The Variable Capital Company (VCC) is a new corporate structure introduced in Singapore to cater to the needs of investment funds and the fund management industry.

The VCC structure is highly flexible to accommodate the creation of sub-funds with either open-ended or closed-ended strategies.

What are the key features of a VCC?

Single Legal Entity –

A VCC is a single legal entity incorporated under the VCC Act that can choose to form sub-funds by registering them with ACRA. As sub-funds are part of a single legal entity (the VCC), they can share a board of directors and have common service providers, such as the same fund manager, custodian, auditor and fund administrator.

Umbrella VCCs –

The VCC can be used as a collective investment scheme (CIS) vehicle either as a standalone entity (non-umbrella VCC) or as an umbrella entity with segregated sub-funds under it (umbrella VCC).

Segregated Portfolios –

The Umbrella VCC structure allows VCCs to have multiple sub-funds with different investment objectives, investors and assets and liabilities.Sub-funds must maintain segregated portfolios of assets and liabilities, and this rule applies even in insolvency, so sub-funds may be wound up separately to ensure ring- fencing of each sub-fund’s assets and liabilities.

Variable Capital –

A VCC is permitted to freely redeem shares and pay dividends using its nets assets / capital, thereby providing flexibility in the distribution and return of capital.

The VCC complements existing fund structures available in Singapore, such as limited partnerships, companies and unit trusts. The VCC removes some limitations associated with existing corporate fund structures in Singapore, such as restrictions on the return of capital to shareholders, public access to the identities of shareholders and the ability to declare dividends only out of profits.

What tax incentives are available to VCCs?

Tax incentives currently granted to Singapore-incorporated companies structured as funds (managed by a Singapore based fund manager) will also be extended to VCCs.

Section 13O (previously 13R) of the Income Tax Act – tax incentives will be granted to VCCs which are incorporated and tax resident in Singapore, which are managed by a Singapore-based fund manager with at least S$10 million Assets Under Management (AUM) (committing to increasing the AUM to S$20 million within 2 years) incurring a minimum annual business spending of S$200,000 (subject to “tiered business spending framework” pegged to the AUM size).

Variable Capital Company Info Sheet

Section 13U (previously 13X) of the Income Tax Act – tax incentives will be granted to VCCs managed by a Singapore-based fund manager with at least S$50 million AUM incurring a minimum annual business spending of S$500,000 (subject to “tiered business spending framework” pegged to the AUM size).

Section 13G (previously 13G) of the Income Tax Act administered by Enterprise Singapore – tax incentives will be granted to VCCs (for up to a maximum of 15 years) with a minimum fund size of S$10 million incurring a cumulative local business spending of at least S$100,000 multiplied by the incentive tenure.

Minimum regulatory / statutory compliance requirements for VCCs

• VCCs must be managed by a fund manager which is licensed or registered by MAS, i.e. a Licensed Fund Management Company, a Registered Fund Management Company, or an exempted financial institution.
• A VCC must have at least one director who is resident in Singapore, and a Singapore-resident company secretary.
• A VCC must have at least one director who is either a director or qualified representative of the VCC’s fund manager.
• VCCs are required to comply with the following regulatory requirements under MAS:

Anti-Money Laundering / Countering the Financing of Terrorism (AML/CFT)procedures
Outsourcing of AML duties to its fund manager or a regulated financial institution

• A VCC must be audited by a Singapore-based auditor.
• VCCs must file their annual returns within 7 months after the end of the VCC’s financial year.