Variable Capital Company (VCC) In Singapore

An image containing cultivation of currency notesVariable Capital Company (VCC) In Singapore

Introduction

The Monetary Authority of Singapore (MAS) and the Accounting and Corporate Regulatory Authority (ACRA) launched the Variable Capital Companies (VCC) framework with effect from 15-January-2020. The VCC is a new corporate structure that can be used for a wide range of investment funds and provides fund managers greater operational flexibility and cost savings [*1] . It will encourage more funds to be domiciled in Singapore and enhance our value as an international fund management centre.

Fund managers will be able to constitute investment funds as VCCs across both traditional and alternative strategies, and as open-ended or closed-end funds [*2] . Fund managers [3] may also incorporate new VCCs or re-domicile their existing investment funds with comparable structures by transferring their registration to Singapore as VCCs.

[*1] Fund managers will have greater flexibility in share issuance/redemption and the payment of dividends. Managers will also be able to incorporate multiple funds in a single VCC and achieve cost efficiencies.

[*2] An open-ended fund allows investors to redeem investments at their discretion, while a closed-end fund does not permit investors to do so.

 

Variable Capital Companies (VCC) Act Passed into Law in Singapore

Singapore has been recognised as a leading Asian fund management hub, with assets under management (AUM) growing 15% pa over the past five years, reaching S$3.3 trillion at the end of 2017. Singapore’s position as a full-service international fund management hub has recently been fortified through the introduction of a new corporate structure to attract for investment funds.

The Variable Capital Company (VCC) complements current unit trusts and investment companies, which are the two commonly used investment fund structures in Singapore, while bringing it with greater operational flexibility, cost efficiencies and tax benefits.

Before the VCC, offshore investment funds, even if managed in Singapore, are domiciled in principal global fund jurisdictions, such as the Cayman Islands, Dublin and Luxembourg, where legal and business regulatory structures allow more flexibility in capital, shares and taxation. Therefore, the economic benefits from funds managed locally have not been fully accrued.

The introduction of the VCC framework by Singapore consolidates fund domiciliation and fund management locally, and service providers, such as Corporate Services Providers (CSP), lawyers, accountants, fund administrators and fund custodians, gain more business opportunities, which in turn create new employment opportunities in the industry, as Singapore-based VCCs are likely to employ Singapore-based qualified corporate Secretaries, engage Singapore-based lawyers, fund administrators to facilitate their operations and expansion.

With fewer cross border administrative and compliance hurdles, the new framework will certainly enhance the Singapore nation’s asset management industry, as investors discover attractive incentives to both incorporate and operate in Singapore.

Key Features and Benefits of a Variable Capital Company (VCC)

  • Greater flexibility in issuance and redemption of shares as well as payment of dividends out of capital
  • VCC is treated as a single entity for tax purposes and also eligible for tax exemption
  • Covers both traditional and alternative investments (such as hedge funds, private equity funds, real estate funds, infrastructure funds)
  • Can be used for all traditional and alternative strategies, and structured as open-ended or closed-end fund
  • Can be a standalone fund or an umbrella entity with multiple sub-funds
  • Can be used for both retail and restricted strategies
  • VCC must be managed by a fund manager regulated by MAS
  • Enhanced safeguards by segregation of assets and liabilities in each sub-fund
  • Foreign corporate entities can re-domicile to Singapore as VCCs

 

Regulatory Authorities for VCC

  • Governed by the new Variable Capital Companies (VCC) Act w.e.f. 15-January-2020
  • Regulated by the Accounting and Corporate Regulatory Authority (ACRA) for establishment and administrative purposes
  • Regulated by the Monetary Authority of Singapore (MAS) for anti-fraud purposes
  • Regulated by the Securities and Futures Act for all investment fund activities

 

Variable Capital Companies (VCC) Grant Scheme

The Variable Capital Company (VCC) is a new corporate structure tailored for investment funds. MAS launched a Variable Capital Companies Grant Scheme (VCCGS) under the Financial Sector Development Fund (FSDF) to co-fund qualifying expenses paid to Singapore-based service providers for work done in Singapore, in relation to the incorporation or registration of a VCC.

Click here to learn more about VCCGS

 

Incorporation and Operational Requirements

  • VCC share capital will always be equal to the net asset value
  • To appoint at least one Singapore resident director (for non-authorised schemes); at least three directors (for authorised schemes)
  • To appoint a Singapore-based, MAS-licensed fund management company (FMC), unless exempted
  • To appoint Licensed Fund Manager regulated by MAS
  • To establish a registered office in Singapore
  • To appoint a Singapore-based company secretary
  • To be audited by a Singapore-based auditor
  • To submit financial statements as per IFRS, Singapore FRS or US GAAP

 

blankModel Constitutions For VCC

The model constitutions are useful templates for early adopters of the VCC as a reference and are customisable as required.

Note: The model constitutions are not drafted nor endorsed by MAS or ACRA.

Source for Model Constitutions For VCC: Singapore Academy of Law (“SAL”)

Guidance notes for model Constitutions for VCC

Guidance notes give pointers as to how the model constitutions can be structured. Learn from Guide with the source from Singapore Academy of Law (“SAL”).

 

Constitution Draft From ACHI BIZ

Due to the new structure of the company in Singapore, the drafting of the Constitution for Variable Capital Company requires specialist knowledge of Tax Laws, Security and Futures Regulations, etc.

We are arranging for having the Constitution for VCC at the reasonable cost not more than 4 digits figure on reimbursement basis through our Associate legal Firm.

 

FAQ for VCC

Click here to learn more from FAQ related to VCC

 

Statutory Fees For VCC

Click here to learn more about Statutory Fees To Authority For VCC

 

Remarks:

Since VCC was launched only on 15-Jan-2020, we would update with more information including compliance once it is available from the regulatory authorities.

Source of Information, Guidelines, Compliance, Laws, Rules & Regulations is from the relevant authorities of Singapore
Details of Source Name of Authorities
  • Corporate matters such as Companies, Businesses, VCC Model Constitutions, etc
  • The Accounting and Corporate Regulatory Authority (ACRA)
  • The Monetary Authority of Singapore (MAS)
  • Singapore Academy of Law (SAL)
  • CPF matters
  • CPF Board
  • Fair Employment Practices (FEP)
  • Tripartite Alliance for Fair and Progressive Employment Practices (TAFEP)
  • Immigration matters & Student Passes
  • Immigration Checkpoints Authority (ICA)
  • Taxation and GST
  • The Inland Revenue Authority of Singapore (IRAS)
  • Skills Development Levy (SDL)
  • SkillsFuture Singapore Agency
  • Work Passes
  • The Ministry Of Manpower (MOM)
Please refer to SERVICES if you wish to proceed or CONTACT us for more information.
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