Alpadis Group Labuan’s New MD on the Twin Drive to Promote the Jurisdiction and Expand the Business

Alpadis Group is a Swiss-based business that delivers multi-jurisdictional corporate and bespoke private client services. It is headquartered in central Zurich and has a strong and growing presence in Asia through offices in Singapore, Hong Kong, Malaysia (Kuala Lumpur and Labuan) and Thailand. The Swiss firm was founded in 2005 by a small team of seasoned experts in wealth planning and remains independent and privately-owned to this day. Alpadis Group works closely with corporate clients, entrepreneurs, business owners, HNWIs, UHNWIs, and family offices. The specialists in the firm consist of seasoned and experienced experts, many of whom are members of national and international professional bodies, providing the full range of corporate services that ensure full compliance of the structures set up under their clients’ mandate and managed by Alpadis Group across different jurisdictions, as well as services to private clients to protect and consolidate their wealth and meet their goals. Hubbis had the opportunity to ‘meet’ with Ken Vui Chau, the recently appointed Managing Director for Alpadis Group’s Labuan office, from where the firm offers a range of services, including company formation, HR and payroll, corporate secretarial, licensing, accounting, and wealth planning. Chau joined Alpadis Group in 2017 as Head of Finance for the Labuan office and offered his insights into the Alpadis Group’s business in the region and into Labuan’s expanding range of offerings, many of which are today especially relevant to the needs of wealth market clients in Malaysia and further afield across Asia. Chau is determined to help boost both Labuan’s prominence and also the Alpadis Group brand and client base, thereby aiming to move into the top tier of names in the local industry.

Chau opens the discussion by explaining the rationale for Alpadis Group’s Labuan office, noting that Alpadis Group has had a presence in Malaysia and in Labuan since 2011 and holds a Labuan Trust Company Licence and a Fund Administration Licence.

He reports that the island of Labuan is strategically located near Asia’s main financial and business hubs including Hong Kong and Singapore and that the Labuan International Business and Financial Centre (Labuan IBFC) was set up in 1990 on the Island of Labuan, one of the three Federal Territories of Malaysia. Labuan IBFC has its own laws and regulations for financial activities carried out within this territory, separate from domestic Malaysian laws, and is regulated by a one-stop-regulator, the Labuan Financial Services Authority (LFSA).

Growing with expanding needs

“Since its inception,” he reports, “Labuan IBFC has evolved into a successful mid-shore jurisdiction serving the growing demands for business expansion and international financial services. A preferential tax regime, minimal foreign exchange controls, the absence of capital gains and withholding taxes, the availability of a multilingual and skilled local workforce and competitive operational costs are just some of the benefits of doing business in Labuan IBFC. Labuan has also become a very attractive hub for wealth management solutions, offering a number of vehicles to high-net-worth individuals to consolidate and protect their wealth, including private and charitable foundations.”

He explains that Labuan is also ideal within the Asia time zone, the costs and fees are reasonable on a global basis, and the regulatory environment is sufficiently robust to meet the demands of the lawyers and the clients.

Growing the range of expertise

Chau explains that the range of services offered through the Alpadis Group’s Labuan office is provided by a dedicated team of skilled and experienced professionals that will execute the setup and administration of the entity that suits client needs in full compliance with Labuan regulatory and tax requirements. “Our team will also advise on the most suitable vehicles for wealth planning purposes, aiming to optimise and protect your assets and investments for your family and future generations,” he comments.

Chau himself joined Alpadis Group in 2017 as Head of Finance for the Labuan office. Over the past three years, he has taken on a range of responsibilities, from managing the daily operations of the office to client servicing and business development, holding the position of Principal Officer and Trust Officer, both of which are regulated by Labuan Financial Services Authority (LFSA).

He started his career with KPMG before moving on to a variety of commercial industries in Kuala Lumpur and Labuan. He is a Certified Public Accountant from Malaysian Institute of CPA (MICPA), CPA Australia and the Malaysian Institute of Accountants (MIA), and is an approved Trust Officer regulated by Labuan Financial Services Authority (LFSA).

He has worked in London, Singapore, Switzerland and Malaysia, and has led teams and overseen regional operations in his past experiences. He is regularly asked to mentor and train younger team members and prides himself on making things happen and solving problems.

He offers more insights into the rationale for operating out of Labuan. He notes, for example, that Labuan forms part of Malaysia and so benefits from many Double Taxation Agreements (DTAs) Malaysia has signed with over 70 countries around the world. In addition, the jurisdiction offers separate tax legislation under the Labuan IBFC, further lowering the tax burden for certain entities.

