Variable Capital Company (VCC)
The Singapore Variable Capital Company (VCC) is a corporate structure for investment funds that offers investors and fund managers significant flexibility across different fund strategies, investor classes and asset classes.
The VCC was introduced in 2020 by the Monetary Authority of Singapore (MAS) as a more flexible fund structure compared to the private limited company and the limited partnership. It allows managers to “onshore” their funds in Singapore as well as setting up fund management activities and operations in the city-state. One of the main challenges facing managers establishing funds as a limited partnership was the lack of a separate legal entity from the partners. A VCC can be established as a standalone VCC or an umbrella VCC with sub-funds – and the latter allows managers to segregate assets which keeps liabilities separate from other sub-funds.
Salient features of a Singapore Variable Capital Company include:
- Utilising a VCC umbrella structure allows the ability to launch sub funds quicker than a standard structure.
- Sub funds can be exited without having to restructure or wind down the entire fund.
- You are permitted to redeem or purchase fully paid shares or pay distributions out of both capital and/or profits.
- You can re-domicile existing funds with comparable structures in Singapore as a VCC, or inwardly re-domicile relevant foreign corporate entities as VCCs.
Requirements of Singapore Variable Capital Company (VCC) include:
A VCC must fulfil some regulatory obligations with regards to its function and operations, which include the following:
- The VCC must appoint a fund management company (FMC) licensed or registered by (MAS) or is an exempted financial institution.
- The VCC must fulfil the minimum requirements for Singapore, i.e. maintaining a Singapore-registered office address and having at least one resident director of Singapore.
- At least one director of the VCC must be a director or a qualified representative of the VCC fund manager (resident / non-resident).
- The VCC must comply with Anti-Money Laundering/Countering the Financing of Terrorism (AML/CFT) procedures, as required by MAS.
- If a fund is offered to certain types of investors (retail investors for example), a custodian of assets is required.
Limitations:
While the introduction of the VCC has certainly had a powerful impact, there are some limitations to the current regime.
- A VCC must be managed by a Singapore-licensed fund manager, thereby eliminating two prominent groups in asset management, i.e. the fund managers for real estate assets/real estate investment trusts (REITs) and single-family offices, both of which fall under the “exempt manager” classification.
- There are a handful of existing investment fund vehicles using onshore structures other than the VCC, such as the Singapore Limited Partnership or a Singapore Private Company Limited.
How it Works
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