Singapore Variable Capital Company VCC
With the introduction of the "Variable Capital Company" (VCC), Singapore is creating opportunities for local fund managers to promote the registration of investment funds under their management. This is expected to attract more fund managers and investment fund structure products based in Singapore, further enhancing Singapore's status as an investment fund center. The VCC framework is comparable to the corporate fund structure of the world's important investment fund centers (such as the Cayman Islands and Luxembourg), or can eliminate the inconvenience of Singapore fund managers in managing overseas investment funds, thereby improving cost and time efficiency. Therefore, Singapore is committed to becoming a full-service fund jurisdiction.
Since the passage of the Variable Capital Companies Act in 2018, relevant authorities have successively introduced other relevant laws and regulations, and the VCC framework is expected to take effect at the end of 2019. In addition, it is applicable to both traditional investment strategies and alternative investment strategies. The new VCC framework gives fund management managers more flexibility in adjusting the structure of investment funds (in the past, only regular companies, limited partnerships and trusts could enjoy minor adjustments to the existing fund structure).
Important features of VCC
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Applicable to open-end and closed-end investment funds (including hedge funds, private equity funds and real estate funds) that adopt different investment strategies.
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It can be used as a stand-alone fund or an umbrella fund that can easily increase or decrease sub-funds (the assets and liabilities of each sub-fund must be legally separated from the assets and liabilities of other sub-funds and the VCC itself).
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An umbrella fund can have an open-end sub-fund and a closed-end sub-fund.
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Foreign corporate investment funds can be registered in Singapore in the form of VCC.
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VCC allows a single shareholder or holding a single asset (so it can be used for the main joint structure).
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The detailed information of VCC shareholders needs to be submitted to the Accounting and Corporate Regulatory Agency (ACRA) together with other information, but does not need to be made public.
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For Singapore tax payment matters, VCC will be treated as a single entity and enjoy tax incentives under the Singapore Resident Fund Scheme (Article 13R) and Enhanced Tier Fund (Article 13X) Tax Incentive Scheme, so all designated investment income Basically tax-free income.
The main requirements of VCC
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The VCC must be managed by a fund manager based in Singapore, and the fund manager must be authorized or licensed (or exempted from registration) by the Monetary Authority of Singapore (MAS).
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Approved collective investment schemes must have at least three directors (one of them must be the head of the fund manager, the other must be an independent director, and one must be a Singapore resident), while unapproved collective investment schemes must only have one Directors (the director must be the head of the fund manager and a resident of Singapore)
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The investment capital must be equal to the net assets (thus allowing regular subscription and redemption of units)
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Financial statements must be submitted in accordance with IFRS, SFRS, US GAAP or RAP 7 standards (the latter only applies to approved collective investment plans)
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About asset managers:
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Every VCC must register and set up an office in Singapore, and employ a company secretary resident in Singapore.
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The financial statements must be audited by a Singaporean auditor.
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In order to meet the conditions of the relevant tax incentive plan, the Singapore office must hire local administrative staff.
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For approved collective investment plans and certain unauthorised collective investment plans, a designated custodian must be appointed (private equity funds or real estate funds do not need to appoint a custodian).
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VCC provides an excellent opportunity for fund managers to locate investment funds in Singapore and profit in such a mature jurisdiction. In addition to having a sound regulatory framework and commercial-conscious regulatory agencies, Singapore has also cultivated many outstanding professionals in the fields of legal and tax consultants, auditors, custodians, and administrative personnel. The limitations of Singapore's existing investment fund structure have been greatly reduced, so VCC is expected to further consolidate Singapore's position as an Asian and global investment fund center.
