Variable Capital Company (VCC)
Singapore’s Variable Capital Company (VCC)
The Variable Capital Company or VCC is a revolutionary initiative announced by the Monetary Authority of Singapore, that makes available a fund entity (fund vehicle) particularly suited for asset managers, wealth managers and family offices, to efficiently manage traditional and alternative investment strategies alike. VCC’s are suitable for both open-ended funds as well as closed-end funds. A Variable Capital Company can be structured as a standalone fund or as an umbrella fund with one or more sub-funds, each having segregated assets and liabilities.
A VCC can be established in Singapore by any person or entity which is “fit and proper” and is from a FATF compliant country. It is mandatory for the VCC to appoint a Singapore-based fund management company holding a capital markets services licence to conduct fund management activities (CMSL), including AIFMC licence holders. A Registered Fund Management Company (RFMC) or a licenced Venture Capital Fund Management Company (VCFM) or an exempted/permitted Manager (for example, a holder of a banking licence, conducting wealth management in Singapore, or a person specifically permitted by the MAS)
VCC’s are established the Variable Capital Companies Act 2018 (VCC Act), administered by the Accounting and Corporate Regulatory Authority (ACRA). As regards compliance (AML and CFT) matters, the variable capital company will fall under the regulatory ambit of the Monetary Authority of Singapore (MAS).
Key features of a VCC at-a-glance
Separate Legal Entity
Flexibility in Issuance & Redemption of Shares
Dividends payable from capital
Suitable for both open-ended and close-end funds
Standalone or umbrella fund structure
Sponsor not necessarily the fund manager
Redomiciliation of overseas funds
Private register of members
Tax incentives
Key Features of the Variable Capital Company
Separate Legal entity
A Variable Capital Company is a separate legal entity, with legal identity separate from that of its members. A VCC can sue or be sued in its own name. It’s shareholders have limited liability.
Flexibility in Issuance & Redemption of Shares
A VCC may issue shares from time to time, and subsequently redeem those shares, without the hassle of going through a capital reduction process or having its directors prepare solvency statements. This flexibility addresses limitations seen in existing fund structures.
Dividends payable from capital
A VCC can pay dividends out of capital of the VCC or in relation to any of its sub-funds.
Redomiciliation of overseas funds
The VCC can be used for the purposes of re-domiciling one or more existing overseas investment funds with comparable structures by transferring their registration to Singapore as VCCs. This mechanism will help to co-locate the fund entity and its Fund Management company, both in Singapore. Further, the fund will be able to preserve it track-record.
Tax & Other Incentives/Grants
VCC incentive scheme and other benefits are available to VCC, subject to meeting prescribed requirements. MAS has launched the 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. Similarly, incentives are also available for re-domiciliation of foreign funds into Singapore VCC structures.
Furthermore, exemption from income tax under Section 13R or Section 13X of the Singapore Income Tax Act, may be available to funds incorporated as variable capital companies, subject to the relevant criteria being met.
For more information on the variable capital company, refer to this MAS media release
Fastcorp has a team of professionals with a depth of experience in compliance matters pertaining to the establishment of funds and fund management companies, ranging from structuring, governance & compliance consulting, project management, to incorporation & corporate services. For more information on how we are able to assist you, please contact us.
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