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 for investment funds.
The Variable Capital Company (VCC) complements current unit trusts and investment companies, the two most commonly used investment fund structures in Singapore, while bringing with it greater operational flexibility, cost efficiency 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 consolidates fund domiciliation and fund management locally, and service providers, such as 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 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 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)
- Exists, for tax purposes, as a company and single entity
- Covers both traditional and alternative investments (such as hedge funds, private equity funds, real estate funds, infrastructure funds)
- Can be open-ended or closed-ended
- Can be a standalone fund or an umbrella entity with multiple sub-funds
- Can be used for both retail and restricted strategies
- Foreign corporate fund structures can be inward re-domiciled to Singapore
- Governed by the new Variable Capital Companies Act
- 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.
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 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