Variable Capital Company (VCC)

What is a VCC?

The Variable Capital Company (VCC) is a new corporate entity structure for collective investment schemes (whether open-end or closed-end). It complements the existing suite of investment fund structures in the asset and wealth management industry in Singapore and can be formed as a single standalone fund or as an umbrella fund with two or more sub-funds, each holding different assets and liabilities while remaining ring-fenced from each other.

Benefits of the VCC

The VCC is increasingly popular with foreign investors because of various benefits, such as operational and tax incentives, confidentiality and the ability to use it as a fund vehicle for a number of investment strategies (such as hedge funds, private equity and real estate funds) that are not otherwise readily provided for by other corporate entity structures. The flexibility of the VCC is also attractive as it allows investors to carry out fund management activities in Singapore and domicile their funds in Singapore.

Setting up a VCC in Singapore

The VCC is governed by the Variable Capital Companies Act 2018 (and subsidiary legislation), which was passed on 1 October 2018 and came into effect on 14 January 2020. Under prevailing legislation, all VCCs must be managed by a Permissible Fund Manager which is a licensed fund management company that is:

  • A holder of a capital markets services licence for fund management under section 86 of the Securities and Futures Act (Cap. 289);
  • A registered fund management company (i.e. a corporation exempted from holding a capital markets services licence under paragraph 5(1)(i) of the Second Schedule to the Securities and Futures (Licensing and Conduct of Business) Regulations);
  • A person exempted under the Section 99(1)(a), (b), (c), or (d) of the Securities and Futures Act (Cap. 289) from the requirement to hold a capital markets services licence to carry on business in fund management (i.e. a bank licensed under the Banking Act (Cap. 19);
  • A merchant bank approved under the Monetary Authority of Singapore Act (Cap. 186);
  • A finance company licensed under the Finance Companies Act (Cap. 108); or
  • A company or cooperative society licensed under the Insurance Act (Cap. 142)).

The VCC allows you to efficiently manage investments comprising diversified portfolios of your clients that comprise investments either as standalone funds or umbrella funds with more than one sub-fund. This flexibility can provide operational efficiencies and related cost savings.

The VCC also provides flexibility in the issuance and redemption of its shares – you can pay dividends out of capital which gives fund managers flexibility to meet dividend payment obligations. While VCCs must maintain a register of shareholders, this need not be made public (subject to law enforcement purposes) hence providing for confidentiality.

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