with raising money from investors without a prospectus, contact the Raffles Corporate Services team at [email protected] or on WhatsApp at +65 8501 7133 or +65 9018 0072. We will help you understand the documents and deadlines. Where your matter needs a lawyer, we will refer you to a firm on our panel of Singapore law firms that regularly handles capital markets and private fundraising work. Raffles Corporate Services is a corporate services provider, not a law firm, and this article is general information, not legal advice.
The Raffles Corporate Services Editorial Team, Raffles Corporate Services