Singapore’s ( VCC ) Variable Capital Company





The Singapore’s (VCC)
Variable Capital Company


The VCC is a new corporate structure that can be used for a wide range of investment funds and provides fund managers greater operational flexibility and cost savings. Fund managers will have greater flexibility in share issuance/redemption and the payment of dividends. Managers will also be able to incorporate multiple funds in a single VCC and achieve cost efficiencies. It will encourage more funds to be domiciled in Singapore and enhance value as an international fund management centre.

Fund managers will be able to constitute investment funds as VCCs across both traditional and alternative strategies, and as open-ended or closed-end funds. Fund managers may also incorporate new VCCs or re-domicile their existing investment funds with comparable structures by transferring their registration to Singapore as VCCs. This can be done via ACRA’s online application form at www.vcc.bizfile.gov.sg .

A VCC must appoint a fund manager that is regulated by MAS to manage its investments. For further details on the eligibility of fund managers to manage a VCC, please refer to the Explanatory Brief on the Variable Capital Companies Bill on 10 September 2018, available on the MAS website.

A group of 18 fund managers participated in a VCC Pilot Programme that was initiated by MAS and ACRA in September last year. All of these fund managers have today incorporated or re-domiciled a total of 20 investment funds as VCCs. These investment funds comprise venture capital, private equity, hedge fund and Environmental, Social, and Governance (ESG) strategies, demonstrating the viability of the VCC framework across diverse use cases.




WHAT IS VCC?

It is a new legal entity form/structure for investment funds administered by ACRA with AML obligations of VCC under MAS guidelines

WHAT CAN IT BE USED FOR ?

Traditional and alternative fund strategies (both open-ended and close-ended)

HOW CAN IT BE SET UP ?

As a stand-alone or as an umbrella entity with multiple sub-funds

CAN A FOREIGN FUND
BE RE-DOMICILED ?

Foreign corporate entities can re-domiciled to Singapore as VCCs

WHAT DO YOU NEED ?

Local registered filing agent Corporate secretary

Singapore based fund administrator ( If 13R or 13X application is considered )

VCC must be managed by Fund Manager regulated by MAS

WHAT ARE THE BENEFITS?

Enhanced safeguard by segregation of assets and liabilities in each sub-fund

Financial statements are not required to be made public

VCC registar members private but need to be provided upon request to certain persons such as public authorities, VCC manager and custodian

Improved operational and tax efficiency

Greater flexibility in issuance and redeeming shares, payment of dividends out of capital

REQUIREMENTS OF A VCC?

The capital of a VCC will always be equal to its net assets, thereby providing flexibility in the distribution and reduction of capital

All VCC must be managed by a Permissable Fund Manager. It will require a Singapore-based licensed or regulated fund manager (unless exempted under the regulation*)

Existing Securities and Futures Act (SFA) requirements for investment funds will apply to VCCs

It must have at least one Singapore resident director and at least one director (may be the same as resident director) who is either a director or qualified rep of the VCC fund manager. For non-autorised scheme and at least 3 directors for authorised scheme

A VCC must have its registered office in Singapore and must appoint a Singapore-based company secretary. A VCC must have at least one shareholder

It must be subject to audit by a Singapore-based auditor and must present its financial statements as per IFRS, Singapore FRS, US GAAP, or RAP 7

* Currently, fund managers exempt from regulations – real estate, single family offices, and related party exemption – cannot use VCC. This list may be intended to expand in future.

VCC – FUND STRUCTURE AND TAX TREATMENT

Stand-Alone (Single Fund) VCC

VCCs may be set up as a single fund VCC (commonly referred to a Standalone VCC).

The tax treatment of a stand-alone VCC will remain the same as that of a Singapore company

The Enhanced Tier Fund (”ETF”) Scheme(13X) and Singapore Resident Fund (”SRF’)(13R) Scheme under the Income Tax Act will apply to a stand-alone VCC similar to a Singapore company as accordingly



Umbrella (Multiple Sub Fund) VCC

The VCC can also be set up with multiple Sub Funds ( Commonly referred to as an Umbrella VCC )




Summary of key features and conditions of tax incentives schemes in Singapore for funds

OTHER TAX RELATED KEY ELEMENTS

GST

The current GST remission will be made available to VCCs approved under the ETF and SRF schemes.

Certificate Of Residence (“COR”)

A Singapore COR is available for the VCC subject to the VCC establishing that it is controlled and managed from Singapore.

In the case of an umbrella VCC, the COR will be issued on the VCC master umbrella level, with the names of the sub-funds receiving the same nature of income from the same treaty country included in the COR

Withholding Tax Exemption

The current withholding tax exemption available to funds approved under the ETF and SRF schemes will be available to VCCs approved under the ETF and SRF schemes.

Incentive Scheme For Fund Managers

The 10% concessionary tax rate under the Financial Sector Incentive – Fund Management Scheme will be extended to approved fund managers managing incentivised VCCs.

Investment Objective Condition

One of the current conditions of the ETF and SRF scheme is that once the funds has been approved under either schemes, the funds will not be permitted to change unless permitted or approved by authorities. This is applicable to all sub funds.

