SINGAPORE’S VARIABLE CAPITAL COMPANY (VCC)
This is a presentation on Singapore’s Variable Capital Company(“VCC”) and is general in nature.
Singapore’s VCC is used as an “investment fund vehicle” for both, open ended and close ended fund structures.
VCC is a corporate entity which is established in Singapore under the Variable Capital Companies Act 2018 (“VCC Act”). It is an investment vehicle or investment entity with corporate identity, The approval for incorporating or registering a VCC is granted by the ACRA, upon the applicant meeting prescribed requirements under the VCC Act and regulations thereto.
VCC being as asset and investment holding entity, is used for investment management and wealth management activities. VCC is required to appoint a Singapore based licenced/registered Fund Management Company as its Manager.
It is established in Singapore by parties such as fund managers, private banks, wealth managers, ultra HNIs, Single Family Offices, Insurance Companies and Asset Allocators
On 15th January 2020 there were 20 VCCs in Singapore, which came through the VCC pilot programme. The number of VCCs as of 15 July 2021 is 330
WHAT IS A VCC?
1. As highlighted, “VCC” stands for Variable Capital Company.
2. VCC is a type of “company” to hold asset and investment for carrying out investment management and wealth management activities.
3. VCC has to be managed by a licenced manager or a registered manager or a manager who is exempted or approved by Monetary Authority of Singapore (MAS) from the requirements of holding fund management licence.
4. Tax incentives are available in Singapore for VCCs (example: Sec 13R, Sec 13X, Sec 13H)
5. VCC regime is an effort of Singapore Government to enable domiciliation of investment and asset holding entity in Singapore, through a corporate entity having variable capital structure.
6. Standalone VCC versus Umbrella VCC – will define the structure being a single fund entity or a multiple fund entity
2. WHY A VCC IS REQUIRED
3. ADVANTAGES AND BENEFITS OF ESTABLISHING A VCC
1. VCC is specifically created for wealth management and investment management activities.
2. It provides flexibility to issue and redeem its shares, with operational ease.
3. VCC can pay dividends out of capital, which gives flexibility to Fund Managers to meet such obligations.
4. VCC’s capital is flexible (unlike a private limited company having fixed capital)
• Management Shares carrying voting rights (no dividend rights); and
• Participating Shares carrying NO voting rights (redeemable, eligible for dividends, upon declaration and other economic benefits)
5. Provides continuity, since VCC is a corporate entity (unlike a non-corporate investment vehicle)
6. Tax/financial incentives are available, subject to meeting requirements (Sec 13R, Sec 13X, Sec 13H)
7. Confidentiality – VCC’s Constitution document, Annual filings, Register of Shareholders of a VCC is not available to public or 3rd parties.
8. VCC can obtain Certificate of Residence (COR) from IRAS, in its own name, unlike a unit trust fund.
9. VCC, if structured well, it can be used as a legal entity for inter-generation wealth transfer.
4. PRIMARY CONDITIONS AND CRITERIA IN SETTING UP A VCC
1) VCC has to be established in Singapore under the VCC Act and Regulations thereto.
2) Submission of prescribed application and requisite declarations are made to ACRA, for incorporation of the VCC
3) VCC’s capital will be variable in nature, resulting in paid capital equals NAV, at a given point in time.
4) Assets and Liabilities of each sub fund has to be segregated, accounted for separately, ring fenced and accounted for at fair value.
5) Mandatory appointment of Director(s), VCC Manager, Company Secretary and Auditor.
6) Necessary to appoint a fund administrator to perform fund accounting, NAV computation and as appropriate to carry out registrar and transfer agency services.
7) Custodian appointment becomes essential when the VCC is investing in listed, traded or quoted securities.
8) AML and CFT guidelines of MAS are applicable to VCC.
9) Appropriate governance framework should be created for the day-to-day operations of the VCC. (This is critical for both VCC Sponsor and VCC Manager)
5. PARTIES ASSOCIATED WITH A VCC
5b. PARTIES ASSOCIATED WITH A VCC
6.GENERAL POINTS FOR DISCUSSION
1. How to structure a VCC?
It depends on several parameters and is a case specific matter. Accordingly cost parameters will vary.
2. Timeline for VCC set up:
Step 1: Name approval
Step 2: Incorporation of VCC
Step 3: Registration of one or more sub-fund(s) of the VCC
3. NS Global Consultants Pte Ltd, Singapore, the consulting arm of Natarajan & Swaminathan Chartered Accountants of Singapore, will function as the Project Manager in Singapore for setting up VCC in Singapore