Licenced by SFC Type 4 & 9 & MAS Capital Market Services
Variable Capital Companies 10 FAQs
1) What are the key features of the VCC?
The VCC has a very flexible structure suitable for a wide range of investment products. It can either be setup as a standalone entity or an umbrella entity with a number of sub-funds under it. To protect investors, the assets of liabilities of each sub-fund are segregated from one another. For investors who value privacy and autonomy, the VCC register of shareholders will also not be made available to the public. One of the important features is that the VCC allows for redemption of shares and payment of dividends from its share capital without the need for shareholders’ approval, giving investors easier entry and exit from their investments.
2) What is the difference between an umbrella VCC and a standalone VCC?
An umbrella VCC essentially has segregated sub-funds under it. In this structure, the VCC will be a single legal entity, with its sub-funds operating as separate cells (without separate legal personalities).
A sub-fund will be constituted by registration with ACRA, which will provide the sub-fund with a unique sub-fund identification number. To prevent cross-cell contagion the assets of a sub-fund cannot be used to discharge the liabilities of or claims against the VCC or any other sub-fund of the VCC; and any liability incurred on behalf of or attributable to any sub-fund of a VCC must be discharged solely out of the assets of that sub-fund. This greatly mitigates investors’ risks from the different sub-funds.
3) Why was there a need to introduce this new framework and what are its advantages over existing fund structures in Singapore?
The VCC was launched to complement the existing fund structures in Singapore. Previous fund structures that were more commonly used include limited partnerships, unit trusts and private limited companies. Many of the restrictions onreturn of capital, publicly available register of shareholders, payment of dividends only from profits have all been removed in the new VCC framework. This allows for greater operational flexibility and additional structuring options for investors looking to domicile funds in Singapore.
4) Does the VCC also target existing foreign funds?
Yes. Another important aspect of the VCC is that it allows an inward re-domiciliation of foreign funds with a similar structure to Singapore quite easily. The fund would have to deregister at their current domicile location and register with ACRA in Singapore. Therefore, this redomiciliation would be suitable for entities such as the Cayman segregated portfolio companies or the British Virgin Islands protected cell companies. Instead of pursuing fund management in these offshore jurisdictions, Singapore is offering an onshore alternative where fund managers can build economic substance and provide longevity.
5) What were some of the main considerations of the Monetary Authority of Singapore (MAS) when they designed the VCC framework and why did they want to do so?
The objective of the VCC is to promote Singapore to become a leading global fund management hub. The MAS has studied and selected the best features from major fund domiciliation programs around the world and adapted these according to the needs and concerns of investors and local fund managers. Key features such as operational and structural flexibility, cost-efficiency, investor protection were also focused upon when designing the new VCC, resulting in a best-in-class product.
6) What are some of the benefits in terms of operations and compliance requirements to fund managers/investors?
The VCC allows fund managers to consolidate and manage all its funds in a single respected jurisdiction here in Singapore under a single framework. Being well known for its transparent regulations and relatively safe economic climate, the VCC will be able to provide investors with more protection and a peace of mind. The mandatory use of local professional service providers will further streamline reporting and compliance requirements.
7) Which types of products are most suitable for the VCC framework?
A wide range of products will be suitable for the VCC. This is by design, to allow fund managers greater room to manoeuvre. It allows for both open and closed ends funds, traditional or alternative investments. There are actually no limitations on the strategies and types of assets that a VCC can hold. We have seen Hedge Funds, Private Equity Funds, Real Estate Funds, Venture Capital Funds all being proposed in this framework.
8) What does the launch of the VCC mean for the investment landscape and opportunities in the region moving forward?
The launch of the VCC framework definitely propels Singapore to becoming one of Asia’s top fund management hubs. It builds on the strong existing fund management ecosystem in Singapore and provides an even more robust framework to tap onto the region’s growth opportunities. We have already seen a significant amount of interest since its launch in late January, even with enquiries from outside of Asia looking to redomicile to Singapore.
9) Are there any regulatory/statutory compliance requirements for the VCC?
A fund management company that is licensed or registered by MAS (Raffles Family Office)
- Has at least one director who is resident in Singapore; at least one director (who may be the same person as above) who is either a director or a qualified representative of the VCC’s fund manager; and
- a Singapore resident company secretary.
- Subject to Anti-Money Laundering/Countering the Financing of Terrorism (“AML/CFT”) procedures, which would be supervised by MAS for compliance.
- Also subject to audit by a Singapore based auditor by which an annual return must be filed after its AGM and within seven (7) months after the end of its financial year.
- Umbrella VCC must also keep separate accounting and other records for each sub-fund that sufficiently explain the transactions and financial position of each sub-fund.
10) What are the tax implications of the VCC?
A VCC will be taxed as a single entity regular Singapore company and would therefore give it access to tax treaties and Double Tax Agreements (DTAs) with 70+ jurisdictions internationally. In addition, tax incentives available for the Singapore Resident Fund (SRF) and the Enhanced-tier Fund (ETF) under the 13R and 13X schemes respectively will also be applied to the VCC framework.
More details can be found here: https://www.rafflesgroup.co/