New Business Structure Available in Singapore for Investment Funds
Modeled after similar corporate fund structures in global investment fund centres such as the UK, Ireland and Luxembourg, the Variable Capital Company (VCC) provides investment funds a new corporate structure that will encourage fund managers to domicile their funds in Singapore, which in turn will strengthen the nation’s full-service fund ecosystem. Similar VCC structures have already been adopted by other jurisdictions in the region, so the passing of the VCC Bill in October this year is a much welcome game-changer for Singapore’s fund management industry.
Second Minister for Finance, Indranee Rajah, highlighted several features of the Bill that address the needs of investment funds, as well as its governance and oversight, in Parliament on 1 Oct 2018:
Flexibility to redeem investments and pay dividends out of capital
- VCCs are able to vary their share capital, without having to seek investors’ approval, thus allowing investors the flexibility to exit their investments when they wish to do so. VCCs will also be able to pay dividends using capital, thus allowing investment funds to meet their dividend payment schedules agreed upon with investors.
Economies of scale through use of VCCs as umbrella funds
- VCC can be established as a standalone fund, or as an umbrella fund with multiple sub-funds, which would benefit the grouping of various Asian and European equities under a single umbrella VCC. The assets and liabilities of each sub-fund, by law, are to be segregated, so that one sub-fund cannot be used to discharge the liabilities of the umbrella fund, or of another sub-fund.
VCCs may be used for a variety of strategies
- VCCs may be flexibly constituted as open-ended or closed-end funds, thus providing a suitable corporate structure for both traditional and alternative strategies for the Singapore-based fund management community, which comprises both traditional and alternative managers.
Governance and Oversight
- Fund manager regulated by MAS
- VCC Board
- Preparation of financial statements
- Register of shareholders