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 2018 is a much welcome game-changer for Singapore’s fund management industry.
Key Features of a VCC
Flexibility to issue shares, 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 issue shares or 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 and enhanced protection 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.
Privacy of Investors
- Public access to VCC financial statements and investor/shareholders’ registers is specifically prohibited.
VCCs may be used for a variety of strategies
- traditional or alternative funds
- retail or restricted funds
- the standalone fund, or an umbrella entity with multiple sub-funds with segregated assets and liabilities
- Assets must be managed by a fund manager duly registered, licensed or exempted by MAS.
Tax residency and incentives
- Classified as a corporate tax resident, VCCs’ profits are taxed at a flat rate of 17%. In addition, tax incentive schemes for Singapore funds such as the Enhanced-Tier Fund and Singapore Resident Fund Schemes will be
extended to VCCs incorporated or domiciled in Singapore.
Set up Requirements
• One (1) Shareholder (individual or corporate entity)
• One (1) Resident Director
• One of the directors needs to be a director or a qualified representative of the Fund Manager and also must be a “fit and proper person”
• Resident Singapore company secretary
• Initial paid-up share capital of at least S$1
• Singapore registered office address
• Appoint Fund Management Company as the investment manager which is licensed / registered by MAS