Variable Capital Companies: A New Corporate Structure for Investment Funds
It’s been a year since the Variable Capital Company (VCC) structure was launched in Singapore, and as of November 2020, 177 VCCs have been registered according to the Accounting & Corporate Regulatory Authority (ACRA), with close to 65% of new VCCs under an umbrella fund scheme and close to 70% of funds managed by Singapore-based fund managers. There are signals that the Monetary Authority of Singapore (MAS) may soon relax requirements to accommodate single-family office structures that will allow high net-worth families to participate in the VCC scheme, and we are therefore likely to see even more new VCCs being set up each month in Singapore.
The VCC scheme have been touted as a potential “game changer for Singapore” by many market observers, and it could well solidify Singapore’s status as a hub for international fund management while creating new jobs in the republic.
Indeed, since the introduction of the VCC structure, the wealth and asset management industry in Singapore has been abuzz with excitement and activity. You may have heard about people talking about VCCs, and you may be wondering what the fuss is all about. Here’s a quick look at the VCC structure, and what you should know about setting up one.
What is a VCC?
The quick and simple answer: a VCC is a new corporate entity for investment funds.
Under the VCC structure, several collective investment schemes (both open-end and closed-end schemes) can be established as a standalone or umbrella entity with several sub-funds. This new corporate entity structure will provide an alternative to existing structures in Singapore for investment funds, i.e. limited partnerships, unit trusts and investment companies.
One of the key advantages of a VCC is the use of an umbrella structure for funds. This way, you can create multiple sub-funds that share a board of directors and service providers like the same fund manager, auditor, accountant etc. You can also consolidate general meetings and only need to submit one set of accounts for tax returns.
The VCC structure offers a number of advantages:
Flexibility: you have the flexibility in the issuance and redemption of shares, and the ability to pay dividends out of net assets (instead of profits). You can also choose between open-ended and close-ended fund options.
Re-domicile funds from overseas: Overseas investment funds with compatible structures can be re-domiciled by transferring existing registration to Singapore as VCCs.
Discretion: VCCs offer privacy for investors and shareholders since they are not required to publish financial statements and share investor/shareholder registers to the public.
Tax incentives: All VCCs are treated as companies under the Companies Act for the purpose of income tax. As such, they enjoy the same tax incentives and tax deductions as Singapore companies. An umbrella VCC will only need to file a single corporate income tax return regardless of the number of sub-funds under the umbrella VCC; furthermore the conditions for tax exemption under Sections 13R and 13X of the Income Tax Act are applied to umbrella VCCs instead of individual sub-funds.
Government subsidy (VCC Grant): The Monetary Authority of Singapore (MAS) launched a VCC Grant Scheme to defray the costs involved in incorporating and establishing a VCC by co-funding up to 70% of eligible expenses paid to Singapore-based service providers up to a cap of $450,000. Eligible expenses include fees paid to fund administrators, legal fees, tax advisory, and corporate secretarial fees.
How to set up a VCC
A VCC can be incorporated with only one shareholder. There are no limits to the number of shareholders a VCC can have.
Registering a VCC is no different from any other business entity: you first choose and register a name for the VCC via the VCC Portal. Once the name application is approved, the name will be reserved for 120 days during which the VCC must be incorporated within this period.
The next stage is to appoint the officers of the VCC, namely:
Director: every VCC should have at least 1 director who is ordinarily resident in Singapore. Every VCC should also have at least 1 director (who can be the same person ordinarily residing in Singapore) who is either a Qualified Representative under the VCC Act, or a director of its fund manager.
Company Secretary: like any other company in Singapore, a VCC must appoint a secretary within 6 months from the date of its incorporation. The sole director of a VCC and the company secretary cannot be the same person.
Auditor: an auditor must be appointed within 3 months of the VCC’s incorporation.
Fund Manager: every VCC must appoint a Permissible Fund Manager, i.e. a fund manager that is licensed or regulated by the MAS. You would be required to provide the Permissible Fund Manager’s Unique Entity Number (UEN), full name, address of the fund manager’s principal place of business and country of incorporation when submitting your application to incorporate the VCC.
In addition, the following information would need to be provided:
Details of subscribers (including identification/passport numbers, name of subscriber and email address)
Registered office address and opening hours
Copy of Constitution; and
Financial Year End (FYE) to determine when the VCC’s corporate filing and taxes are due.
The fee for incorporating a VCC is SGD 8,000 and will typically take between 14 and 60 days for the application to be processed.
Learn more about setting up a VCC
Tap onto FidCorp’s expertise and professional networks to help you launch your VCC in Singapore. Contact us at +65 6365 3066, or drop us an inquiry at firstname.lastname@example.org today.