Statute Details
- Title: Finance Companies (Exemption from sections 23(1) and 25(2)) Regulations 2017
- Act Code: FCA1967-RG2
- Legislative Type: Subsidiary Legislation (SL)
- Current Status: Current version as at 27 Mar 2026
- Revised Edition: 2025 Revised Edition (17 December 2025)
- Authorising Act: Finance Companies Act 1967 (as reflected in the extract)
- Key Provisions: Regulation 2 (Definitions); Regulation 3 (General exemptions); Regulation 4 (Specific exemptions)
- Primary Exemptions Granted: Exemptions from specified restrictions in sections 23(1) and 25(2) of the Finance Companies Act 1967
What Is This Legislation About?
The Finance Companies (Exemption from sections 23(1) and 25(2)) Regulations 2017 (“Exemption Regulations”) is a targeted regulatory instrument that allows certain finance companies in Singapore to carry on specified banking- and payments-adjacent activities without being fully constrained by particular prohibitions or licensing-style limitations found in the Finance Companies Act 1967.
In plain language, the Regulations recognise that some finance companies—particularly those with established corporate customer bases—may need to offer practical services such as cheque-related current account facilities, certain foreign exchange and hedging-related arrangements (subject to limits), unsecured credit facilities for business purposes (subject to caps and exclusions), and modern electronic payments tools (including corporate purchasing cards and specified electronic funds transfer channels). Rather than requiring a separate regulatory pathway for each activity, the Regulations provide exemptions, but only within carefully defined boundaries.
The scope is not universal. The exemptions are granted to specific named institutions (Hong Leong Finance Limited, Sing Investments & Finance Limited, and Singapura Finance Ltd for the “general exemptions”, and Hong Leong Finance Limited for the “specific exemptions” in the extract). The exemptions are also conditional: they are limited by quantitative thresholds (for example, foreign currency exposure and unsecured credit limits), by restrictions on certain risk-taking behaviours (for example, no foreign exchange trading for own account), and by exclusions for connected parties (for example, directors and certain related entities).
What Are the Key Provisions?
1) Definitions (Regulation 2)
The Regulations define key terms used throughout, including “approved exchange” (linked to the Securities and Futures Act 2001), “business customer” (a customer type for the exempt finance company’s activities), and several instruments and concepts such as “cheque”, “credit card”/“charge card”, and “foreign exchange trading”. These definitions matter because the exemptions are drafted around precise activity descriptions. For example, “foreign exchange trading” is defined to include entering into or offering to enter into contracts or arrangements that exchange currency at an agreed rate (including settlement mechanics) or that settle differences based on an agreed currency index at a future time. This definition is central to the condition that the exempt finance company must not carry on foreign exchange trading for its own account.
2) General exemptions for specified finance companies (Regulation 3)
Regulation 3 is the core provision granting exemptions. Subject to paragraphs (2), (3) and (4), the named finance companies are exempt from:
- Section 23(1)(a) in respect of opening current accounts with facilities for (i) issuing cheques by any business customer, (ii) payment of cheques drawn on the finance company by any business customer, and (iii) collection of cheques drawn by any business customer.
- Section 23(1)(b) in respect of specified activities, including hedging/covering/changing foreign currency liabilities or entitlements for business customers (with currency-direction limits), financing the purchase of assets in foreign currency, and financing foreign currency denominated invoices under factoring and accounts receivable financing.
- Section 23(1)(f) in respect of unsecured advances, unsecured loans or unsecured credit facilities granted for purposes relating to the person’s business.
- Section 25(2) in respect of issuing corporate purchasing cards and providing electronic funds transfer services using specified rails/systems (interbank GIRO, FAST, or electronic funds transfer at point of sale network systems).
3) Conditions attached to the foreign exchange-related exemption (Regulation 3(2))
The exemption for the hedging/covering/changing foreign currency arrangements and related financing under Regulation 3(1)(b) is conditional. The key conditions in paragraph (2) are:
- Foreign currency exposure cap: the aggregate amount of foreign currency exposure must not exceed 10% of capital funds.
- No own-account foreign exchange trading: the exempt finance company must not carry on foreign exchange trading for its own account.
- Unhedged foreign currency exposure cap: the aggregate amount of foreign currency exposure not hedged must not exceed $500,000.
Practically, these conditions are designed to ensure that the exemption supports customer-facing hedging and financing needs rather than enabling speculative foreign exchange activity. A practitioner should treat these as ongoing compliance obligations: exposure and hedging status must be monitored, and internal risk limits should be aligned with the statutory thresholds.
4) Conditions and connected-party exclusions for unsecured credit (Regulation 3(3) and (4))
The exemption for unsecured advances/loans/credit facilities under Regulation 3(1)(c) is also subject to strict quantitative limits and exclusions.
Quantitative limits (Regulation 3(3))
- Overall unsecured credit cap: the aggregate and outstanding unsecured advances/loans/credit facilities must not exceed 15% of capital funds.
- Per-person cap (aggregate and outstanding): unsecured facilities granted to any person or body of persons must not exceed 0.5% of capital funds at any one time.
