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Founder & Consultant

Harry Elias, Senior Counsel Managing Partner

Philip Fong Partners

Pauline Lee Foo Siew Fong S Suressh Claudia Teo Tan Chau Yee Francis Goh Koh Tien Hua Andy Lem Justin Chia Chu Shi Quan Benjamin Leong Khoo Boo Han Khaw Gim Hong Ong Wei Jin Carrie Gill Sharmini Selvaratnam Adriene Cheong Toh Wei Yi Kevin Lim Yasmeen J. Marican Ivan Cheong James Lin Sunil Nair Esther Seow Consultants

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SGX Centre 2 #17-01 4 Shenton Way Singapore 068807 Tel : +65 65350550 Fax : +65 64380550 www.harryelias.com We do not accept service of court documents by fax

Harry Elias Partnership LLP (T10LL0175E) is registered in Singapore under the Limited Liability Partnership Act (Chapter 163A) with limited liability.

The contents of this letter are strictly confidential and may contain privileged information. This letter is intended for the sole use of the addressee. If you have received this in error, please contact us IMMEDIATELY. All reasonable expenses including postage and telephone charges will be borne by us.

Our Ref : 2016.013804.CT

Your Ref :

24 May 2016 Dear Sir LEGAL OPINION ON COASSETS PTE LTD IN RELATION TO THE LISTING OF COASSETS LIMITED (ISSUER) ON THE AUSTRALIAN SECURITIES EXCHANGE LIMITED (LISTING) The Issuer proposes to issue a prospectus in respect of the Listing (Prospectus), to be lodged with the Australian Securities and Investments Commission (ASIC) on or around 23 May 2016. The Prospectus relates to the offer (Offer) by the Issuer (via ASX CHESS), of up to 25,000,000 shares at an issue price of A$0.40 each to raise up A$10 million together with one free attaching option for every 2 shares subscribed; and up to 1000 shares at an issue price of A$0.40 together with one free attaching option for every 2 shares subscribed to raise up to A$400. King Park Corporate Lawyers have been appointed by the Issuer in connection with the Listing. We act as the Singapore counsel for the Issuer’s wholly owned subsidiary, CoAssets Pte Ltd (CoAssets Singapore), in relation to its current business model and the regulatory requirements that it is subject to in Singapore. In connection with this role, we have been asked to provide a legal opinion for the purposes of the Prospectus with respect to matters of Singapore law only (Opinion) on Section 8.2 of the draft Prospectus, circulated to us by Mr. Seh Huan Kiat of the Issuer via e-mail on 24 May 2016, timed at 11.34 am (Singapore time). This Opinion is subject to the assumptions and qualifications made hereinafter and as set out in Schedule 4. 1. SCOPE OF OPINION 1.1. We have been retained by CoAssets Singapore as Singapore counsel to advise on

the Singapore legal requirements that are relevant to the Issuer’s wholly-owned subsidiary in Singapore, being CoAssets Singapore, in relation to whether: 1.1.1. the current business model of CoAssets Singapore, as explained in

paragraph 2 and Schedule 1, involves: (a) securities and whether offers of securities are involved;

ATTENTION: COASSETS PTE LTD BY EMAIL ONLY

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of 35 Harry Elias Partnership LLP 24 May 2016

(b) units in a collective investment scheme (CIS) and whether offers of

such units are involved; 1.1.2. CoAssets Singapore is:

(a) carrying on business in a regulated activity, in particular, dealing in securities, as defined under the Securities and Futures Act (Cap. 289) (SFA);

(b) acting as a financial advisor in Singapore in respect of any financial advisory service as defined under the Financial Advisers Act (Cap. 110) (FAA);

(c) carrying on the business of moneylending in Singapore (whether as

principal or agent) as defined under the Moneylenders Act (Cap. 188) (MLA);

(d) in the course of carrying on a deposit-taking business as defined

under the Banking Act (Cap. 19) (BA),

all of which either require a licence or be exempt under certain conditions from licensing requirements, prior to the commencement of such business activities.

1.2. This Opinion is not intended to provide a summary of all legal issues relevant to the business model of CoAssets Singapore (as described in paragraph 2 below) and aims only to highlight those legal issues mentioned in paragraph 1.1.

1.3. This Opinion is confined to matters of the laws of Singapore. Accordingly, we express no opinion with regard to any system of law other than the laws of Singapore as currently applied by the courts of Singapore. This Opinion is to be governed by and construed in accordance with the laws of Singapore as at the date of this opinion. To the extent that the laws of other jurisdictions may be relevant, we have made no independent investigation thereof and our Opinion is subject to the effect of such laws.

1.4. This Opinion has not been prepared to identify solutions to any issues raised and only relates to the matters reviewed by us which are the subject of this Opinion and our investigations only concern these matters. To the maximum extent permitted by law, we do not accept any liability to any person other than to CoAssets Singapore and in relation to CoAssets Singapore, only to the extent where this Opinion is used for the purposes as stated in this Opinion.

1.5. As of the date of this Opinion, CoAssets Singapore has been informed by the Singapore Monetary Authority of Singapore (Authority) that they have recently completed their review of the current regime surrounding crowdfunding and will be issuing a set of frequently asked questions (FAQs) which is anticipated to be issued on or about June 2016. Please refer to Schedule 2 for a brief overview of

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the potential changes to the securities regulatory regime in Singapore, as announced by the Authority to date.

2. BUSINESS MODEL 2.1. CoAssets Singapore provides an interactive business networking and educational

platform for real estate enthusiasts on https://www.coassets.com (the Website). The Website is a targeted leads generation site, comparable to property listing portals. Such property listing portals do not sell properties but allow property stakeholders (i.e. developers, agents, owners) (collectively, the Opportunity Providers) to list available properties and real estate projects for interested investors (the Investors) to view.

2.2. The Opportunity Providers and Investors (collectively, the Users) must be

registered as members with CoAssets Singapore in order to utilize the listing platform on the Website.

2.3. Please refer to Schedule 1 for an overview of the business segments and revenue

streams of CoAssets Singapore (the Business Model).

3. REGULATORY REQUIREMENTS: OFFER OF SECURITIES 3.1. Securities Generally

3.1.1. All offers of securities made to any persons in Singapore are prima facie required to be accompanied by a prospectus which must comply with certain statutory requirements1 (Prospectus Requirement), unless expressly exempted by the safe harbour provisions2 in the SFA.

3.1.2. In addition, section 251(1) of the SFA provides that, where a prospectus is required for an offer of securities (i.e. where the Prospectus Requirement applies), a person shall not (a) advertise the offer or (b) publish a statement that directly or indirectly refers to the offer or is reasonably likely to induce persons to subscribe for or purchase the securities. For the avoidance of doubt, where the Prospectus Requirement is not applicable, the advertising restriction under section 251(1) of the SFA is in turn not applicable.

3.1.3. The SFA expressly specifies the circumstances as to what constitutes an

offer for securities. A person makes an offer if and only if as principal (either personally or by an agent) (emphasis in bold and italics ours):

(a) he makes an offer to any person in Singapore which upon

acceptance would result in a contract for the issue or sale of securities; or

1 Section 240 of the SFA 2 Part XIII of the SFA, Subdivision (4) of Division (1)

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(b) he invites any person in Singapore to make an offer which upon

acceptance would result in a contract for the issue or sale of securities.3

3.1.4. “Securities” as defined in section 239(1) of the SFA refers to shares or

debentures of a corporation or entity. Both definitions of “corporation” and “entity” include both Singapore and overseas incorporated companies.

3.1.5. Section 239(3) of the SFA contains a deeming provision whereby:

(a) any invitation to a person to deposit money with or to lend

money to an entity shall be deemed to be an offer of debentures of the entity; and

(b) any document that is issued or intended or required to be issued by an entity acknowledging or evidencing or constituting an acknowledgment of the indebtedness of the entity in respect of any money that is or may be deposited with or lent to the entity in response to such an invitation shall be deemed to be a debenture.

3.1.6. Hence, any fund raising project that involves or refers to “deposit of

money”, “lending money” or “looking for funds” invariably, following the deeming provision, fall within the nature of an offer of debentures of an entity and any accompanying document, a debenture.

3.2. Promissory Notes as securities

3.2.1. “Debenture” as defined in section 239(1) of the SFA includes debenture

stock, bonds, notes and any other debt securities issued by a corporation or any other entity, whether or not constituting a charge on the assets of the issuer but does not include, subject to the regulations made under the SFA, a promissory note having a face value of not less than $100,000 and having a maturity period of not more than 12 months (Promissory Note Exclusion).

3.2.2. Following the popularity of crowdfunding platforms generally, the

Authority started its review on rules and regulations on crowdfunding, in particular peer-to-peer lending.

3.2.3. On 6 May 2016, the Authority informed Harry Elias Partnership LLP in

writing that it would be issuing a set of public FAQs in shortly to inform the platform operators and the public of the following:

3 Section 239(6) of the SFA

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(a) the Authority’s plan to introduce legislative amendments to

remove promissory notes from the carve-out of the definition of “debenture”; and

(b) the Authority’s stance on the Promissory Note Exclusion.

3.2.4. In addition to the requirement of having a face value of not less than

$100,000 and having a maturity period of not more than 12 months, the Authority has indicated that the Promissory Note Exclusion will only apply if it is issued by one borrower to one single lender (the Singular Promissory Note Rule). Therefore, an aggregation of multiple loans from multiple lenders, consolidated into one promissory note (Consolidated Promissory Note) which has a face value of not less than $100,000 and a maturity period of not more than 12 months, will not qualify for the Promissory Note Exclusion.

3.2.5. When the Promissory Note Exclusion was introduced in the SFA,

Parliament was silent on the legislative intent behind the Promissory Note Exclusion4. The SFA does not expressly prohibit an aggregation of multiple loans from multiple lenders into one consolidated promissory note in order to rely on the Promissory Note Exclusion. Although the FAQs do not constitute legal advice, they do provide guidance on the regulatory requirements and policy intent of the Authority and as a matter of business conduct, are generally expected to be abided by industry participants with no opposition. As the FAQs do represent the policy intent of the Authority they would be persuasive in the court’s interpretation of the Promissory Note Exclusion.

3.2.6. From paragraph 2 of Schedule 1, the Business Model of CoAssets

Singapore involves the administration and issue of aggregated promissory notes to multiple Investors, each with a face value of not less than S$100,000 and a maturity period of not more than 12 months. From paragraphs 1 and 2 of Schedule 1, the Business Model of CoAssets Singapore has no reference to “deposit” and “lending”, only to “invest” and “investments”.

3.2.7. Prior to the issuance of the FAQs, a literal interpretation of the Promissory

Note Exclusion in the SFA did not prohibit the aggregation of multiple loans from multiple lenders into one consolidated promissory note. With

4 The Authority may have adopted the position taken by Australian Parliament in the definition of promissory note as an unconditional promise in writing made by one person to another outlining the payment of a sum of money at a certain date. In the extract from Hansard, Parliament had stated that the risks associated with promissory notes are considerable as the lender is solely reliant on the note issuer's ability to repay the money. Therefore the public must be made aware of the high risks associated with promissory notes and their unsuitability as investment instruments for retail investors. For this reason we can only surmise that the Authority made a policy decision to introduce the Singular Promissory Note Rule in the form of FAQs in order to protect the retail investors - to make it clear that the Promissory Note Exclusion is only intended for a one borrower one lender situation.

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the issue of the pending FAQs, due to the application of the Singular Promissory Note Rule, such promissory notes will be treated as debentures and thus securities under the SFA.

3.2.8. As such the offer of promissory notes by the Opportunity Providers will

then constitute an offer of securities, which attracts Prospectus Requirements unless the Opportunity Provider can avail itself to a safe harbour exemption.