Labuan was originally a no-tax regime, but nowadays, certain substance requirements must be met. “However, even today,” he reports, “Labuan still offers a jurisdiction with low tax for a wide variety of businesses, and are not subject to Bank Negara Malaysia, the Malaysian central bank, of the usual foreign exchange administration (FEA) regulations, allowing for a much easier movement of funds.”

White-listed by the OECD

“Labuan’s laws and regulations are also robust, pragmatic and transparent, adhering to all international laws and standards, and it is on the OECD ‘white list’ and is a member of several multilateral organisations focused on the development and regulation of international financial centres,” he explains. “When new regulations emerge, Labuan often seeks a business-friendly approach. For instance, following increased substance requirements, many offshore jurisdictions have imposed requirements, even on licensed entities. Labuan, however, while still adhering to international rules, has taken a more flexible approach by allowing an alternative, where an election is allowed to be taxed under the domestic Income Tax Act 1967 (ITA). The ITA does not impose any substance requirements, although the tax rates are higher.”

Broadening the solutions

He explains that the legal framework of Labuan IBFC allows for a wide range of companies and entities to be formed in order to cater to a variety of regional and international needs. Entities that can be created include companies limited by shares or by guarantee, protected cell companies, limited liability partnerships, private and charitable foundations, special purpose trusts, private trust companies and more.

“The result,” he states, “is a jurisdiction that contains a wide and diverse array of companies that are used for a number of services including asset holding, banking and insurance, including captive insurance,  business and fund management, among other areas. Labuan IBFC is also continuing to attract newer industries, with over 30 FinTech companies present in Labuan and a growing insurance industry with USD1.5billion in gross written premiums in 2019.”

Appeals for the wealth management community

Chau zooms in on the world of wealth management and the relevance of Alpadis Group in Labuan to the broader group offering. Labuan, he says, is a very attractive hub for wealth management solutions, offering a number of vehicles to high-net-worth individuals to consolidate and protect their wealth, including private and charitable foundations. Labuan has a preferential tax regime and no foreign exchange controls, among other benefits.

Corporate tax ranges from 3% to 24%, depending on the applicable tax rules for a Labuan entity. The jurisdiction has a tax exemption (subject to compliance with substance requirements) for “non-trading” activities, such as holding companies and investment vehicles. There are no taxes on capital gains (subject to compliance with substance requirements)no withholding taxes on dividends, interest, management fees, royalties and technical fees, Sales and Service Tax is not applicable for transactions within Labuan and between Labuan and abroad.

Foundations for success

He offers more detail on Labuan Foundations, which have become more popular in recent years. Labuan Foundations are corporate bodies that exist as legal entities, set up to manage their own property for any lawful charitable or non-charitable purpose. There are also Labuan Islamic foundations, whose operations must be in compliance with Shariah principles.

“Labuan Foundations are ideal for wealthy individuals, families, companies and non-profit organisations who wish to control their assets and business while enjoying legal protection,” Chau reports. “Typically, Labuan Foundations are used for asset protection, charitable purposes, business succession, wealth management and other legal activities.”

Wide appeal

He adds that oversight requirements vary depending on the type of Foundation, with Family Foundations (used for private succession planning) subject to minimal oversight and Charitable Foundations subject to more oversight and reporting requirements. “For Charitable Foundations that accept money from the public, there is more oversight, and they are required to be audited and have regular reporting requirements,” he notes.

He also highlights how one of the main benefits of a Labuan Foundation is the fact that foreigners are able to form a Foundation alongside foreign founders, management, beneficiaries and with assets from around the world. Furthermore, the names of the founders, beneficiaries, council members and officers who are lodged with the Registrar of Companies (ROC) of Labuan FSA, are not available to the wider public.

A Labuan Foundation takes two to three weeks to establish, though the preparation and drafting of the main documents before the establishment of the Foundation may take longer, depending on its complexity.

“They provide considerable protection, with all assets owned by the foundation can generally not be seized by creditors of the founders and beneficiaries,” Chau comments. “And for succession planning, Labuan Foundations allow wealthy individuals to pass on their assets to the next generation sheltering them from inheritance and other laws.”

Chau notes that the Foundation is a lead product to market to clients currently. “. “It is an excellent product for wealth management or succession and next generation planning. This is especially useful for families that are spread across the globe, with members and assets all over, and this includes wealthy expatriates who own businesses in this region. With a Labuan foundation, there is full protection of the assets, because these are housed in a totally ring-fenced legal entity.”