Exclusions (Regulation 3(4))
Even if the quantitative caps are met, the exemption does not apply to unsecured facilities granted to a range of connected persons and entities, including:
- Directors of the exempt finance company (whether jointly or severally).
- Firms in which the finance company or its directors have an interest as a partner, or where a director is a manager or agent.
- Individuals or firms for whom directors are guarantors.
- Companies where directors own more than 50% of issued capital or control the board composition (with carve-outs for certain listed public companies and their subsidiaries).
- VCC structures (both non-umbrella and umbrella VCCs) where directors own more than 50% or control the board composition for relevant sub-funds/units not listed on an approved exchange.
- Related corporations deemed related under section 6 of the Companies Act 1967 (other than a bank).
For legal advisers, these exclusions are often where compliance work concentrates: loan documentation, credit committee approvals, and beneficial ownership/control analysis must be structured to ensure that exempt treatment is not inadvertently claimed for connected-party exposures.
5) Specific exemptions for Hong Leong Finance Limited (Regulation 4)
Regulation 4 provides additional, more tailored exemptions for Hong Leong Finance Limited. In the extract, Regulation 4(1) exempts Hong Leong Finance Limited from:
- Section 23(1)(c) in respect of acquisition of foreign currency denominated stocks, shares, debts or convertible securities pledged by a customer as security for a loan, advance or credit facility.
- Section 25(2) in respect of certain business activities, including:
- providing corporate financial advisory services;
- underwriting the issue or sale of shares for companies listed (or intending to be listed) on an approved exchange;
- underwriting similar share issues for VCCs listed (or intending to be listed) on an approved exchange;
- marketing a “relevant service” provided by NIUM Pte. Ltd. either directly or under a co-branding arrangement using Hong Leong Finance Limited’s logo; and
- facilitating payments between users of the relevant services and NIUM Pte. Ltd. in connection with those services.
Although the extract truncates the remainder of Regulation 4, the visible text indicates that the Regulations are designed to accommodate specific commercial arrangements—particularly payments and distribution models involving third-party service providers (here, NIUM Pte. Ltd.). Practitioners should therefore read the full Regulation 4 text (including any definitions of “relevant service” and any further conditions) to confirm the exact boundaries of the exemption.
How Is This Legislation Structured?
The Regulations are concise and structured as follows:
- Regulation 1 (Citation): provides the short title.
- Regulation 2 (Definitions): defines key terms used to interpret the exemptions.
- Regulation 3 (General exemptions): grants exemptions to three named finance companies for specified activities under sections 23(1) and 25(2), subject to conditions and exclusions.
- Regulation 4 (Specific exemptions): grants additional exemptions to Hong Leong Finance Limited for particular activities, including corporate financial advisory services, underwriting-related activities, and NIUM-linked marketing and payment facilitation (as shown in the extract).
Who Does This Legislation Apply To?
The Regulations apply to the named finance companies identified in Regulation 3 and Regulation 4. For the general exemptions, the beneficiaries are Hong Leong Finance Limited, Sing Investments & Finance Limited, and Singapura Finance Ltd. For the specific exemptions shown in the extract, the beneficiary is Hong Leong Finance Limited.
Importantly, the exemptions are activity-specific. Even for a named finance company, the exemption only applies to the particular business lines described (for example, current account cheque facilities for business customers; hedging-related foreign currency arrangements within exposure limits; unsecured credit for business purposes within caps; and specified electronic funds transfer channels). The Regulations do not create a blanket permission to conduct all activities that might otherwise be restricted under the Finance Companies Act 1967.
Why Is This Legislation Important?
These Exemption Regulations are practically significant because they enable finance companies to offer mainstream corporate banking and payments functionality while remaining within a regulated perimeter. Without the exemptions, certain activities could be prohibited or restricted under the Finance Companies Act 1967, potentially requiring alternative structuring, licensing, or outsourcing arrangements.
From an enforcement and compliance perspective, the Regulations are also a clear example of “permission with guardrails”. The quantitative thresholds (10% foreign currency exposure; $500,000 unhedged exposure; 15% unsecured credit cap; 0.5% per-person cap) and the connected-party exclusions (directors, controlled companies, certain VCCs, related corporations) create measurable compliance targets. A practitioner advising a finance company should ensure that internal policies, credit risk frameworks, treasury limits, and beneficial ownership/control checks are aligned with these statutory parameters.
Finally, the specific exemptions for Hong Leong Finance Limited demonstrate that the regulatory framework can accommodate evolving fintech and distribution models—such as co-branding and payment facilitation with third-party platforms—provided the activity fits within the exemption’s defined scope and any additional conditions in the full text.
Related Legislation
- Finance Companies Act 1967
- Banking Act 1970
- Securities and Futures Act 2001
- Exchange Act 1949
- Futures Act 2001
- Companies Act 1967
Source Documents
This article provides an overview of the Finance Companies (Exemption from sections 23(1) and 25(2)) Regulations 2017 for legal research and educational purposes. It does not constitute legal advice. Readers should consult the official text for authoritative provisions.