3.2.9. If CoAssets Singapore intends to continue to offer the Consolidated

Promissory Notes on its platform it would have to consider invoking a safe harbour provision (as the Consolidated Promissory Notes would constitute a security) in order not to attract prospectus requirements. Once the FAQs are issued, CoAssets Singapore can no longer rely on the Promissory Note Exclusion based on its current Business Model.

3.2.10. One such safe harbour provision to consider is the small offer exemption

which is detailed in Schedule 3. 3.2.11. However CoAssets Singapore can consider offering “singular” promissory

notes applying the Singular Promissory Note Rule (since these would not be security) therefore allowing it to continue to rely on the Promissory Note Exclusion until the legislative amendments are effected to remove the exclusion.

3.2.12. If the promissory notes can no longer fall within the Promissory Note

Exclusion, a prospectus will be needed, and the advertising restrictions under section 251(1) of the SFA would thus apply.

3.3. Advertising restrictions for securities generally

The advertising restrictions under section 251(1) of the SFA states that if a prospectus is required for an offer or an intended offer of securities, a person shall not:

(a) advertise the offer or intended offer;

(b) publish a statement that directly or indirectly refers to the offer or intended offer; or

(c) publish a statement that is reasonably likely to induce persons

to subscribe for or purchase the securities; unless the advertisement or publication is otherwise authorised.5

3.3.1. The advertisement restrictions impose an absolute restriction on any

form of advertisement in Singapore, including advertisements made

5 Section 251(4) to Section 251(11) of the SFA

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online. An advertisement made outside of Singapore may constitute a contravention of the advertisement restrictions if the advertisement has a substantial and reasonably foreseeable effect in Singapore6 (Extra-territoriality Provision).

3.3.2. Therefore any advertisement that is made outside of Singapore but can be accessible by potential investors in Singapore should carry out the following measures to avoid invoking the Extra-territoriality Provision in the SFA:

(a) The use of prominent disclaimers in all advertisements and

published information in relation to the offer of the promissory notes stating to the effect that the advertisement or published information is directed or targeted at persons outside Singapore; or

(b) The use of reasonable and effective precautions to ensure that

the offer of services or the invitation to engage in any conduct that involves the offer of promissory notes may be acted upon only by persons outside Singapore.

Please refer to Schedule 3 for an overview of the Extra-territoriality Provision.

3.4. Advertising restrictions for small offer exemptions

Please refer to Schedule 3 for the conditions to satisfy before invoking the small offer exemption, in particular in making any offer in reliance on the small offer exemption, the offer must not be accompanied by an advertisement offering or calling attention to the offer or intended offer.

3.5. Real Properties

3.5.1. In addition to the promissory notes under the P2P platform, the other

investments in the Business Model relate to physical properties in real estate.

3.5.2. Offers of securities in Singapore are regulated by the Authority. Operating

purely web-based real estate research and education platforms or a platform offering opportunities in real estate properties are not regulated activities under the regime or activities intended to be regulated by the Authority.7 Tools such as heatmaps (showing real estate transaction volumes) and charts (showing historical and current pricing

6 Section 339(2) of the SFA 7 MoneySense, Consumer Alert on Land Banking – Look Before You Leap <http://www.mas.gov.sg/moneysense/understanding-financial-products/investments/consumer-alerts/land-banking-look-before-you-leap.aspx> (accessed 10 May 2016)

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http://www.mas.gov.sg/moneysense/understanding-financial-products/investments/consumer-alerts/land-banking-look-before-you-leap.aspx

http://www.mas.gov.sg/moneysense/understanding-financial-products/investments/consumer-alerts/land-banking-look-before-you-leap.aspx


for real estate) are not activities regulated by the Authority so long as they relate purely to the real estate market.

3.5.3. In so far as “invest” and “investments” are concerned, so long as such

activities do not constitute “lending”, “deposit of funds” or “securities”, these activities are generally not prohibited.

4. REGULATORY REQUIREMENTS: OFFER OF UNITS IN A COLLECTIVE INVESTMENT

SCHEME 4.1. A “CIS” as defined in section 2(1) of the SFA means an arrangement in respect of

any property (emphasis in bold and italics ours): 4.1.1. where the participants do not have day-to-day control of the property;

4.1.2. the property is managed as a whole by a manager (the Management

Limb); 4.1.3. where the contributions of the participants and the profits and income

from which payments are to be made to them are pooled (the Pooling Limb); and

4.1.4. the purpose of the scheme is for the participants to receive profits,

income or other income from the acquisition, holding or management of the property under the scheme.

4.2. The factors are conjunctive in determining whether an arrangement constitutes a

CIS (or not). A CIS may invest in all kinds of assets, be it financial, real estate, precious metals or commodities.

4.3. All offers of units in a CIS are required to be authorised (or recognised, if constituted outside of Singapore)8 and be accompanied by a prospectus which complies with the requirements as set out in the SFA9, unless the safe harbour requirements apply.

4.4. In relation to the investments in physical properties in real estate, the following points are noted: 4.4.1. There is no management of property (be it investments or the Projects)

as a whole by CoAssets Singapore. CoAssets Singapore merely acts as a conduit where the Opportunity Providers and the Investors have an opportunity to network and discuss possible ways of cooperation. Any negotiation is directly between the Opportunity Providers and the Investors which may eventually lead to a successful cooperation. There may be many forms of cooperation amongst the different Opportunity

8 Part XIII of the SFA, Subdivision (2) of Division (2) 9 Part XIII of the SFA, Subdivision (4) of Division (2)

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Providers and Investors involving different Projects. CoAssets Singapore has no visibility on the form (or success or failure) of the cooperation;

4.4.2. There is also no pooling of profits or income by CoAssets Singapore. The

invested sums go directly towards the respective Opportunity Providers, who will pay out any returns on investments directly to the Investors. A plain reading seems to suggest some form of pooling (of monies) on the part of the Opportunity Providers, but CoAssets Singapore is not involved in the flow of funds between the Opportunity Providers. Neither the Investors nor does CoAssets Singapore manage these funds. Even if there was pooling, of funds (which it is denied) there are several Opportunity Providers (instead of one) who ‘pool’ for their own respective purposes;

4.4.3. Whilst arguably, it may appear that the Investors may be receiving

payments of profits or income as a result of their investments in the Projects with the Opportunity Providers, CoAssets Singapore does not make any representations to the Investors on any such payments. This is iterated in the Terms of Use10;

4.4.4. Unlike traditional CIS models, the Investors will have direct ownership

over properties in real estate as compared to a share in a fund structure. The right to any returns stems from the contracts which the Investors enter into with the Opportunity Providers.

4.5. In relation to the P2P platform, the Investors’ monies are held in a CoAssets

Singapore-operated bank account (the CoAssets Account) which is operated by the authorised signatories of CoAssets Singapore. Upon indicating an interest in a transaction listed on the P2P platform, the Investor shall transfer into the CoAssets Account the desired investment sum within five (5) business days. If the funds are not in the account by then, CoAssets Singapore shall not process the investment.

4.6. The CoAssets Account is a segregated client account specifically set up to hold

funds belonging to the Investors and is not commingled with any funds of CoAssets Singapore. Upon registration as a User of the P2P platform, as part of the Terms of Use, Investors agree and authorise CoAssets Singapore to disburse such sums as determined by them to the relevant Opportunity Provider when the aggregate investment sums committed by Investors exceed a pre-determined level. This sum is determined by the Opportunity Providers before listing their project on the P2P platform and must be more than S$ 100,000. If this sum cannot be met within sixty (60) business days of the listing, CoAssets Singapore shall refund the monies to the Investors within ten (10) business days. In a similar fashion, CoAssets Singapore also acts as an intermediary when the Opportunity Providers make repayment of the investment sums and pays such sums to the Investors. At any time before the investment is processed, the Investors are also given the option to issue a withdrawal instruction requesting CoAssets Singapore

10 CoAssets Terms of Use <https://www.coassets.com/terms-of-use/> (accessed 10 May 2016).

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to refund their monies.For more details on the mechanism relating to the handling of funds by CoAssets Singapore, please refer to paragraph 3 of the Terms of Use11.

4.7. On this basis, at first glance there would seem to be some form of pooling of funds (a term used in the definition of a CIS) in the CoAssets Account, but it should be pointed out that, unlike in the case of a CIS, the participants, being the Investors, do have day to day control over the funds in the CoAssets Account. Any form of handling of the funds belonging to the Investors is based on the instructions received from the Investors themselves. Given the above, it is unlikely that the P2P platform constitutes a CIS.

4.8. As all elements are to be read conjunctively to constitute a CIS, and on facts, as not all elements are met, we are of the view that the Business Model of CoAssets Singapore does not constitute a CIS.

4.9. By way of a consultation paper issued in July 2014 in relation to the “Proposals to Enhance Regulatory Safeguards for Investors in the Capital Markets” and a response paper subsequently issued in September 2015, the Authority informed the public that there are plans to amend the definition of CIS by way of legislative amendments such that the Management Limb will be an alternative limb to the Pooling Limb. Therefore, the definition of CIS would be widened to include collectively managed schemes which do not have an element of pooling of contributions and profits.

4.10. Such legislative amendments will have an impact on Business Model of CoAssets. If the definition of a CIS is amended it may include collectively managed investment schemes of any property including real estate projects made available on the CoAssets Singapore platform. In such a case, the CoAssets Singapore platform may be seen as offering units in a CIS. Such a CIS would have to be authorised (or recognised for overseas constituted schemes) with the Authority accordingly. It will also have to comply with the Code on Collective Investment Schemes and be managed by a licensed fund manager or real estate investment trust manager who is fit and proper.

5. REGULATORY REQUIREMENTS: REGULATED ACTIVITIES UNDER THE SFA AND

FAA 5.1. Regulated activities under the SFA

5.1.1. Under section 82 of the SFA, a person (whether as principal or agent)

who wishes to carry on a business in any regulated activity is required to hold a capital markets services (CMS) licence for that regulated activity unless an exemption can be sought.

5.1.2. The ambit of regulated activities for the purposes of the SFA, as set out in the Second Schedule of the SFA, must be read in line with the

11 CoAssets Terms of Use <https://www.coassets.com/terms-of-use/> (accessed 10 May 2016).

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legislative intent of the SFA, which in the preamble is said to be for “the regulation of activities and institutions in the securities, futures and derivatives industry, including leveraged foreign exchange trading, and of clearing facilities, and for matters connected therewith”.

5.1.3. Read in this light, a regulated activity which requires a CMS licence

before one can carry on business in, must be one which involves securities, futures and/or derivatives.

5.1.4. The Authority has expressly stated in a consultation paper, “Facilitating

Securities Based Crowdfunding” that a crowdfunding platform operator which facilitates the offers of securities is dealing in securities and is required to hold a CMS licence, unless exempted.12

5.1.5. For the purposes of section 82 of the SFA, “securities” includes

debentures or stocks issued or proposed to be issued by a corporation and any unit in a CIS, but does not include a promissory note which satisfies the Promissory Note Exclusion, applying the principles to be expounded by the Authority in the FAQs.

5.2. Regulated activities under the FAA

5.2.1. Under section 6 of the FAA, any person who carries on the business of

providing financial advisory service has to be either licensed or exempt.

5.2.2. “Financial advisory service” as defined in the Second Schedule of the FAA include (emphasis in bold and italics ours):

(a) advising others, either through print or electronic or other

media, concerning any investment product; (b) advising others by issuing or promulgating research analyses or

research reports, whether in electronic, print or other form, concerning any investment product; and

(c) marketing of any CIS.

5.2.3. “Investment product” as defined in section 2(1) of the FAA refers to any

capital markets product or any life policy. “Capital markets product” refers to any securities (shares, debentures or units in a CIS), futures contracts, contracts or arrangements for the purposes of foreign exchange trading.