Philanthropic goals

There are other key areas in which Labuan offers relevant solutions from a wealth structuring perspective. Chau reports that one area which is gaining attention though still not widely used or recognised, especially in Asia, is Philanthropic Structuring, which he says is useful for the wealthy clients who are interested in philanthropic activity, and he notes that Asia’s billionaire population is projected to grow by 27% between 2018 and 2023, outpacing Europe and North America. “However, thus far, it would appear Asia is lagging behind - the 2018 “Doing Good Index” by the Centre for Asian Philanthropy and Society (CAPS) suggests that Asian philanthropists are giving far below their actual capacity.”

Digital days ahead

Chau also points to Labuan’s forward-thinking strategies. He reports, for example, that Labuan is promoting digital financial services with the launch of digital banking framework by LFSA in December 2020. “This adds further to the variety of financial products which the jurisdiction is already offering,” he comments. “Digital-related business is a key growth area for Labuan IBFC, and the island is taking steps to further cultivate this business for the jurisdiction to cater for the digital Asian future. In fact, in the first half of 2020, Labuan International Business and Financial Centre (Labuan IBFC) approved 46 Digital Financial Services operators – a record number for the territory.”

Key Priorities

In his new role as MD of Labuan, Chau’s first priority is business development. “I need to grow the portfolio, to move up from a mid-tier company to one of the bigger players. When at a more prominent level in the industry, it helps with branding, client generation and so forth. Clearly, we have the capabilities to become a top tier player here, so that is what we are shooting for. We have a team of nine here now; that has been fairly constant for some years, and we are now keen to expand that significantly as we build more clients.”

His second priority is to align the quality of service, efficiency and client centricity to those goals, by further building in-house expertise and bringing in new talent where required.

Shining a light on Labuan

“There are many around the world who are not so familiar with what Labuan offers, so the regulators and everyone here are always eager to promote the jurisdiction,” he explains. “The original intention of course back in 1990 was to add another dimension to the capital markets of Malaysia and offer an alternative offshore jurisdiction, or more mid-shore these days in many ways. Labuan was actually one of the earliest to enter the market, offering conventional types of products initially such as the Labuan company, the trusts, and over the years now offering more products other than the usual banking and insurance, so we have foundations and other structures, we have money broking, we have moved into the FinTech arena, and the island is promoting fund management. In short, there is now a long list of products we are able to offer to the wealth management industry in general.”

Chau concedes that Labuan’s history cannot match that of the Channel Islands, or even the Caribbean, but is optimistic about the future. “We are still young in terms of the maturity of regulatory risk framework, we are still a work in progress, but we certainly have advantages in this part of the world, as wealth accumulation is so robust and as there is rising demand for the products and solutions on offer here. But we do need to keep up the branding and promotion effort, individually and collectively.”

The final word

Chau closes the conversation by remarking that Labuan has indeed evolved significantly in the many years since he first went to work in Labuan in 1997, the year of the Asian financial crisis.

“The range of products and services has diversified very markedly, along with the broader Asian financial services industry at large,” he says. “And the market itself here has evolved dramatically in Asia; there is vastly more corporate and personal wealth today, and therefore a lot more demand within Malaysia and the broader region for Labuan’s offerings. The growth has been robust and there is plenty of potential ahead.”

Getting Personal with Ken Chau

Chau hails from Sandakan in the eastern part of the Malaysian state of Sabah, and then first went to work in Labuan in 1997. He started his career with KPMG before moving on to a variety of commercial industries in Kuala Lumpur and Labuan. He is a Certified Public Accountant from Malaysian Institute of CPA (MICPA), CPA Australia and the Malaysian Institute of Accountants (MIA), and is an approved Trust Officer regulated by Labuan Financial Services Authority (LFSA).

He has worked in London, Singapore, Switzerland and Malaysia, and has led teams and overseen regional operations in his past experiences. He is regularly asked to mentor and train younger team members and prides himself on making things happen and solving problems.

Chau is married with one daughter of 17 years old. Quiet time at home is spent reading on a wide variety of subjects, particularly business and investment related. “I thoroughly enjoyed the biography I read of Steve Jobs recently,” he reports. “And I also enjoy soccer, my favourite team being Liverpool, and some TV series, the most recent and one of the finest I have ever seen being the Queen’s Gambit on Netflix here.”