Key considerations for Singapore Variable Capital Company:
The sub-funds under an umbrella structure do not have a separate legal identity. To address a potential contagion risk, whereby the assets and liabilities of the sub-funds get mixed up with or used to discharge the liabilities of other sub-fund, the VCC Act requires assets and liabilities of each sub-fund to be segregated. Each sub-fund must be wound up separately to uphold the segregation, and the winding up of one Sub-fund does not lead to the winding up of the VCC. As the sub-funds lack legal persona, the VCC may sue or be sued in respect of a sub-fund. A sub-fund of a VCC may invest in another sub-fund of the VCC.
Since the Act allows inward re-domiciliation of foreign-domiciled funds, many of the funds that used overseas jurisdictions to route investment via vehicles similar to VCC can now consider to re-domicile in Singapore and consolidate their pooling and investment activities. Those foreign-domiciled funds that are constituted as corporations will have to first convert to a VCC before re-domiciling in Singapore; alternatively, they can freshly incorporate a VCC in Singapore.
Related Read: How to Incorporate a VCC company in Singapore »
Although shares can be issued and redeemed without shareholders’ approval, shares can be issued and redeemed only within the net asset value. This is to protect the creditors. However, for listed close-ended funds, this has to be in accordance with the relevant listing requirements.
The VCCs offered to retail investors must have at least three directors, including at least one independent director. A prospectus must also be filed with the MAS before offering shares, and the MAS must approve the VCC. An approved trustee must be appointed as the custodian of the VCC assets.
In its present form, the Act’s provisions relating to the insolvency of VCC has been adopted from The Companies Act. However, this would soon be amended with provisions from the Insolvency Bill along with appropriate modifications that are specific to VCC.
Related read: How the Variable Capital Company (VCC) is a global gamechanger after launch in Jan 2020 »
The VCC is a new corporate vehicle that obviates the limitations of the existing structures. With this addition, Singapore’s position as the fund management hub is anticipated to become holistic and efficient with world-class management capabilities, robust regulatory framework and favourable tax regime. With the introduction of the VCC, the sector will witness a surge in activity with plenty of growth opportunity for service providers such as auditors, tax professionals, custodians, fund managers and advocates Singapore’s latest innovation for the fund management sector is a testimony for the city-states resolve to stay ahead of the competition to fortify its reputation as a pro-business asset and fund management hub in the region.
What you’ll need to set up a VCC