5.3. Following the FAQs, if the Business Model and/or the Website of CoAssets

Singapore does involve securities (including units in a CIS), any investment

12 Monetary Authority of Singapore, Consultation Paper on Facilitating Securities Based Crowdfunding (February 2015). Paragraph 1.5.

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product and/or capital markets product, CoAssets Singapore would be carrying on business in: 5.3.1. dealing in securities, a regulated activity as set out in section 82 and

the Second Schedule of the SFA; and 5.3.2. providing financial advisory service as set out in section 6 and the

Second Schedule of the FAA, and would require a CMS licence unless an exemption from licensing requirements apply. A CMS licence holder can also be exempted from having to be licensed under the FAA, subject to the satisfaction of certain conditions.

6. REGULATORY REQUIREMENTS: MONEYLENDING BUSINESS

6.1. Under section 5(1) of the MLA, no person shall carry on or hold himself out in any way as carrying on the business of moneylending in Singapore, whether as principal or as agent, unless: 6.1.1. he is authorised to do so by a licence;

6.1.2. he is an excluded moneylender; or 6.1.3. he is an exempt moneylender.

6.2. “Moneylender” as defined in section 2 of the MLA means a person who, whether as principal or agent, carries on or holds himself out in any way as carrying on the business of moneylending, whether or not he carries on any other business, but does not include any excluded moneylender.

6.3. There is a presumption under section 3 of the MLA, which deems any person, other than an excluded moneylender, as a moneylender if he lends a sum of money in consideration of a larger sum being repaid unless the contrary is proved. The definition of “excluded moneylender” in section 2 of the MLA includes any person who lends money solely to corporations.

6.4. In the case of the P2P platform, the presumption in paragraph 6.3 above, would apply, with the effect that CoAssets Singapore is presumed to be a moneylender engaging in the moneylending activity.

6.5. However, membership on the P2P platform is limited only to corporations. There is no option for individuals to apply to be Opportunity Providers of the P2P platform. On this basis, any lending activities by the Investors would, more likely than not, fall within the “excluded moneylender” category, which rebuts the presumption and exempts any licensing requirements for any moneylending activities under the MLA.

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7. REGULATORY REQUIREMENTS: DEPOSIT-TAKING BUSINESS

7.1. Under section 4A(1) of the BA, no person shall, in the course of carrying on (whether in Singapore or elsewhere) a deposit-taking business, accept in Singapore any deposit from any person in Singapore.

7.2. “Deposit” is defined in section 4B(4)(a) of the BA as a sum of money paid on terms 7.2.1. under which it will be repaid, with or without interest or a premium, or

with any consideration in money or money’s worth, either on demand or at a time or in circumstances agreed by or on behalf of the person making the payment and the person receiving it; and

7.2.2. which are not referable to the provision of property or services or to the giving of security.

7.3. There is a presumption under section 4B(7) of the BA, which deems a business as

a “deposit-taking business” if in the course of the business, money received by way of deposit is lent to others. There is an exception in, section 4B(8) of the BA with the resulting effect that even if the deeming provision in section 4B(7) applies, it is not a “deposit-taking business” if the business does not hold itself out to accept and does not accept deposits on a day-to-day basis whether or not involving the issue of debentures or securities. This is in line with the parliamentary intention of regulating internet-only banks in enacting this restriction on deposit-taking business. The business should be such that it is akin to a bank accepting deposits on a daily basis, as part of its core business operations.13

7.4. Although CoAssets Singapore handles funds between Opportunity Providers and Investors as part of its P2P platform, it does not do so on a day-to-day basis. Such funds are handled as and when there are opportunities made available on the Website, by the Opportunity Providers. Investors only transfer funds to the CoAssets Account when they intend to invest and when there are active deals. Further, monies are returned in the event a deal is unsuccessful for any reason.14 Accordingly, it is unlikely that CoAssets Singapore can be said to be carrying on a deposit-taking business within the ambit of the BA.

8. PROSPECTUS

8.1. We have also reviewed Section 8.2 of the draft Prospectus, circulated to us by Mr.

Seh Huan Kiat of the Issuer via e-mail on 24 May 2016, timed at 11.34 am (Singapore time).

8.2. Subject to the assumptions and qualifications as set out in Schedule 4, we are of the opinion that all descriptions and references to the Singapore laws and

13 Singapore Parliamentary Debates, Official Report (16 May 2001) vol 73 at cols 1690 – 1691 (BG Lee Hsien Loong, Deputy Prime Minister) 14 Please refer to paragraph 4.5 of this Opinion.

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regulations as set out in the Prospectus as far as the references and descriptions of Singapore laws and regulations are concerned are true and accurate in all material aspects in the context they appear.

9. BENEFIT

9.1. This Opinion is addressed to the addressee personally and may not, without our prior written consent, be: 9.1.1. relied on by any person other than CoAssets Singapore and the directors

and officers of CoAssets Singapore; or

9.1.2. disclosed except to persons who in the ordinary course of business have access to the CoAssets Singapore’s papers and records on the basis that it is disclosed without any liability on our part and they (other than governmental or regulatory authorities) will make no further disclosure; or

9.1.3. used for any purpose other than those stated in this Opinion; except as required by law, the requirements of a stock exchange or in connection with the conduct of legal proceedings relating to CoAssets Singapore or persons entitled to rely upon this Opinion.

9.2. This Opinion is strictly limited to the matters stated in it and does not apply by implication to other matters.

9.3. Nothing in this opinion shall be deemed to imply any legal advice or

recommendation by us with respect to the Listing. This Opinion does not comment on the commercial nature or effects of the Listing and is not intended as an evaluation of the Listing, other than for purposes of rendering this Opinion.

9.4. This Opinion is given in relation to the laws of Singapore which were in force as at

17 May 2016. Yours faithfully,

HARRY ELIAS PARTNERSHIP LLP

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SCHEDULE 1

Business Segments (Revenue Streams)

1. ONLINE PROJECT LISTING (HTTPS://COASSETS.COM/PROJECT/)

1.1 Allows Opportunity Providers to upload projects for the sale of units in real estate property developments (Projects).

1.2 Projects can be:

1.2.1 bulk purchase, where Investors invest in multiple real estate units;

1.2.2 crowdfunding, where Investors co-invest in real estate units with others; or

1.2.3 pre-sales, where Investors invest in real estate units before the official

launch of the development.

1.3 References to “units” above are references to units in real estate properties as opposed to units in shares or debentures15.

1.4 No fees are charged for listing of Projects, but Opportunity Providers have to be registered with the Website, and membership fees apply.

1.5 As part of background checks on Users, upon registration, Users are required to provide CoAssets Singapore with sufficient details to establish their identity. CoAssets Singapore also identifies politically exposed persons, defined as “someone who is or has been entrusted with prominent public functions whether in Singapore or a foreign country, immediate family members of such a person; or close associates of such a person”, and entities controlled by such persons, for the purposes of complying with the anti-money laundering and counter-terrorism financing regime in Singapore. In relation to such Users, CoAssets Singapore would take steps to establish by appropriate and reasonable means the source of funds for investments and decide whether it would want to accept the politically exposed person as a User. However, such “know your client” checks shall not be taken as a representation or warranty as to the viability of any investments.

1.6 The purpose of the listing is to generate a list of Investors who are interested in the Project (i.e. “hot” leads). Investors can indicate their interest by clicking on the “I’m interested” or “I have a question” buttons.

1.7 CoAssets Singapore also generates a list of “warm”’ leads. These are Investors who have viewed the Project listing but did not indicate their interest. CoAssets Singapore tracks the time spent and the number of times they view the listing.

1.8 Based on the amount of leads, CoAssets Singapore then contacts the Opportunity Providers to check if they want to organize an event to engage Investors. The

15 Section 239(1) of the SFA: “unit”, in relation to a share or debenture, means any right or interest, whether legal or equitable, in the share or debenture, by whatever name called, and includes any option to acquire any such right or interest in the share or debenture.

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https://coassets.com/project/


Opportunity Providers will not have access to the contact details of the Investors but they will know how many hot leads and warm leads their Projects have attracted. The event guidelines stipulate that all presentations and talks should be educational in nature and there should be no soliciting during the presentation. For details, please refer to: https://www.coassets.com/event/event_guidelines/.

2. PEER-TO-PEER LENDING (P2P) PLATFORM

2.1 Opportunity Providers which are corporations may seek financing from Investors in the form of promissory notes, with face values of not less than S$100,000 and maturity periods of not more than 12 months. CoAssets Singapore currently structures the promissory notes by aggregating multiple loans from multiple Investors into a single promissory note to be issued by the Opportunity Provider.

2.2 CoAssets Singapore, as the administrator of the P2P platform, will offer the following services:

2.2.1 provide platform for developers and investors to meet;

2.2.2 provide promissory note template;

2.2.3 conduct background checks on the Opportunity Providers and Investors as explained in paragraph 1.5 of this Schedule;

2.2.4 remedy any defaults in payment;

2.2.5 appoint third party professional debt collectors;

2.2.6 commence legal proceedings to recover debt; and

2.2.7 facilitate the transfer of funds between Opportunity Providers and Investors.

2.2.8 Upon indication of interest in a P2P project, the Investors will transfer the intended investment sum into a CoAssets Singapore-operated bank account. CoAssets Singapore will only release the sums to the Opportunity Providers when the financing target is met, failing which, CoAssets Singapore will return the monies back to the Investors. CoAssets Singapore also acts as an intermediary on repayment by the Opportunity Providers to the Investors. The role of CoAssets Singapore is that of administrator and it does not carry on a deposit-taking business.

2.2.9 CoAssets Singapore charges the Opportunity Providers for use of the P2P platform in the form of commission-based fees, pegged to the amounts raised via the P2P platform. In an offer of securities, commission-based fees can imply an agency relationship such that the crowdfunding platform operator is also seen as “dealing in securities”, a regulated activity requiring a CMS licence. The P2P platform does not involve any offer of securities.

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https://www.coassets.com/event/event_guidelines/


3. EVENTS (https://coassets.com/event/)

3.1 If a Project generates a large number of qualified leads, the Opportunity Provider may engage CoAssets Singapore to organize an event to network with Investors.

3.2 CoAssets Singapore charges the Opportunity Providers based on the number of people who may show up. This is how CoAssets Singapore derives its revenue from lead generations on the Website.

3.3 At the events, the Opportunity Providers will provide educational introduction to their Projects as examples but they are not allowed to solicit.

3.4 If the attendees are intrigued to find out more, they can then approach the Opportunity Provider to request for more information. At this point, CoAssets Singapore is no longer in the loop apart from technical Website support and post-event feedback surveys.

4. DEVELOPER PORTALS

4.1 CoAssets Singapore charges Opportunity Providers for portals and microsites on the Website, containing profile information on the Opportunity Providers.

4.2 The Opportunity Providers can submit additional content on key people, past projects, testimonials etc and contact info on the portals and microsites for Investors to find out more about them.

4.3 The Opportunity Providers can also be featured on CoAssets Singapore weekly newsletters. This serves as additional marketing opportunities.

5. ADVERTISEMENTS (https://coassets.com/newsletter/weekly)

5.1 To generate awareness to the Project listings, CoAssets Singapore sends out weekly newsletters to Investors. Advertisements on listed Projects in the weekly newsletters are free of charge for Opportunity Providers.

5.2 If the Opportunity Providers would like additional advertisements, CoAssets Singapore charges fees for additional electronic mailers to Investors. They can also buy banner slots on the weekly newsletters.

5.3 CoAssets Singapore provides media write-ups for Opportunity Providers upon successful payouts of returns on investments in Project to Investors. These media releases are limited to payouts after a Project has been closed and are not used for solicitation of investments in Projects.

