On or about 1 October 2018, the Parliament of Singapore passed into law a new type of corporate structure, the Variable Capital Company (“VCC”) that put Singapore in the same league as other global fund hubs like Cayman Islands, Dublin and Luxembourg.
The VCC framework is aimed to attract more fund managers to base their funds and run their fund management activities in Singapore and to grow Singapore as a fund management hub.
Currently, funds can be registered under existing structures such as unit trusts, limited partnerships and investment companies, but these structures with restrictions are less ideal for funds.
The VCC corporate structure will give fund managers greater operational flexibility on the domiciliation of funds either open-ended or closed-ended. Some salient features include:
- a VCC will be governed by the Variable Capital Companies Act (“VCC Act”) that are to be regulated by the Accounting and Corporate Regulatory Authority (for establishment and administrative purposes) and the Monetary Authority of Singapore (“MAS”) (for Anti-Money Laundering/Countering the Financing of Terrorism purposes).
- a VCC can be used for both traditional funds or alternative funds and can be used for retail investors or for restricted class investors. It can be formed as a single standalone fund, or as an umbrella fund with two or more sub-funds. The sub-funds can share a single board of directors with the same fund manager, custodian, auditor and administrative agent. It must appoint a fund management company that is licensed or registered by MAS, or is an exempt financial institution in Singapore.
- It can issue and redeem shares without shareholders’ approval, and enable investors to exit their investments when they wish to. Dividends can also be paid out of capital.
- a VCC need not hold annual general meetings with its shareholders, subject to caveats.
- a VCC must prepare financial statements. Except for VCCs offered as a Collective Investment Scheme, which must be based on Recommended Accounting Practice (RAP) 7, Reporting Framework for Unit Trusts, the financial statements may be prepared using US GAAP, International Financial Reporting Standards, or Singapore Financial Reporting Standards.
- a VCC will not be required to disclose its register of shareholders to the public. The financial statements also need not be made public.
- a VCC must be able to demonstrate sufficient mandatory substance in Singapore, via a Singapore registered office, a Singapore resident company secretary and auditor, and at least one resident director.
Source: Singapore Law Watch, 30 November 2019