The Variable Capital Company (VCC) is a new corporate structure under the Variable Capital Companies Act for investment funds. The VCC will complement the existing investment fund structures that are available in Singapore. This new legal entity form / structure applies to all types of investment funds in Singapore. The Variable Capital Company can be either formed as a stand alone fund or as an umbrella fund.

What are some of the key features of a VCC

• The flexibility in the issuance and redemption of its shares
• A VCC can pay dividends out of capital
• Fund managers have the flexibility to meet dividend payment obligations
• Variable capital companies must maintain a register of shareholders
• The shareholders register need not be made public, however, it should be disclosed to public authorities (for regulatory, supervisory and law enforcement purposes)
• Variable capital companies can issue and redeem shares without the approval of members or shareholders
• Companies can pay dividends out of the capital and not necessarily from the profits
• Variable capital companies will have shareholders (members)
• Variable capital companies must have a board of directors, the board is responsible for the VCC operations
• Accounting standards of a VCC can either be based on Singapore, or other recognised international accounting standards for financial statements preparation

Source: https://www.acra.gov.sg/business-entities/variable-capital-companies

Companies can use a VCC for both open and close ended fund strategies and to list the funds for trading purposes. This type of fund structure is common across global fund centers and is being introduced in Singapore. The introduction of the VCC in Singapore is potential for most of the fund management industries, where several investment schemes can be gathered under a single entity. Companies can set up a VCC as a stand alone or as an entity with various sub funds.

What are the benefits of VCC?

Apart from greater flexibility of operational and tax efficiency for addressing global fund needs for investment, the VCC has other benefits, for instance, the financial statements need not be made public. The VCC can be used for various investment strategies – private equity, hedge funds, real estate funds etc. VCC can also be used as a pooling, investing vehicle and an option for the wealth management industry.

Requirements of a VCC at a glance

• The company’s capital should always be equal to its net asset value
• A Singapore based licenced fund manager is required unless exempted from the regulations
• The Securities and Futures Act (SFA) for investment funds will apply for a VCC
• The VCC should have at least one Singapore resident director
• It must have a registered office in Singapore and to appoint a Singapore based company secretary
• VCC’s are subject to audit by an auditor based in Singapore

With the introduction of the VCC, Singapore is hoping to promote its position as a notable funds hub.

To find out more information about the VCC legislation or on how to set one up, please contact us at contact@hnwgroup.com.sg.