6. EPIC (https://www.coassets.com/epic/)

6.1 EPIC is an exhibition, essentially a large scale event where several Opportunity Providers and partners such as the media and real estate consultants may purchase booths to network with potential Investors.

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https://coassets.com/event/

https://coassets.com/newsletter/weekly

https://www.coassets.com/epic/


6.2 Opportunity Providers and sponsors of CoAssets Singapore are given speaker

slots, similar to the typical real estate trade shows and exhibitor booths. No soliciting is allowed.

7. NEWS AND COMMENTARIES (https://coassets.com/news/)

7.1 These materials are used as content marketing materials to attract more Users to the platform and are thus accessible by all visitors without the need to register for an account with CoAssets Singapore.

7.2 News consists of crowdfunding or real estate investment news both extracted from the web and generated internally.

8. TOOLS

8.1 In general, only Users registered with CoAssets Singapore may access the interactive tools which are focused on the real estate market. Data from across the Southeast Asian region are provided. The tools include heatmaps (transaction volume) and charts (historical and current pricing).

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https://coassets.com/news/


SCHEDULE 2

Potential Changes to the Securities Regulatory Regime in Singapore

1. GENERAL OVERVIEW OF THE REGULATORY REGIME IN SINGAPORE

1.1. The SFA and FAA sets out the regulatory framework of the Authority on the offer

and distribution of capital markets products, such as shares, debentures and units in collective investment schemes. The Authority seeks to protect investors by requiring offerors to disclose material information to investors to enable them to make well-informed decisions. It also seeks to ensure that intermediaries are competent and deal with their clients fairly.

2. CONSULTATION PAPERS

2.1. The Authority has issued the following consultation papers16: 2.1.1. in July 2014, in relation to “Proposals to Enhance Regulatory Safeguards

for Investors in the Capital Markets” (Consultation Paper on Enhancing Safeguards);

2.1.2. in February 2015, in relation to “Proposed Amendments to the Securities and Futures Act” (Consultation Paper on SFA Amendments); and

2.1.3. in February 2015, in relation to “Facilitating Securities Based

Crowdfunding” (Consultation Paper on Crowdfunding).

2.2. Consultation Paper on Enhancing Safeguards 2.2.1. The Consultation Paper on Enhancing Safeguards sets outs anticipated

changes to the definition of a “collective investment scheme” in the SFA. 2.2.2. The Authority observed a number of non-conventional products being

offered to consumers as alternative investments. Some of these products exhibit essentially the same characteristics as regulated capital markets products, but are deliberately structured in a way that takes them outside the regulatory perimeter of the SFA. These typically involve consumers taking a direct interest in physical assets (as opposed to a securitised interest with the physical asset as underlying).

2.2.3. The Authority is of the view that where products are being offered to

consumers as investments, sufficient information should be provided to consumers on how the projected returns are made, the expected investment horizon and exit options available to guide consumers in making informed decisions. Products that display similar characteristics

16 Please refer to http://www.mas.gov.sg/news-and-publications/consultation-paper.aspx for the full consultation papers

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http://www.mas.gov.sg/news-and-publications/consultation-paper.aspx


as capital markets products should accordingly be subject to the requirements built into the SFA, such that consumers enjoy the regulatory safeguards when being offered such products.

2.2.4. Following the public consultation on the proposals set out in the

Consultation Paper on Enhancing Safeguards, the Authority published “Response to Feedback Received – Proposals to Enhance Regulatory Safeguards for Investors in the Capital Markets” in September 2015 (Response Paper).

2.2.5. In the Response Paper the Authority emphasised its intention to

regulate collectively-managed investments schemes. 2.2.6. The Authority noted that there are collectively-managed investments

schemes which offer investors direct legal title to individual assets without pooling the contributions and profits of the participants, thereby avoiding regulation as a CIS. However, these investors may not have day-to-day control of their investment. The Authority cited an example of a scheme where investors are led to expect profits from the management of the entire block of apartments as a hostel, and the scheme operator runs the hostel as a business and the investors do not make any commercial decisions. The investors only have a right to financial returns on their investments.

2.2.7. The Authority stated that the purpose of the CIS definition is to

safeguard the interest of investors who have contributed money or assets to an investment scheme under circumstances in which they have no day-to-day control of their investment because it is pooled or subject to collective management.

2.2.8. Therefore, notwithstanding the lack of pooling of the contributions and

profits of the participants, such collectively-managed investments schemes were in substance CIS.

2.2.9. Therefore, the Authority maintained its position to extend the CIS

regulatory regime to collectively-managed investment schemes, to be implemented by way of legislative amendments.

2.2.10. In addition, the Authority clarified that any future legislative

amendments in relation to the CIS regulatory regime will not have retrospective effect (i.e. they will not apply to transactions entered into before such legislative amendments come into effect).

2.3. Consultation Paper on SFA Amendments

2.3.1. The Consultation paper on SFA Amendments sets out anticipated

changes to the SFA in order to strengthen the Authority’s enforcement regime.

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2.3.2. In particular, the Authority stated that the references to “securities” will

be amended to include certain promissory notes.

3. Consultation Paper on Crowdfunding 3.1.1. The Consultation Paper on Crowdfunding sets out anticipated changes

to the prospectus and licensing requirements currently relied upon by crowdfunding platforms.

3.1.2. The Authority observed that there are high risks associated with

crowdfunding and that the current regulatory regime is not suited for crowdfunding.

3.1.3. The Authority stated that crowdfunding platforms may be subject to

licensing requirements as an entity conducting the regulated activity of dealing in securities. However, the licensing requirements for crowdfunding platforms may be modified so as to make it easier for crowdfunding platforms to meet the financial requirements on minimum base capital and the lodgment of a security deposit with the Authority.

3.1.4. In addition, the Authority suggested that borrowers on the

crowdfunding platforms can rely on the prospectus exemption under section 275 of the SFA by restricting its offer to accredited or institutional investors.

4. NOTIFICATION IN WRITING ON ANTICIPATED REGULATORY CHANGES

4.1. On 6 May 2016 CoAssets Singapore was informed by the Authority that they have

recently completed their review of the current regime surrounding crowdfunding and will be issuing a set of FAQs in second quarter of 2016 to inform the platform operators and the public of the following: 4.1.1. the Authority’s plan to introduce legislative amendments to remove

promissory notes from the carve-out of the definition of “debenture”; and

4.1.2. the Authority’s stance on the Promissory Note Exclusion as explained in

paragraph 3.2.4 of this Opinion.

4.2. The Authority also stated that after the FAQs are issued, borrowers need to comply with the Singular Promissory Note Rule failing which they must comply with the Prospectus Requirement, unless they can rely on an exemption.

4.3. In addition, the Authority also stated that CoAssets Singapore should consider whether its platform requires licensing.

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SCHEDULE 3

Offer of Investments in Singapore under the Small Offer Exemption

1. INTRODUCTION 1.1 In Singapore, the statutory requirements as to offers of securities (including

prospectus requirements, restrictions on advertisements and the available exemptions) are set out in the Securities and Futures Act (Cap. 289) (SFA). Pursuant to Part XIII section 240(1) read with section 240(4) of the SFA, all offers of securities must be accompanied by a prospectus or a profile statement, which must (i) comply with the information and other requirements of the SFA and (ii) be lodged with and registered by the Monetary Authority of Singapore (MAS) (the prospectus requirements).

1.2 Any person who contravenes section 240(1) of the SFA shall be guilty of an

offence and shall be liable on conviction to a fine not exceeding S$150,000 or to imprisonment for a term not exceeding 2 years or to both, and in the case of a continuing offence, to a further fine not exceeding S$15,000 for every day or part thereof during which the offence continues after conviction.

1.3 Notwithstanding the foregoing, where an offer of securities is made to the public, such an offer may, nevertheless, be exempted from the prospectus requirements if it satisfies the conditions of one of the safe harbor provisions set out in Subdivision (4) of Division 1 of Part XIII of the SFA. This memorandum sets out the conditions of one such safe harbor provision – the small offer exemption.

2. APPLICATION OF SECTION 240 of the SFA 2.1 For the purposes of Part XIII Division 1 Subdivision (4) of the SFA, an “offer of any

securities” is defined under section 239(6) of the SFA to mean: -

(a) an offer to any person in Singapore that would give rise to a contract for the issue or sale of securities if accepted; or

(b) an invitation to any person in Singapore to make an offer which upon

acceptance would give rise to a contract for the issue or sale of securities. 2.2 The term “securities” is defined under section 239(1) of the SFA to mean: -

(a) shares or units of shares in a corporation;

(b) debentures or units of debentures of an entity;

(c) interests in a limited partnership or limited liability partnership formed in Singapore or elsewhere; or

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(d) such other product or class of products as the Authority may prescribe, but does not include such other product or class of products as the Authority may prescribe as not being securities.

2.3 The term “debenture” is defined under section 239(1) of the SFA to include

debenture stock, bonds, notes and any other debt securities issued by a corporation or any other entity, whether or not constituting a charge on the assets of the issuer but does not include-

(a) a cheque, letter of credit, order for the payment of money or bill of

exchange; (b) subject to the regulations made under this Act, a promissory note having

a face value of not less than $100,000 and having a maturity period of not more than 12 months (the PN Exclusion); or

(c) for the purposes of the application of this definition to a provision of this

Act in respect of which any regulations made thereunder provide that the word “debenture” does not include a prescribed document or a document included in a prescribed class of documents, that document or a document included in that class of documents, as the case may be.

2.4 However, it should be noted that in the upcoming MAS Public FAQs on the

interpretation of the PN Exclusion (Upcoming FAQs), MAS will be taking the position that a promissory note will only qualify for the PN Exclusion if it is issued by one borrower to one single lender and has a face value of not less than $100,000, as well as a maturity period of not more than 12 months. Therefore, an aggregation of multiple loans from multiple lenders, consolidated into one promissory note (Consolidated PN) which has a face value of not less than $100,000 and a maturity period of not more than 12 months, will not qualify for the PN Exclusion. In addition, MAS has also indicated that there is an intention to introduce legislative amendments by the end of 2016 to completely remove the PN Exclusion (Upcoming Legislative Amendments).

2.5 In light of the Upcoming FAQs and the Upcoming Legislative Amendments, it should also be noted that section 239(3) of the SFA further provides that-

(a) any invitation to a person to deposit money with or to lend money to an

entity shall be deemed to be an offer of debentures of the entity; and

(b) any document that is issued or intended or required to be issued by an entity acknowledging or evidencing or constituting an acknowledgment of the indebtedness of the entity in respect of any money that is or may be deposited with or lent to the entity in response to such an invitation shall be deemed to be a debenture.

2.6 As such, once the Upcoming FAQs have been published by MAS, the Consolidated

PNs presently used in the business model of CoAssets Limited will be regarded as

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a document evidencing the indebtedness of an entity, and will hence be deemed to be a debenture (and therefore a security) under section 239(3) of the SFA – since the PN Exclusion will no longer be applicable to Consolidated PNs.

2.7 In summary, section 240 of the SFA applies to all offers made to any person in

Singapore with respect to securities that typically consists of shares and debentures. This would require compliance with the prospectus requirements under Part XIII Division 1 Subdivisions (2) and (3), unless otherwise exempted under the SFA.

3. SMALL OFFER EXEMPTION 3.1 Section 272A(1) of the SFA provides that the prospectus requirement shall not

apply to a personal offer (as defined below at paragraph 3.3) of securities by a person (or his agent), provided that the following conditions are satisfied.

3.2 Amount raised by the offer shall not exceed Singapore Dollars Five Million

(S$5,000,000)

3.2.1 The total amount raised by the person from such offers within any period of 12 months does not exceed Singapore Dollars Five Million (S$5,000,000) (or its equivalent in a foreign currency), or such other amount as may be prescribed by MAS.