Addition Of New Sub Funds

There is no need to seek approval from or inform the authorities if there are new sub-funds added to a VCC. However, where the investment scope has changed with the addition of a new sub-fund, an approval will be needed from the authorities to expand the investment scope. Further, if there is an announcement of termination of the ETF and SRF schemes, then additions of sub-funds will not be allowed.




VCC Grant Scheme to Accelerate Industry Adoption

To further encourage industry adoption of the VCC framework in Singapore, MAS has also launched a Variable Capital Companies Grant Scheme. The grant scheme will help defray costs involved in incorporating or registering a VCC by co-funding up to 70% of eligible expenses paid to Singapore-based service providers. The grant is capped at S$150,000 for each application, with a maximum of three VCCs per fund manager.

The grant scheme will be funded by the Financial Sector Development Fund (FSDF) and take effect today for a period of up to three years. Interested applicants can write to fsdf@mas.gov.sg for more information.




Grant Details


Applicant Eligibility

Qualifying Fund Managers [1] that have incorporated a VCC or have successfully re-domiciled a foreign corporate entity to Singapore as a VCC, and have obtained a notice of incorporation or transfer of registration from ACRA.


Project Eligibility

This grant is open to Qualifying Fund Managers that have incorporated VCCs or re-domiciled a foreign corporate entity to Singapore as a VCC. The following conditions apply:

The set up of the VCC cannot be simultaneously funded by other government grants/incentives with respect to the same set of qualifying costs and commitments

Each applicant may only apply for the VCCGS for work done in relation to a maximum of three (3) VCCs that have been successfully incorporated or re-domiciled

Qualifying expenses must be paid to Singapore-based service providers for work done in Singapore in relation to the incorporation and registration of VCCs and their sub funds

A Qualifying Fund Manager may not claim co-funding under the grant scheme solely for registration of sub-funds (without the accompanying incorporation or transfer of registration of a VCC). However, a Qualifying Fund Manager may claim qualifying set up costs incurred for the registration of sub-funds as part of the set up of an umbrella VCC and

Applicants should formally submit their applications within three (3) months from the date on the notice of incorporation or notice of transfer of registration issued by ACRA (for a newly incorporated VCC) or within three (3) months from the date of ACRA’s approval of the VCC’s evidence of de-registration (for a foreign corporate entity re-domiciled to Singapore as a VCC).


Funding

70% co-funding of qualifying expenses listed below, capped at $150,000 per VCC.

• Legal services

• Tax services

• Administration or regulatory compliance services

Please refer to the downloadable VCCGS factsheet for full details on qualifying expenses:
VCC Grant Scheme Factsheet (139.8 KB)


Minimum Operational Period

A VCC which has been awarded a grant under the VCCGS is required to remain operational for at least one year from the Registration Date. This means that the VCC cannot be wound up within the first year from the Registration Date. In the event that the VCC is wound up within the first year from the Registration Date, the Qualifying Fund Manager is to inform MAS promptly and no later by the end of one week from the date of the application for the winding up or passing of resolution for a voluntary winding up. MAS reserves the right to claw back the grant awarded if the VCC is wound up within the first year from the Registration Date and/or if the recipient fails to inform MAS of the winding up of the VCC within one week from the date of the winding up.


[1] Refers to: (i) a licensed fund management company, i.e., a holder of a capital markets services license for fund management under section 86 of the Securities and Futures Act (Cap. 289) (“SFA”); (ii) a registered fund management company, i.e. a corporation which is exempted from holding a capital markets services licence under paragraph 5(1)(i) of the Second Schedule to the Securities and Futures (Licensing and Conduct of Business) Regulations; or (iii) a financial institution exempted under sections 99(1)(a), (b), (c) or (d) of the SFA from the requirement to hold a capital markets services licence to carry on business in fund management, i.e., a bank licensed under the Banking Act (Cap. 19), a merchant bank approved under the MAS Act (Cap. 186), a finance company licensed under the Finance Companies Act (Cap. 108) or a company or co-operative society licensed under the Insurance Act (Cap. 142).





“The VCC marks a significant chapter in the development of Singapore as a full-service international fund management and domiciliation hub. The VCC framework provides fund managers with a greater choice of investment fund vehicles in Singapore that caters to the needs of global investment funds and investors. Fund managers will also be able to extract cost savings from centralising their fund management and domiciliation activities in Singapore and structuring their funds more efficiently. The VCC framework also creates new opportunities for Singapore-based fund service providers such as legal and tax advisors, accountants, fund administrators and fund custodians, as we expect more fund managers to use the VCC to structure their investment funds.”

Mr Benny Chey,
Assistant Managing Director
(Development and International),
MAS



“The fund managers’ response for VCC applications in the VCC Pilot Programme is heartening. The diverse spread of fund managers and the use of VCC across different fund strategies demonstrate the use of VCC as a viable investment fund structure.”

Mr Andy Sim,
Assistant Chief Executive
(Legal Services & Compliance),
ACRA






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