Benefits of setting up a Variable Capital Company (VCC)

  • Ace Global
  • December 29, 2021

The Variable Capital Company (VCC) is Singapore’s newest and legal means for investment funds constituted under the Variable Capital Companies Act which took effect on 14 Jan 2020.

The Accounting and Corporate Regulatory Authority (ACRA) together with the Monetary Authority of Singapore (MAS) officially launched the Variable Capital Company Act (VCC Act). There are some key features of a VCC:

  • First, A VCC has a variable capital structure that provides the flexibility of distributions and returns on investments. Specifically, it can pay dividends out of capital, which gives fund managers flexibility to meet dividend payment obligations.
  • Second, A VCC can be established as a single standalone fund or an umbrella fund with multiple sub-funds, each holding a portfolio of segregated assets and liabilities. Where fund managers choose to structure their funds as umbrella VCCs, cost efficiencies may arise from using common service providers across the umbrella and its sub-funds.
  • Third, A VCC can be used for both open-ended and closed-end fund strategies.
  • Fourth, the re-domiciliation process of a VCC is made easy in Singapore. For fund managers, they may incorporate new VCCs or re-domicile their existing overseas investment funds with comparable structures by transferring their registration to Singapore as VCCs.
  • Last but not least, VCCs must maintain a register of shareholders, though there is no requirement for it to be made public. However, this register must be disclosed to public authorities upon request for regulatory, supervisory, and law enforcement purposes.

Moreover, this article will describe some Variable Capital Company benefits and advantages for every business sector:

For fund managers

  1. Fund Managers are able to exploit tax and operational efficiencies arising from the VCC’s flexibility. It will offer them a competitive edge on a global scale.
  2. VCC gives alternatives to fund managers to multiple separate companies because each VCC sub-funds has assets and liabilities that can be separated from the others under one umbrella.
  3. As each sub-funds can share a Board of Directors and use the same service providers, VCC helps fund managers save time and cost.
  4. If a VCC acquires another VCC, the original can use the customer due diligence research already done by the acquired one.
  5. VCC helps fund managers provide an appealing package to potential investors because of its flexible capital structure coupled with the fact as a Singapore-established company, it can gain access to the 86 tax treaties that Singapore has in place with foreign jurisdictions.
  6. When VCC is used as an open-end fund, it provides a low barrier for entry and low threshold for the operation because the usual capital requirements do not burden it, and so forth.

For Local Fund Service Providers

  1. With the introduction of VCC, local fund service providers can expect an increase in business inflows.
  2. All VCCs will only have Singapore based fund managers, so there will be no foreign competitor.
  3. The VCC can share the same Board of Directors when it has sub-funds, which makes the local fund service providers’ operation much more efficient.
  4. The local fund service providers can re-domicile their offshore funds to enjoy the same benefits their clients have, and so forth.

For investors

  1. VCC can operate without the need to appoint any trustee because it is corporate and legal.
  2. VCC permits investors to issue and redeem shares without a shareholder’s approval. Besides, they can withdraw anytime.
  3. VCC can issue dividends by using its capital if it is required.
  4. VCC is not required to hold an AGM and Singapore is known to have excellent governance.
  5. Investors do not need to be concerned about the interrelation of the sub-funds as they are independent of each other.
  6. If VCC has sub-funds, it can share the same Board of Directors which brings to cost efficiency, and so forth.

For Singapore

  1. Singapore will create a greater share of the overall chain of fund management. From that, Singapore will be built the reputation all over the world
  2. The increase in investments from Offshore would help Singapore maintain economic stability
  3. The rate of employment will be increased positively, and so forth.

If the entrepreneurs would like to expand the market in Singapore, Variable Capital Company (VCC) is one of the best choices for businesses to invest. Please follow the ACE website to read more about Singapore Business Registration.

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