3.2.2 In determining the amount raised by an offer, the following are included:

(a) the amount payable for the securities at the time they are

allotted, issued or sold;

(b) if the securities are issued partly-paid, any amount payable at a future time if a call is made;

(c) if the securities carry a right to be converted into other securities

or to acquire other securities, any amount payable on the exercise of the right to convert them into, or to acquire, other securities.

3.2.3 In determining whether the amount raised by a person from offers within

12 months exceeds Singapore Dollars Five Million (S$5,000,000), the following amounts are included: (a) each amount raised by that person from any offer of securities

issued by the same entity; or

(b) each amount raised by that person or another person from any offer of securities of an entity, units or derivatives of units in a business trust, or units in a collective investment scheme, which is a closely related offer (as defined below at paragraphs 3.2.4 and 0).

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3.2.4 According to Regulation 28 of the Securities and Futures (Offer of Investments) (Shares and Debentures) Regulations 2005 (SF(OI)(SD)R), an offer of securities (other than asset-backed securities or structured notes) may be considered a closely related offer to (i) another offer of securities (other than asset-backed securities or structured notes), (ii) an offer of units or derivatives of units in a business trust; or (iii) an offer of units in a REIT when:

(a) both offers form part of a single plan of financing; (b) both offers are made for the primary benefit of the same person

or persons; or (c) both offers are made in connection with the same business or in

relation to a common business venture.

3.2.5 An offer of investment products such as asset-backed securities or structured notes may be considered part of a closely related offer when:

(a) the person who makes the first offer or is a sponsor of the first

offer also makes or is a sponsor of the second offer; or (b) the person who makes the first offer or is a sponsor of the first

offer is a related corporation or related entity of the person who makes or is a sponsor of the second offer.

3.3 The offer is a personal offer

3.3.1 Section 272A(3) of the SFA states that a personal offer is one that (“Personal Offer Test”):

(a) may be accepted only by the person to whom it is made; and (b) is made to a person who is likely to be interested in that offer,

having regard to–

(i) any previous contact before the date of the offer between the person making the offer and that person (Limb A);

(ii) any previous professional or other connection established before that date between the person making the offer and that person (Limb B); or

(iii) any previous indication (whether through statements made

or actions carried out) before that date by that person that indicate to-

(A) the person making the offer;

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(B) a Specified Person; that he is interested in offers of that kind (Limb C).

3.3.2 The definition of a specified person under the SFA is set out in detail in the Annexure. In summary, a specified person refers to a holder of a capital markets services licence to deal in securities, a person licensed under the Financial Advisers Act (Cap. 110) to provide financial advisory services concerning investment products, or persons exempted from such requirements.

3.3.3 Limb A and Limb B of the “Personal Offer Test” provide that a personal

offer would include offers made to persons who have previous contact or who have previous professional or other connection with the offeror. According to the MAS Guidelines on Personal Offers made Pursuant to the Exemption for Small Offers (Personal Offers Guidelines), the reason for this is that “such persons, through their personal contacts and relationships with the offeror, would already have access to the type of information that would have been required to be disclosed in a prospectus”.

3.3.4 In the Personal Offers Guidelines, MAS also states that persons who

satisfy Limb A and Limb B of the “Personal Offer Test” would include “family members and relatives of the offeror (where the offeror is an individual), the offeror’s controlling shareholders, management and directors (where the offeror is an entity) as well as business associates and other persons whom the offeror reasonably believes to have sufficient knowledge of the business operations, financial performance and position of the entity the securities of which are the subject of the offer”.

3.3.5 The Personal Offers Guidelines also states that “persons with whom the

offeror, or where the offeror is an entity, its controlling shareholders, the management and directors have only social or casual relationships” would not be considered to have satisfied Limb A or Limb B of the “Personal Offer Test”.

3.3.6 Limb C of the “Personal Offer Test” also provides that a personal offer would include offers made to persons who have previously indicated interest (whether through statements made or actions carried out) to the offeror, or a Specified Person, that they are interested in offers of that kind (Qualified Investor).

3.3.7 According to the Personal Offer Guidelines, as the number of persons with whom an offeror has prior contact or connection may be limited, Limb C makes it possible for the offeror to “enlist the help of a Specified Person in its offer so as to tap on the distribution network of the Specified

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Person and extend the reach of its offer to persons whom it has no prior contact or connection with but who have previously indicated interest in offers of such securities made under an exemption”.

3.3.8 In this regard, the Personal Offer Guidelines emphasizes that an offeror

who wishes to enlist the help of a Specified Person must make sure that the Specified Person, acting as agent of the offeror, has proper “know your client” and pre-qualification procedures to ensure that offers of securities are “made only to investors who fully understand the risks involved and still view such investments as suitable in light of their investment objectives, financial means and risk profiles”.

3.3.9 MAS would generally consider an offeror as having appointed a Specified

Person with proper procedures to pre-qualify investors for small offers if the following procedures are carried out by the Specified Person- (a) information on a customer’s interest in exempted offerings is

first gathered by means of a generic and neutral questionnaire that does not refer to a specific transaction; and

(b) following a customer’s indication of interest, its representative

conducts a comprehensive analysis of the investment needs and risk profile for that customer and having done so, reasonably believes that --.

(i) the customer has sufficient knowledge and experience in

financial and business matters to evaluate the risks and the merits of investments in exempted securities;

(ii) the customer is fully aware of the risks involved in such investments;

(iii) the customer views exempted securities as appropriate investments having regard to his investment objectives, financial means and risk profile; and

(iv) its representative is satisfied that the investment is suitable for the customer in light of his investment objectives, financial means and risk profile.

3.4 Conditions relating to the offer document

3.4.1 In making the offer, the offeror must give the offeree the following statements and notifications by setting them out on the first page of the notice, circular, material, publication or document issued in connection with the offer (offer document): (a) the following statement in writing:

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(b) a notification in writing that the securities being offered shall not

be subsequently sold to any person, unless the offer resulting in such subsequent sale is made in compliance with the prospectus requirements in Subdivision 2 or 3 of the SFA otherwise under any exemptions in Subdivision 3 of Division 1 of the SFA.

3.5 Restrictions against advertisements

3.5.1 In addition to the above, the following restrictions against

advertisements also apply-

(a) the offer must not be accompanied by an advertisement offering or calling attention to the offer or intended offer;

(b) no selling or promotional expenses are paid or incurred in

connection with the offer other than those incurred for administrative or professional services or incurred by way of commission or fee for services rendered by the holder of a capital markets services licence to deal in securities, an exempt person in respect of dealing in securities, or a person who is licensed, approved, authorised, or otherwise regulated under the laws, codes or other requirements of any foreign jurisdiction in respect of dealing in securities, or who is exempted therefrom in respect of such dealing; and

(c) no prospectus in respect of the offer has been registered by the

MAS, or where a prospectus has been registered, it has expired or the person making the offer had informed the MAS of its intent to make the offer in reliance on the exemption.

3.5.2 Under section 272A(10), an “advertisement” means:

(a) a written or printed communication; (b) a communication by radio, television or other medium of

communication; or (c) a communication by means of a recorded telephone message

but does not include (a) a document purporting to describe the securities being offered,

or the business and affairs of the person making the offer, the issuer or, where applicable, the underlying entity;

(b) a document purporting to have been prepared for delivery to

and review by persons to whom the offer is made so as to assist them in making an investment decision in respect of the securities being offered.

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(c) a publication which consists solely of a disclosure, notice or report required under the SFA or any listing rules or other requirements of a securities exchange, futures exchange or overseas securities exchange, which is made by any person; or

(d) a publication which consists solely of a notice or report of a

general meeting or a proposed general meeting of the person making the offer, the issuer, the underlying entity or any entity, or a presentation of oral or written material on matters so contained in the notice or report at the general meeting

The above description mirrors the definition of an information memorandum in section 275(2) of the SFA. Therefore, it is possible to issue an information memorandum to accompany the offer while relying on the applicable exemption in section 272A of the SFA.

4. RESTRICTION ON SUBSEQUENT OFFER 4.1 The small offer exemption is not excluded from the operation of Section 257 of

the SFA. This could potentially attract liability (civil and/or criminal) arising from any document accompanying a subsequent offer of securities to another person that fails to meet the prospectus requirements where:

(a) an entity allots or agrees to allot to any person any securities of the entity

with a view to all or any of them being subsequently offered for sale to another person (subsequent offer); and

(b) the subsequent offer does not qualify for an exemption under Part XIII

Division I Subdivision (4) (other than section 280) of the SFA. 4.2 Significantly, the operation of Section 257 affects subsequent offers and not the

subsequent sale of the securities. The definition of a “subsequent offer” is analogous to the meaning ascribed to an “offer” under Section 239(6) of the SFA, as discussed above at paragraph 2.1.

4.3 Under Section 257(2) of the SFA, any document which accompanied the

subsequent offer of securities shall be deemed a prospectus issued by the entity, and the entity shall be deemed to be the person making the offer, where the intention behind an original allotment of securities was that they would be offered for subsequent sale to other persons. Hence, the document accompanying the subsequent offer would need to comply with the prospectus requirements, and failure to do so may potentially attract liability (civil and/or criminal).

5. EXTRA-TERRITORIAL EFFECT OF THE SFA 5.1 Due to the increasingly borderless and cross-jurisdictional nature of capital

markets today, the extra-territorial provision in section 339 of the SFA was

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enacted to ensure that the regulatory objectives comprising systematic stability, market integrity and investor protection are not compromised by the blurring of physical geographical boundaries that financial services operate on.

5.2 Section 339 in relation to the Offer of Investments under Part XIII 5.2.1 Section 339 of the SFA expressly grants the Singapore courts jurisdiction over acts

taking place (partly or wholly) outside Singapore that may constitute offences under the primary offence-creating provisions, in particular, Part XIII of the SFA concerning the offer of investments.

5.2.2 It should be note that, on its own, Section 339 of the SFA is not an offence-

creating provision, but must be read with the primary offence creating provisions under the SFA.

5.3 Scope of section 339 5.3.1 Based on the Guidelines on the Application of Section 339 (Extra-Territoriality) of

The Securities and Futures Act issued by MAS (Guidelines on Section 339), Section 339 can be classified into the following two limbs:

(a) Any act committed in Singapore which contravenes an offence-creating

provision in the SFA, even if the act is only partially carried out in Singapore, is triable in Singapore courts (Section 339(1) of the SFA deems the act to be committed wholly in Singapore); or

(b) Any act, which contravenes an offence-creating provision in the SFA, that

is committed wholly outside Singapore but has a substantial and reasonably foreseeable effect in Singapore (effects doctrine), is triable in Singapore courts under Section 339(2).

5.4 Application of the effects doctrine to acts committed wholly outside Singapore 5.4.1 In considering whether Section 339(2) applies to an act carried out wholly outside

Singapore, the Guidelines on the Application of Section 339 suggests that the following factors in relation to the effects doctrine would be taken into consideration by MAS:

(a) Whether the effect of the act in Singapore is “Substantial”

(i) The number of persons in Singapore to whom an offer of services or an invitation to engage in any conduct that involves the carrying out of an activity regulated under Part II, III, IV or XIII (relevant act) is made; or

(ii) Whether the act has a significant or adverse impact on the soundness, stability and safety of Singapore’s financial system, or on public or investor confidence in the soundness, stability and safety of Singapore’s financial system, or is detrimental to the public interest or protection of investors.

