Singapore has launched the Variable Capital Company framework with effect from 15 January 2020 in a bid to attract more investment funds and foreign private capital to Singapore and encourage more fund managers to domicile their funds in Singapore. This new structure would add to Singapore's full service offerings for any type of fund to be based in this jurisdiction. The Variable Capital Company (VCC) would be regulated by the Variable Capital Companies Act 2018 (VCC Act). The new structure is tailored for collective schemes and would be open to both open-end and closed-end funds, traditional and alternative funds – be it private equity, venture capital, hedge fund or any other fund with different strategies. The VCC can be a stand-alone entity or an umbrella entity with multiple sub-funds.
This article sets out the key aspects of the VCC so that readers can be informed of the principal features through an easy glance:
Features | Variable Capital Company |
Legal Form |
Body corporate incorporated under the VCC Act for investment funds and having a separate legal personality. It can be set up as a stand-alone entity or an umbrella entity with multiple sub-funds. VCC will be a single legal entity, with its sub-funds operating as separate cells (each without legal personality). |
Legislative Framework |
Variable Capital Companies Act 2018 for the incorporation, operation and regulation of the structure. |
Statutory Filing Fees |
VCC name reservation – S$15 Application for incorporation of VCC – S$8,000 Registration of Sub-Fund – S$400 Application for transfer of registration – S$9,000 + S$400 (sub-fund registration fee) x number of sub-funds. |
Processing time for application |
It will usually take up to 14 days to process an application form (except for Transfer of Registration which may take up to 60 days) from the date of submission of all required documentation. If referral to another government agency is required, it may take up to 60 days processing time. |
Administering authority |
Accounting and Corporate Regulatory Authority (ACRA) will administer the VCC Act. (For matters relating to anti-money laundering and countering the financing of terrorism, the administering authority would be MAS.) |
Owned by |
Subscribers to the constitution of the VCC and every other person who agrees to become a member of the VCC and whose name is entered in the register of members. |
Legal status |
A separate legal entity from its members and directors, entity can sue or be sued in own name and also own property in own name.
Members have limited liability.
|
Yearly statutory obligations |
Annual returns must be filed after its AGM and within 7 months after the end of its financial year. |
Accounting and governance |
Wider scope of accounting standards to be used in preparing a VCC's financial statements thus allowing more flexibility in financial reporting:
|
Re-domiciliation |
Foreign corporate fund structures similar to VCCs can re-domicile or transfer their registration to Singapore.
|
Appointment of company secretary and
auditors |
Company secretary: Must appoint at least 1
company secretary within 6 months of incorporation. |
Requirement for fund manager |
VCC must appoint a fund manager that is regulated by MAS to manage its investments.
|
Number of shareholders and directors |
Shareholders: At least one shareholder/ subscriber/ member. Subscribers can be either local individual, local corporate entity, or foreign individual/corporate entity (the latter would be required to engage a Corporate Service Provider to assist with filings). Director:
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Registration requirements |
The registering party must submit to ACRA:
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Requirement for Annual General Meeting
(AGM) |
An AGM must be held at the end of a financial year within 6 months. However, a VCC need not hold an AGM if:
However, one or more members with 10% or more of the total voting rights may by notice to the VCC require the AGM to be held. |
Taxes |
|
Continuity in law |
A VCC has perpetual succession until it is wound up. |
Closing the business |
Winding up- voluntarily by members or creditors, or compulsorily by the High Court. When winding up a sub-fund, all shareholders of a sub-fund should redeem their shares (where appropriate) and the VCC shall be required to submit an application to the MAS to be de-authorised. |
VCC Grant Scheme |
To further encourage industry adoption of the VCC framework in Singapore, MAS has also launched a Variable Capital Companies Grant Scheme. The grant scheme will help defray costs involved in incorporating or registering a VCC by co-funding up to 70% of eligible expenses paid to Singapore-based service providers. The grant is capped at S$150,000 for each application, with a maximum of three VCCs per fund manager. The grant scheme will be funded by the Financial Sector Development Fund (FSDF) administered by MAS and take effect today for a period of up to three years. Applications for the grant are to be made directly by the fund manager to MAS. |
This author views the following points as worth noting by any party looking to set up a VCC:
- The VCC would be regulated by both ACRA and MAS;
- A VCC must have "VCC" as part of and at the end of its name;
- There would be a requirement for a Singapore-based licensed or regulated fund manager for a VCC (unless exempted under regulations);
- Directors of a VCC can dispense with need to hold an annual general meeting (AGM) with at least 60 days' written notice to the members prior to the last date to hold AGM (thus lowering operating costs). In contrast, for companies, all members must pass a resolution at a general meeting to dispense with the need to hold an AGM;
- Another key difference between a VCC and a company from an administrative standpoint is that there is no need for shareholders' approval for a VCC to redeem shares thereby providing flexibility in the distribution and return of capital as well as payment of dividends out of capital. In contrast, companies under Companies Act are subject to restrictions on capital reduction and can only pay dividends out of profits;
- Financial statements are not required to be made public; and
- Unlike companies, VCCs' shareholder registers are not required to be made public (but open to inspection by a public authority) – thus offering privacy to investors.
Conclusion
The VCC is intended to complement the existing structures available for use by fund managers in Singapore (namely unit trusts, companies incorporated under the CA and limited partnerships governed under the Limited Partnerships Act). It is hoped that this new corporate structure with corresponding tax benefits and the attractiveness of doing business in Singapore would spur more funds (with varying strategies) to be domiciled in Singapore and enable Singapore to continue its growth as a full-service international fund management hub.
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