The Variable Capital Company (VCC): What You Need to Know

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A different type of corporate vehicle called a Variable Capital Company (VCC) will shortly be made available for Collective Investment Schemes (CIS). Currently, the corporation, limited partnership, and unit trust structures are the organizational forms available to CIS. The VCC is suitable for both closed-ended and open-ended classic and alternative fund strategies. Shares are produced when investments are made and are easily redeemable by the shareholders since they are a corporate vehicle with flexible capital. 


 

What are the features of Variable Capital Companies Singapore (VCC)

 

Due to its distinctive features that will give fund managers in Singapore operational flexibility, the innovative suggested structure has attracted a lot of attention from the fund management sector. Key characteristics of a VCC Singapore include the following:

 

The Variable Capital Companies Act (the Act) will control it. 

 

The Monetary Authority of Singapore (MAS) will be responsible for monitoring its requirements related to anti-money laundering and combatting the funding of terrorism. The Accounting and Corporate Regulatory Authority is the regulatory authority for the establishment and administrative reasons. The sale of shares in a VCC and all other matters relating to the VCC as a fund shall be governed by the Securities and Futures Act.

 

  • VCC can be utilized by restricted class investors as well as regular investors for both conventional and alternative funds.

 

  • It may be utilized as a stand-alone fund or as an umbrella organization holding several sub-funds with various investment goals, investors, and assets and liabilities.

 

  • Unlike corporations, shares are redeemable without the consent of the shareholders, and dividend payments are made from the capital.

 

  • To assure substance and prevent the vehicle from being used for illegal purposes, it must choose a fund management company ("FMC") that is regulated or registered by MAS, or that is an exempt financial institution in Singapore.

 

  • A Singapore registered office, a Singapore resident company secretary, auditor, and at least one resident director are required to provide evidence of substance. It also needs to keep an up-to-date register of shareholders and provide the details to regulatory and law enforcement authorities upon request.

 

  • VCCs made available to regulated investors (such as accredited investors) may employ a variety of legally mandated, generally recognized accounting principles, such as US GAAP, ASC Standard, or IFRS.



What are the Benefits of Variable Capital Companies (VCCs) Offer?

 

For the issuance and redemption of shares, there is no requirement for solvency tests or corporate resolutions. Elimination of these restrictions guarantees smooth capital transfer. Through convenient share subscription and redemption, shareholders have more freedom and flexibility to join and leave a fund. Such ease of movement and adaptability are essential to the effectiveness of investment funds.

 

The financial reporting requirements often require such instruments to be classed as liabilities when funds are capitalized with redeemable preferred shares, and this presents a challenge during solvency assessments prior to capital reduction or redemption. The limitation caused by the reporting standard's categorization requirement is eliminated because VCCs are excluded from the solvency test.

 

Contrary to corporations formed in accordance with the Companies Act, which mandates that dividends only be paid from profits, VCCs may pay dividends from the capital itself.


Conclusion

The Variable capital company Singapore is a brand-new corporate structure that gets over the drawbacks of the pre-existing ones. With this development, it is predicted that Singapore's role as the fund management hub will become comprehensive and effective, with top-tier management capabilities, a strong regulatory environment, and a favourable tax regime. With the introduction of the VCC, the industry will experience a boom in activity, providing many opportunities for service providers like auditors, tax experts, custodians, fund managers, and advocates to expand their businesses. Singapore's most recent advancement in the fund management industry is proof of the city-state's determination to keep one step ahead of the competition and maintain its position as the region's leading center for asset and fund management for business.

 


Location: 7 Temasek Blvd, Singapore 038987

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