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(b) Whether the effect of the act in Singapore is “Reasonably foreseeable”

Whether – (i) the offer of services or the invitation to engage in any conduct that

involves the carrying out of the relevant act is made to persons in Singapore;

(ii) any advertisement or published information about an offer of services or invitation to engage in any conduct that involves the carrying out of the relevant act is directed or targeted at persons in Singapore;

(iii) the foreign entity accepts or appears willing to accept orders or applications from persons in Singapore to engage in any conduct that involves the carrying out of the relevant act;

(iv) the foreign entity enters into contractual relationships with persons in Singapore in connection with the carrying out of the relevant act; or

(v) the offer is priced in Singapore dollars. 5.4.2 In addition to determining whether section 339(2) of the SFA applies to an offer

of securities made outside Singapore, regulation 33 of the SF(OI)(SD) Reg makes further reference in determining its applicability alongside the circumstances highlighted in the corresponding MAS Guidelines on Section 339.

5.4.3 Regulation 33 (1) of the SF(OI)(SD) Reg provides that section 339(2) of the SFA will

not apply to an offer if:

(a) the number of enquiries or applications from persons in Singapore in response to such offer is insubstantial;

(b) the number of persons in Singapore to whom the offer is made is

insubstantial; (c) the number of persons in Singapore to whom the securities are issued is

insubstantial; and (d) the amount raised from persons in Singapore is insubstantial.

5.4.4 Notwithstanding that the conditions in regulation 33(1) of the SF(OI)(SD) Reg

cannot be satisfied, regulation 33(2) of the SF(OI)(SD) Reg further provides that section 339(2) of the SFA will not apply to an offer if:

(a) the offer is not denominated in Singapore dollars;

(b) there are systems to prevent persons in Singapore from subscribing and

adequate checks to ensure that these systems are effective;

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(c) the offer is not made to or directed at persons in Singapore, whether

electronically or otherwise; (d) there is in place a prominent disclaimer comprising of a statement to the

effect that the offer is made to or directed at only persons outside Singapore and may be acted upon only by persons outside Singapore;

(e) the materials for the offer do not contain any information which is

specifically relevant to persons in Singapore; and (f) the offer is not referred to in, or directly accessible from, any source

which is intended for persons in Singapore. 5.4.5 Therefore, it would first be necessary to determine if the offer of securities is an

offer to any person in Singapore. We would then need to consider the extra-territorial provisions under the SFA and if section 339 of the SFA can be excluded pursuant to the provisions of regulation 33 of the SF(OI)(SD) Reg. Should the offer fall outside the regime of offers made to persons within our jurisdiction, the effect of the non-applicability of section 339 would mean that the issuing company would no longer be required to comply with the prescribed limits pursuant to the small offer or private placement exemption.

We hope that the above is sufficiently clear. Should you have any queries, please do not hesitate to contact us. Harry Elias Partnership LLP

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SCHEDULE 4

Assumptions and Qualifications

1. ASSUMPTIONS 1.1 In providing the Opinion, we have made the following assumptions:

1.1.1 that there are no material documents or other material information in

existence other than those which were disclosed to us, relevant to the matters dealt with in this Opinion;

1.1.2 that all documentation, information (in whatever form) and responses provided to us is true, complete and accurate; and

1.1.3 that the responses to written and oral questions which have been put to the directors, officers, employees and agents of CoAssets Singapore and its related bodies corporate and third parties (other than Harry Elias Partnership LLP and its representatives) and searches obtained from public records have been true, complete and accurate in all respects, and have not been misleading.

1.2 For the purposes of this Opinion, we rely on the truth, correctness and accuracy of all statements made and confirmations given to us by CoAssets Singapore pursuant to our engagement.

1.3 The making of each of the above assumptions indicates that we have assumed that the subject of each assumption is true, correct and complete in every way and the assumptions made in this Opinion does not imply that we have made any enquiry to verify an assumption.

1.4 No assumption is limited by any other assumption.

2. QUALIFICATIONS This Opinion is subject to the following qualifications:

2.1 we have acted and been involved only in our capacity as the Singapore legal

adviser to CoAssets Singapore;

2.2 we have not gone beyond the scope of the enquiries allocated to us;

2.3 we have not been responsible for or involved in, and we express no opinion on, any business, operational, facilities, commercial, market or industry related, financial, accounting, statistical, taxation, inventory and stock, fixed assets, suppliers and customers, research and development, intellectual property, and environmental matters and issues. We are also in particular, unable to verify any statement pertaining to financial and accounting information, information on profitability, viability or reputation, technical information and investment considerations, personal profile of directors, management and third parties

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(other than inspecting the documents given by them), and all other information which is within the scope of expertise of other advisers such as auditors, merchant bankers, tax specialists and environmental specialists (if any);

2.4 this Opinion does not relate to:

2.4.1 any statement concerning the Offer or the Prospectus that may be made by any person; or

2.4.2 any conduct that any person may engage in concerning the Offer or the Prospectus,

which is not contained or referred to in the Prospectus;

2.5 our work has been, and this letter is, limited solely to the laws of Singapore (Relevant Jurisdiction) in force at 17 May 2016 and we express no opinion as to the impact or relevance of the laws of any other jurisdiction or (except as expressly provided in this letter) factual matters;

2.6 in giving this Opinion we only hold ourselves out as having skills and expertise as lawyers with respect to the laws of the Relevant Jurisdiction and disclaim any skills or expertise in any other capacity, financial, accounting, statistical or otherwise. We have been engaged on the express basis that we are to provide only this Opinion; and

2.7 this Opinion is limited to the knowledge of those of our partners and solicitors who have acted for CoAssets Singapore in respect of the matters referred to in this Opinion.

3. Other than as set out in the Prospectus, we were not involved in the preparation of the Prospectus and have not authorised or caused the issue of any part of or statement in the Prospectus and, to the maximum extent permitted by law, disclaim any responsibility or liability for any part of the Prospectus.

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Yours faithfully Title Harry Elias Partnership LLP

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23 May 2016 The Directors Our Ref:DC:MM:12633 CoAssets Australia Pty Ltd level 2 1139 Hay Street WEST PERTH WA 6005

Dear Directors,

Re: Australian regulatory advice We have been instructed to advise on how the Australian financial services regulatory rules apply to the current business model operated by CoAssets Pte Ltd ("CoAssets Singapore") in Singapore as it is made available to Australian investors by CoAssets Australia Pty Ltd ("CoAssets Australia"). We have considered the matter and our advice follows: 1. Background

1.1 In providing this advice we have considered:

(a) an opinion letter dated 18 May 2016 from Harry Elias Partnership LLP in relation to the application of Singaporean laws to the CoAssets Singapore business ("HEP Advice")1;

(b) information found on the websites coassets.com and coassets.com.au ("Website");

(c) template Promissory Note documentation; and

(d) template Personal Guarantee documentation.

1.2 CoAssets Singapore provides an online interactive business networking and educational platform on a "crowd funding" model ("Platform") under which the following services are offered:

(a) Opportunity Providers can list available real estate properties or development projects on the Website for potential investors to view and express an interest in. Should sufficient expressions of interest be received CoAssets Singapore will contact the Opportunity Provider to see if they wish to organise an event.

(b) Opportunity Providers can seek debt financing from investors in the form of a promissory note (backed by personal guarantee) for particular real estate properties or development projects listed on the Website. CoAssets

1 For ease of reference we have attempted to use the same terminology as used in the HEP Advice when

considering the CoAssets business model.

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http://www.coassets.com/

http://www.coassets.com.au/

Holley Nethercote Commercial & Financial Services Lawyers 2

Singapore facilitates the listing of the offers, establishes the loan, handles investor cash and attends to debt collection in return for which it receives a fee from the Opportunity Provider ("P2P Lending Platform").

(c) A related set of events, advertisements, tools and news and information services.

A detailed description of the business segments presently operated by CoAssets Singapore are set out in Schedule 1 to the HEP Advice.

1.3 In addition to the above we are instructed that CoAssets Singapore is also considering developing a corporate equity funding model based on the P2P Lending Platform.

1.4 CoAssets Australia makes the Platform available to Australian resident investors and the Board of CoAssets Australia requires confirmation as to the application of the Australian financial services laws to its business model.

1.5 We note that CoAssets Australia:

(a) has been appointed as an authorised representative (number 1239859) of Melbourne Securities Corporation Limited ("MSC"); and

(b) has notified ASIC2 that it is operating a business introduction service under the class order relief discussed in section 13.

2. Conducting a financial services business in Australia

2.1 The Corporations Act 20013 provides that a person who carries on a financial services business in Australia must hold an Australian Financial Services Licence ("AFSL"), or be a representative of a person who holds an AFSL4.

2.2 Under the legislation, CoAssets Australia will be carrying on a business in Australia if it:

(a) has a place of business in Australia;

(b) administers, manages or otherwise deals with property situated in Australia;

(c) engages in conduct that is intended to, or likely to, induce Australian residents to use the financial services of CoAssets.

2.3 It is clear that CoAssets Australia is "carrying on a business in Australia" through the Platform. Its activities meet a number of the necessary criteria of the common law definition of "carrying on business", encompassing elements such as system, repetition and continuity and it has a place of business in Australia.

2 The Australian Securities and Investments Commission – the Australian financial services regulator.

3 All subsequent legislative references are to this Act or the regulations made under it.

4 Section 911A.

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3. The consequences of providing a financial service in Australia

3.1 If CoAssets Australia carries on a financial services business in Australia then it must generally hold an AFSL covering the financial services that it provides.

3.2 However, the legislation5 also permits a person to provide financial services as a representative of another person that holds an AFSL with the relevant authorisations. This permits CoAssets Australia to "use" the AFSL of another entity.

3.3 The need for an AFSL, and the authorisations it will include, will therefore be determined by the financial services (if any) that CoAssets Australia provides and the manner in which it provides them.

4. The types of financial services

4.1 The legislation defines the following financial services6:

(a) providing financial product advice;

(b) dealing;

(c) providing custodial or depository services;

(d) making a market;

(e) operating a managed investment scheme; and

(f) providing a traditional trustee company service.

4.2 Based on our understanding of the CoAssets Australia business we are satisfied that CoAssets Australia will not be providing the service referred to in paragraph 4.1(f). However, the other services need to be considered in more detail.

4.3 The provision of a financial service is only regulated by the financial services laws if it relates to a financial product. It therefore also needs to be considered whether the activities of CoAssets Australia involve financial products – and particularly whether the Platform is itself a financial product.

5. Is the Platform a financial product?

5.1 A financial product is defined as a facility through which a person does one or more of the following7:

(a) makes a financial investment;

(b) manages a financial risk; or

(c) makes non-cash payments.

5 Section 911A(2)(a).

6 Section 766A.

7 Section 763A(1).

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5.2 CoAssets Australia is clearly offering a "facility" to its clients through the Platform. However, we do not consider that a person using the Platform is making an investment. The Platform facilitates an investment in other types of products but it does not, in itself, generate any financial return to an investor that uses it.

5.3 The meaning of the term "manage" concerns the management of the financial consequences of the risk, rather than the risk itself or the circumstances giving rise to the risk8. Accordingly, we also do not consider that the Platform is managing a financial risk – the financial risks that an investor is subject to in the underlying investment products are the same whether or not they use the Platform.

5.4 A person makes a "non-cash payment" if they9:

"…make payments, or cause payments to be made, otherwise than by the physical delivery of Australian or foreign currency in the form of notes and/or coins."

We do not consider that the Platform makes any payments. Settlement of transactions occurs using the payment systems provided under the general banking system.

5.5 In our opinion, the Platform is not, in itself, a financial product based on the general definition. However, in addition to the general definition the legislation specifies:

(a) certain financial instruments as being financial products10; and

(b) certain financial instruments as not being financial products11.

These lists of specific inclusions and exclusions are extensive. We do not consider that any of the exclusions apply to the Platform. In relation to the specific inclusions it only needs to be considered whether the Platform is a "managed investment scheme".

