Singapore Variable Capital Company Incorporation

What is Variable Capital Company (VCC)?

VCC is a new legal entity structure for investment funds in Singapore. As the name suggests, the funds will have a flexible capital structure, whereby, according to investor activity shares can be issued and redeemed.

Presently the following types of funds can adopt the VCC structure:

• Both standalone funds as well as umbrella funds that have multiple sub-funds, each holding a different class of assets.
• Traditional and alternative funds strategies involving open-ended and close-ended funds.
• Retail funds and restricted funds

The flexibility to redeem shares at the fund’s Net Asset Value (NAV) and pay dividends from the capital rather than profits as in the case of companies and the cost-efficiency of umbrella funds with multiple sub-funds are the key tractions of the VCC. Foreign corporations that are set up as funds could be inward re-domiciled as VCCs. By such domiciliation, the funds can take advantage of the low tax regime and other incentives offered by Singapore to the fund management sector. The flexibility and cost-savings of the VCC funds would spur foreign domiciled funds to seek inward domiciliation into Singapore.

Benefits of Variable Capital Company

Eligible to access Singapore tax treaties.	Eligible for Enhanced-Tier Fund (ETF) and Singapore Resident Fund (SRF) Schemes	Open-ended, close-ended funds and umbrella funds can setup VCC	Privacy of investors and shareholders is upheld.	Easy to Incorporate

Incorporation Requirements

• The share capital must always be equal to the Net Asset Value (NAV).
• Name of the VCC must have the suffix VCC.
• Name approval must be obtained before incorporation.
• The following appointments are mandatory:
  • At least one Singapore resident director in the case of non-authorised schemes and at least three directors in the case of authorised schemes.
  • Unless exempted, a MAS-licensed fund management company (FMC) must be appointed.
  • At least one of the directors must be a registered representative or director of the Fund Management Company (FMC).
  • A Singapore-based company secretary.
  • A Singapore-based auditor
  • At least one shareholder (foreign or local individual or corporate entity).
• A registered office in Singapore.
• Constitution of the proposed VCC.
• On registration, the Registrar must be provided with the last day of the first financial year.
• A registration fee of S$8,000 payable to ACRA, in the case of Sub-Fund registration a fee of S$400 is payable for each Sub-Fund.

In addition to the above, a foreign fund that is re-domiciling in India must include the following:

• A certified copy of the charter, statute, constitution or memorandum or articles or other instrument constituting or defining its constitution, in its place of incorporation;
• A certified copy of the certificate of incorporation (or a document of similar effect) of the foreign corporate entity in its place of incorporation;
• Where the entity consists of two or more collective investment schemes, certified copy of the document of registration (or a document of similar effect) of each collective investment scheme in its place of incorporation;
• Declarations/ endorsements where applicable;

Note: Only overseas funds that adopt a corporate structure that is equivalent to a VCC may re-domicile as VCCs in Singapore. Fund managers of such funds can do so by registering the VCC and sub-funds with the ACRA and notify the foreign authorities of the de-registration accordingly.

Post-Incorporation Requirements

• VCCs that are Authorised Schemes shall have an approved custodian (i.e. an approved CIS trustee under the SFA must supervise the custody of the property of the VCC). More details are awaited on the role of the custodian.
• The assets of the VCC is measured on a fair value basis, and the actual value of the paid-up capital must be equal to the NAV at all times.
• An umbrella VCC must maintain separate records and financial statements for each sub-fund.
• VCCs must have audited financial statements for each financial year, reflecting the true and fair view of the financial performance. In the case of an umbrella VCC, the audited financial statement should reflect the true and fair view of the performance of each sub-fund.
• In the case of VCC, which is a parent company, its consolidated financial statements must be audited for each financial year.
• Besides Singapore Financial Reporting Standards (SFRS), VCCs are allowed to use International Financial Reporting Standards (IFRS) and US Generally Accepted Accounting Principles (US GAAP).
• Annual Return must be filed within seven months after the end of the VCC’s financial year.
• Unless approved by the Registrar, the first financial period must not be longer than 18 months
• A sub-fund is required to be registered within seven days of formation. There will be a separate name and registration number for each sub-fund.

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