6. Is the Platform a managed investment scheme?

6.1 A managed investment scheme is a scheme that has the following features12:

(a) people contribute money or money’s worth as consideration to acquire rights ("interests") to benefits produced by the scheme;

(b) any of the contributions are to be pooled, or used in a common enterprise, to product financial benefits, or benefits consisting of rights or interests in property, for the people ("members") who hold interests in the scheme (whether as contributors to the scheme or as people who have acquired interests from holders);

(c) the members do not have day-to-day control over the operation of the scheme (whether or not they have the right to be consulted or give directions).

8 Section 763C.

9 Section 763D(1).

10 Section 764A.

11 Section 765A.

12 Section 9.

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6.2 We note that this definition is conceptually similar to the "collective investment scheme" defined under Singaporean law. Based on the reasoning set out in the HEP Advice13 we consider that CoAssets Australia is not operating a managed investment scheme through the Platform. Rather, it is providing a service in the nature of a facilitator, conduit or intermediary.

6.3 However, we consider that CoAssets Australia is providing a custodial service in relation to the P2P Lending Platform. This has implications in Australia which are discussed further below.

7. Is CoAssets Australia providing financial services in relation to other financial products?

7.1 In our opinion, the Platform is not, in itself, a financial product based either on the general definition or the specific inclusions. Accordingly, CoAssets Australia is not operating a managed investment scheme.

7.2 However, the operation of the Platform concerns the following products which may in themselves be financial products:

(a) real property;

(b) credit facilities;

(c) promissory notes;

(d) corporate equity; and

(e) bank deposit accounts.

7.3 Real property and credit facilities are not financial products within the meaning of the legislation. Accordingly, CoAssets Australia can provide services in relation to direct real property investment without infringing the financial services laws. This is an important point as a large part of the operation of the Platform concerns interests in real property. We discuss the question of credit facilities in section 12.

7.4 Bank deposit accounts14 and corporate equity are clearly financial products. Promissory notes issued by corporations are regarded as debentures which are a financial product.

7.5 Debentures and corporate equity are also usually treated as securities under the Australian legislation. We note that there is no exemption under Australian law for certain types of promissory notes as presently applies under Singaporean law15. The public offering of debentures and corporate equity is also regulated under Australian law and these rules are considered further below in section 13.

13

Section 4 of the HEP Advice. 14

Technically, they are referred to as "basic deposit products" in the legislation. 15

See section 3.2.1 of the HEP Advice. We note that the situation in Singapore is likely to change in the near future as set out in the HEP Advice.

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7.6 The question that then needs to be answered is whether CoAssets Australia is:

(a) advising;

(b) providing a custodial service;

(c) dealing; or

(d) making a market,

in relation to bank deposit accounts, corporate equity and promissory notes.

8. Providing financial product advice

8.1 Financial product advice is defined as a recommendation or a statement of opinion, or a report of either of those things, that:

(a) is intended to influence a person or persons in making a decision in relation to a particular financial product; or

(b) could reasonably be regarded as being intended to have such an influence16.

The provision of purely factual information is not considered to be the provision of advice.

8.2 There are two types of financial product advice: general and personal. General financial product advice is "advice that is not personal advice". Personal advice is advice given to a person in circumstances where the provider of the advice has considered one or more of the person’s objectives, financial situation and needs.

8.3 The nature of the Platform is such that it will be difficult for CoAssets Australia to contend that it will not be providing some form of general advice to potential investors in relation to the promissory notes and corporate equity. We note that CoAssets Australia has obtained an authorisation from MSC to provide general advice in relation to securities17.

8.4 CoAssets Australia is unlikely to be providing general advice in relation to bank deposit accounts as it will only be providing the details of existing accounts (which is factual information) to facilitate payments by clients. CoAssets Australia will not be influencing investors to open their own bank accounts.

9. Providing a custodial or depository service

9.1 CoAssets Australia will provide a custodial or depository service to investors if, under an arrangement between CoAssets Australia and the investors, a financial product, or a beneficial interest in a financial product, is held by CoAssets Australia in trust for, or on behalf of, the investor or another person nominated by the investor18.

16

Section 766B. 17

As noted earlier, the promissory notes and corporate equity both come within the meaning of "securities". 18

Section 766E(1).

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9.2 We note that the promissory notes will be entered into directly between the Opportunity Provider and the investors with the result that CoAssets Australia will not be providing a custodial service in relation to the promissory notes.

9.3 We presume that the corporate equity will be issued directly to the investors (or their nominees) with the result that CoAssets Australia will not be providing a custodial service in relation to the corporate equity.

9.4 The holding of cash amounts (such as loan funds, loan repayments proceeds or interest income) on trust by CoAssets Australia for investors prior to disbursement in a bank deposit account will constitute the provision of a custodial service. However, the holding of basic deposit products and client money accounts is specifically excluded from the definition of a custodial or depository service19.

9.5 As a result, CoAssets Australia is not providing a custodial or depository service through the Platform.

10. Dealing

10.1 The financial service of dealing is defined as:20

(a) applying for or acquiring a financial product;

(b) issuing a financial product;

(c) in relation to securities or managed investment interests – underwriting the securities or interests;

(d) varying a financial product; or

(e) disposing of a financial product.

10.2 Arranging for a person to engage in conduct referred to in paragraph 10.1 is also included in the definition of dealing21. We note that ASIC also takes a broad interpretation of "arranging". ASIC will treat any processes "by which a person negotiated for, or brings into effect, a dealing in a financial product (e.g. an issue, variation, disposal, acquisition or application)"22 as arranging and, therefore, dealing.

10.3 In the ordinary course of operating the Platform, CoAssets Australia will place investor funds in bank deposit products and arrange for a person to subscribe for corporate equity and enter into promissory notes. Both activities constitute dealing.

10.4 However, the exclusion that is described in section 9.4 above, in effect, also excludes dealing in bank deposit products from being a financial service23. There is no applicable dealing exclusion in relation to corporate equity or promissory notes.

19

Regulation 7.1.40(1)(a). We note, in any event, that MSC will be holding the relevant bank account. 20

Section 766C(1). 21

Section 766C(2). 22

ASIC Regulatory Guide 36 at paragraph RG36.38. 23

Regulation 7.1.35(1).

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10.5 We note that CoAssets Australia has obtained an authorisation from MSC to deal on behalf of another person in relation to securities.

11. Making a market

11.1 A person makes a market for a financial product if they regularly state "the prices at which they propose to acquire or dispose of financial products on their own behalf"24.

11.2 It is clear that CoAssets Australia does not provide a pricing service through the Platform. Accordingly, we do not consider that CoAssets Australia is making a market in any type of financial product through the Platform.

12. The provision of credit

12.1 The HEP Advice considers whether CoAssets Singapore is a moneylender under Singaporean law25.

12.2 Australian laws also regulate the lending of money. However, the legislation only applies where the credit is provided to a natural person or to a strata corporation26.

12.3 As noted in the HEP Advice, membership of the P2P Lending Platform is only available to corporations27. Accordingly, the Platform does not come under the Australian consumer credit laws.

13. The public offering of securities

13.1 We have noted above that the promissory notes and corporate equity will constitute securities for the purposes of Australian law. Any public28 offer of securities in Australia generally requires:

(a) the issuing of a prospectus29; and

(b) in the case of promissory notes, entering into a trust deed with an independent trustee30.

These provisions potentially apply to CoAssets Australia and each of the Opportunity Providers.

13.2 However, ASIC has provided class order relief31 from these requirements for business introduction services ("BIS Class Order") which the Platform and the Opportunity Providers can potentially come within. The relief covers all types of securities and potential investors but is conditional upon:

24

Section 766D. 25

Section 6 of the HEP Advice. 26

The owners corporation of a strata titled property. We presume that such entities would not be providing opportunities through the Platform. 27

Section 6.5 of the HEP Advice. 28

There are exemptions for offerings to "wholesale clients" (that is institutional and sophisticated investors) and small scale offerings but these are generally inapplicable in a crowd funding environment. 29

Section 706. 30

Section 283AA. 31

ASIC Class Order 02/273.

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(a) the offer being for less than AUD5 million in relation to any one Opportunity Provider;

(b) the Opportunity Provider employing less than 250 FTE employees; and

(c) various specified disclosures being made to potential investors.

13.3 We note that CoAssets Australia has notified ASIC that it is operating a business introduction service under the BIS Class Order.

13.4 It should be noted that the BIS Class Order does not provide an exemption from the need to obtain an AFSL if one is otherwise required. Elsewhere in this advice we consider the need for CoAssets Australia to hold an AFSL. In relation to the Opportunity Providers they are exempted from the need to hold an AFSL to the extent that they are advising or dealing in their own securities. This means that an Opportunity Provider would not need to hold an AFSL in order to offer and issue either promissory notes or corporate equity.

13.5 We also note that the BIS Class Order "sunsets" on 1 April 201732. This means that ASIC has to decide whether to continue the operation of the BIS Class Order after that time. ASIC’s website shows that a Consultation Paper on the BIS Class Order is due to be issued in June 2016. The Consultation Paper will indicate what ASIC’s attitude will be to the continuation of the operation of the BIS Class Order.

14. Advertising and hawking restrictions

14.1 Australia has limited prohibitions on the advertising of financial products33. They apply to a person that:

(a) advertises the product; or

(b) publishes a statement that is reasonably likely to induce people to acquire the product.

It would appear that the Platform is advertising the promissory notes and corporate equity offerings that are listed on it. However, the consequences of this are not particularly onerous (essentially disclosure of certain matters).

14.2 Australia also has general prohibitions on making false or misleading statements and conduct that is misleading or deceptive which have obvious application to advertising and promotional materials.

14.3 The Australian legislation also prevents a person from offering securities for issue or sale in the course of or because of an unsolicited meeting with, or telephone call to another person34. It is difficult to see how the Platform results in any unsolicited contact with a person in these terms. Rather, the existence of the Platform will only come to the attention of an investor due to advertising or through the investor's own enquiries. We note that the BIS Class Order also contains an exemption from these rules.

32

All Class Orders "sunset" after 10 years. 33

Section 1018A. 34

Section 736.

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15. Use of template documents in Australia

15.1 As noted above, we have been provided with templates of the promissory note and personal guarantee that is used to document debt funding arrangements through the Singapore P2P Lending Platform.

15.2 The are no Australian laws that require any particular form of wording for either a promissory note or a personal guarantee.

15.3 The templates provided are relatively concise and in a fairly generic form for such types of documents. Even though they are expressed to be subject to Singaporean law we consider them to be legally effective under Australian law with minor changes.

15.4 We have prepared revised versions of the templates for the promissory note and personal guarantee for use by CoAssets Australia.

16. Summary of advice

16.1 In our opinion, by inducing Australian residents to use the Platform CoAssets is conducting a financial services business in Australia.

16.2 Although the Platform is not itself a financial product it does involve the provision of general advice and dealing services to investors in relation to financial products.

16.3 Accordingly, CoAssets Australia must either:

(a) obtain an AFSL with advice and dealing authorisations in relation to securities; or

(b) become an authorised representative of an AFSL holder who has such authorisations under its AFSL.

CoAssets Australia has satisfied the requirement under paragraph (b) by becoming an authorised representative of MSC.

16.4 The BIS Class Order provides conditional relief from the securities offering rules that can be taken advantage of by the Platform and the Opportunity Providers.

Please let us know if we can be of further assistance. Yours sincerely,

David Court Partner HOLLEY NETHERCOTE

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Fujian Ruiquan Law Firm

Address: Teaching Practice Base, Faculty of Law,

Building 5, Cangshan Campus,

Fujian Normal University

8 Shansan Road, Cangshan

Fujian

Tel/Fax: (0591) 833 00729 Postal Code: 35007

Lawyer, Yang Qing Mobile: 15005958642

__________________________________________________________________________

Legal Opinions

(2016) Fujian Ruiquan No.

Fujian Shanding Network Technology Co., Ltd.:

In accordance with the agreement between us, Fujian Ruiquan Law Firm has appointed a

lawyer to provide legal opinions on the issues associated with the company’s development of

financial intermediary services through network platforms based on the “Letter of Reply

Stating Agreement to the Establishing of Sino-Foreign Joint Venture Fujian Shanding

Network Technology Co., Ltd.”; “Certificate of Approval for Foreign-Invested Companies in

the People’s Republic of China”; business licence; organisational credit code certificate; legal

opinions from a Singaporean law firm; and other materials provided by the company.

The lawyer has understood the following facts based on the materials provided by the

company:

I. Company’s basic information

The company is a Sino-foreign joint venture between China’s Fujian Yaosheng Asset

Management Co., Ltd. (Chinese party; hereinafter referred to “Yaosheng”) and Singapore’s

CoAssets International Private Limited (foreign party; hereinafter referred to as “Singapore

Company”) established on 1 December 2015 with approval from Taijiang’s Ministry of

Commerce. The company’s unified social credit code is 91350100MA344T1X9, legal

representative is She Huan Tung and registered business address is 5-05, 2 Shuguang Road,

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Aofong Street, Taijiang, Fuzhou, Fujian (intersection of Yuanlianjiang Road East and

Shuguang Road). The company’s total investment is RMB10 million and registered capital is

RMB7 million. Of which, Yaosheng contributed RMB4.2 million in cash in renminbi,

constituting 60% of the registered capital; the Singapore Company contributed RMB2.8

million in cash, constituting 40% of the registered capital.

On 1 December 2015, with the approval of the Fujian People’s Government, the company

obtained the Certificate of Approval for Foreign-Invested Companies in the People’s

Republic of China with the business scope: computer network technology development,

technical advisory, technical services, technical transfer, computer system integration,

software and hardware development and sales, financial information advisory services, data

processing services, electronic commerce (excluding value-added telecommunications and

financial services), investment advisory, investment management and consultancy, asset

management (excluding trust and financial asset management, and securities financing);

corporate image planning, advertisement designs and creation, public relation activity

planning, and marketing planning. (Approval from the relevant authorities must be obtained

for business activities that require permits in accordance with the law).

II. Company’s operating model

The company provides customers with professional financial intermediary services through

an electronic platform, www.coassets.com.cn, to attract borrowers who require loans due to

shortage of funds and investment beneficiaries with idle funds and no specific investment

projects, and to create financial connections by connecting borrowers with lenders through

the network platform. The parties will then sign the relevant contracts using fixed electronic

loan agreements created by the company to facilitate the transaction(s) between the borrower

and lender. The company profits by collecting a certain percentage of the transaction as an

intermediary service fee. However, the company pledges not to provide any funds and/or to

accede to security risks for any transactions.

Based on the aforementioned facts, the lawyer has provided the following legal analysis:

I. Is the operating model illegal

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http://www.coassets.com.cn/

In principle, the current laws and standards of the People’s Republic of China do not prohibit

the aforementioned operating model. In accordance with Article 2 of the “Non-Financial

Institution Management Measures” drafted and issued by the People’s Bank of China: In

these measures, payment services of a non-financial institution refers to any non-financial

institution that provides the following monetary fund transfer services while acting as an

intermediary organisation between a payer and a payee: (1) network payment; …; (4) any

other payment services determined by the People’s Bank of China. In these measures,

network payment refers to the act of transferring any monetary asset between a payer and a

payee through a public of private network, including currency exchange, internet payments,

mobile phone payments, fixed telephone payments and digital television payments. The

article also clearly states that the existence of internet financial platforms or crowdfunding

platforms are both legitimate and necessary.

In addition, the “Notice on Relevant Risk Notification of Peer-to-Peer Loans” issued by the

Banking Regulatory Commission of the People’s Republic of China also states that the

illegitimate existence of peer-to-peer loan models cannot be denied, but necessary steps must

be taken to prevent the risks associated with peer-to-peer loan (business) models.

In view of the significant unknown risks associated with internet financing, Chinese

regulatory authorities have implemented a review and licence system on internet payment

organisations. In accordance with Article 3 of the “Non-Financial Institution Management

Measures”: non-financial institutions providing payment services shall become a payment

organisation by obtaining a Payment Business licence in accordance with the regulations of

these measures. Payment organisations shall be regulated by the People’s Bank of China. A

non-financial organisation or individual shall not engage in payment services directly or

indirectly without prior approval from the People’s Bank of China. Although the company is

an independent third party payment management institution, the transfer and payment of

funds between payees and payers on the platform are not performed by the company.

However, if the company participates in any third party payment platform cooperation, the

company shall fully understand whether the payment platform has been approved by the

People’s Bank of China and other regulatory authorities. If the payment organisation has

obtained the relevant approvals, the company may establish a cooperation without being

concerned about any potential legal risks of operating an illegal business.

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II. Legal effects of transactions completed through the network platform

In view that all information, funds, contract and contract signing procedures performed

through the company’s network platform are realised through the network, the contract

stating the rights and obligations of both parties to the loan becomes a medium through the

network platform and constitutes an electronic contract in the strictest sense. And the legal

effects of electronic contracts are recognised by the laws and regulations of the People’s

Republic of China, and electronic contracts are binding on both parties of the loan.

Article 10 of the “Contract Law of the People’s Republic of China” states that: The relevant

parties may establish a contract in written format, verbal format or any other format.

Contracts that are required to be in written format by law and administrative regulations with

the same guidelines shall always be in written format, as stated. The contract shall be

established in written format if the relevant parties have agreed to do so. Article 11 states that:

Written format refers to formats such as a written contract, letter and digital file (including

telegraph, telex, fax, electronic data exchange and e-mail) that presents the contents

contained therein in a tangible manner. And Article 3 of the “Electronic Signature Law”

states that: For contracts or other files, documents or instruments used in civil activities, the

relevant parties can agree to use or not to use an electronic signature or data message. If the

relevant parties have agreed to use an electronic signature or data message, the legal effects

of the instrument cannot be denied due to the use of electronic signature or data message.

Article 4 states that: Any data message that presents the contents contained therein in a

tangible manner and can be retrieved or checked at any time shall be considered as a written

format that fulfils the requirements of the laws and regulations. Article 14 states that:

Reliable electronic signatures, handwritten signatures or seals shall have the same legal

effects.

Based on the aforementioned regulations, electronic contracts and traditional contracts are

granted the same legal effects and legislatively, electronic contracts are granted the same

legal standing and are legally binding on both parties of the loan.

A loan transaction that has been concluded on the company’s platform may involve an

individual and an individual; an individual and a legal person or other organisation; a legal

person or other organisation; and a legal person or other organisation. With regards to

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whether the identity type of the parties to a loan can put the legal effects of the loan into

question, in accordance with Article 1 of the “Supreme People’s Court’s Ruling on Issues

Pertaining to the Application of the Law on Cases Involving Private Lending”, it states that:

In this article, private lending refers to any act of financial intermediation between a natural

person, legal person and other organisation. The article has clearly confirmed that civil

lending refers to any act of financial intermediation between a natural person, legal person

and other organisation. From the legislative standpoint, the legal effects of any lending

relationship between the aforementioned parties have been recognised.

III. Avoid illegal fund-raising activities

The company’s payment platform provides both parties with information exchange and

interaction, matching, credit evaluation, investment advisory services, legal procedures and

other intermediary services. This means that the company is involved in the absorption and

raising of funds from non-specific social objects, and cannot perform complete substantial

reviews of the borrowers’ identities. In accordance with Article 176 of the Criminal Law of

the People’s Republic of China: illegal absorption of public funds directly or indirectly

disrupts financial order and anyone found guilty shall face up to three years imprisonment or

criminal detention and/or a fine of no less than RMB20,000 and no more than RMB200,000;

those found guilty of amassing a huge amount or involving other severe consequences, shall

face imprisonment of no less than three years and no more than ten years, and a fine of no

less than RMB50,000, and no more than RMB500,000. Companies [translator’s note:

translated literally as ‘units’] found guilty of the aforementioned offence shall be fined and

the direct person responsible and other indirect person responsible shall be prosecuted in

accordance with the aforementioned penalties. Article 192 states that: For illegal raising of

funds with the purpose of illegal possession or through fraudulent means involving relatively

large amounts, anyone found guilty shall face up to five years imprisonment or criminal

detention and/or a fine of no less than RMB20,000 and no more than RMB200,000; for those

involving a huge amount or other severe consequences, anyone found guilty shall face

imprisonment of no less than five years and no more than ten years, and a fine of no less than

RMB50,000 and no more than RMB500,000; for those involved an exceptionally high

amount or other exceptionally severe consequences, anyone found guilty shall face

imprisonment of no less than ten years, and a fine of no less than RMB50,000 and no more

than RMB500,000 or confiscation of property.

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Therefore, certain criminals that leverage on the lack of regulation on network lending

platforms to engage in illegal raising of funds under the guise of network lending services,

resulting in massive loss of investors’ property, will be suspected of illegal absorption of

public monetary deposits and fund-raising fraud. During the operation of the platform, try to

ensure the security of the funds involved and review the personal information, purpose of

borrowing, repayment capacity and other substantial information of the borrower that may

affect the lending relationship.

At the same time, while operating the platform, the company shall review the information

sent between the parties to the loan using the platform and inform the parties sufficiently

about information disclosure and risks so that the parties can make sound investment

decisions.

IV. Do not offer any guarantee, either expressly or implied, as far as possible to avoid

legal liability

In accordance with Article 22 of “Supreme People’s Court’s Ruling on Issues Pertaining to

the Application of the Law on Cases Involving Private Lending”: The People’s Court shall

not support any request from any party involved in a lending relationship through a network

lending platform that holds such a network lending platform provider liable that is only

providing intermediary services. However, The People’s Court will support requests from

any lender that holds a lending platform provider liable that has expressly provided security

for a loan through a webpage, advertisement or any other media, or in any other case where

there is sufficient evidence that shows the provider has pledged such security. During the

operation of the network platform, the company shall expressly indicate in a prominent

position of a network page that the platform only provides the relevant medium and

intermediary services for the parties to loans, and the company shall not assume any liability

or joint responsibility over the capital, interest or rights violation compensation incurred

through such loans. The company shall, as far as in so possible, avoid any legal responsibility

to ensure the best interests for the company.

V. Does the company’s business model and partnership with downstream financial

organisations present any legal risks

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Any partnership between the company and a downstream financial organisation is a

discretionary business decision of the company. However, regardless of the business model,

the company shall understand its business partner fully, including its business registration

information, shareholding and equity information, corporate governance structure, any

litigation involving the company and the company’s annual review, and rewards and

punishments. Therefore, I suggest that before establishing any business partnership with any

other company, the company should conduct a comprehensive appraisal of the company. At

present, according to the company’s staff, a company interested in a business partnership is

Pufa Financial Company. In view of the fact that the company has a certain level of

familiarity with Pufa Financial Company, the company only needs to ensure strict regulation

of operational processes and examine all aspects of the business to minimise any legal risks.

However, disputes in a partnership exist objectively. Therefore, before entering into a

collaboration, both parties shall establish detailed agreements on the content of the

partnership, the respective rights and obligations, and monetary distributions to prevent any

unnecessary litigation.

In summary of the above, as a Sino-foreign enterprise that has been approved by the

regulatory authorities, the company has obtained the business licence to operate the

aforementioned network platform. Currently, there is no law that explicitly prohibits such

business model and the legal effects of any leading relationship established through the

platform have been recognised. However, as the platform has a high level of risk, in

subsequent operation, the company shall ensure proper information review and disclosure to

prevent running foul of the law.

The aforementioned legal opinions are for the company’s reference.

Wishing you business success!

Yang Qing

Fujian Ruiquan Law Firm

29 April 2016

Contact number: 150-0595-8642

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Partners For personal use only

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