Singapore: The Singapore Variable Capital Company ("VCC")

Last Updated: 22 August 2019
Article by Shook Lin & Bok

The VCC is a new Singapore fund structure that will go live by the end of 2019. The VCC Act was passed in October 2018 and the draft regulations were released on 30 April 2019 for public consultation.

Key Features & Benefits of a VCC

The VCC is an entirely new legal structure that provides an attractive alternative to existing fund or collective investment scheme ("CIS") structures (ie corporation, limited partnership and unit trust).



  1. is governed by the VCC Act;
  2. is regulated by the Accounting and Corporate Regulatory Authority (for establishment and administrative purposes) and the Monetary Authority of Singapore ("MAS") (for Anti-Money Laundering/Countering the Financing of Terrorism ("AML/CFT") purposes);
  3. can only be used as one of the following funds (although it may be extended to other uses in future):
    1. traditional or alternative funds;
    2. retail or restricted funds; and
    3. standalone fund, or an umbrella entity with multiple sub-funds with segregated assets and liabilities;
  4. is able to redeem shares and pay dividends using its net assets. This allows a VCC to be flexible in distributions and return of capital (in contrast with a corporate fund);
  5. must appoint a fund management company ("FMC") that is licensed or registered by MAS, or is an exempt financial institution in Singapore;
  6. must have sufficient mandatory Singapore substance (ie Singapore registered office, Singapore resident company secretary and auditor, and at least one resident director);
  7. must have minimum regulatory compliance, ie:
    1. at least one director must be a director or registered representative of the FMC;
    2. all directors must be fit and proper persons; and
    3. compliance with AML/CFT requirements, although these can be outsourced to the FMC of the VCC or a regulated financial institution in Singapore;
  8. can dispense with annual general meetings of its shareholders;
  9. can maintain only a private register of shareholders; and
  10. can use US GAAP, ASC Standard or IFRS, except for VCC offered to retail investors which must use RAP7.

Redomiciliation of Foreign Funds to VCC

Foreign corporate funds (eg a Cayman segregated portfolio company or a BVI protected cell company) may redomicile to a VCC, if they have positive net assets and remain solvent within 12 months from the date of application. The applicant must submit the requisite forms and documentation for inward re-domiciliation.

VCC Offered to Retail Investors

VCCs offered to retail investors must meet additional requirements, including operational requirements for custodians, provisions to be included in a VCC constitution and certain VCC contractual agreements, and mandatory disclosures in VCC prospectuses. The custodian must safeguard the rights and interests of the VCC's shareholders and ensure the disclosure of the risk of cross-cell contagion to shareholders of VCCs. The custodian must also notify MAS within three business days upon knowing any breaches of the VCC or the FMC, in relation to laws or regulations relating to the VCC or the FMC, take custody and control of all VCC assets, ensure all VCC assets are accounted for, and ensure all VCC assets are distinct from its own and those of its clients.

Tax Incentives

A VCC will be treated as a company and a single entity for the purposes of tax. In addition, tax incentives applicable to funds under sections 13R and 13X of the Income Tax Act will be extended to VCCs. The Financial Sector Incentive Scheme for fund management and GST remission for funds will also be applicable to VCCs, provided that all applicable incentive conditions are met.

Comparison with Tax Haven Funds

In our opinion, the VCC's structure and features are very similar to the Cayman segregated portfolio company ("SPC"). However, we expect it will be easier, faster, more convenient, and less expensive to operate and maintain the VCC. In addition, much of the regulatory (including AML/CFT and Common Reporting Standards) and substance requirements are already fulfilled by the Singapore regulated fund management company and the relevant financial institutions servicing the funds. The additional benefits are:

  1. having everything (including the process, documentation and professionals) located in one central business district in Singapore, a safe, stable and reputable international financial centre and asset and wealth management hub;
  2. availability of a tax neutral fund structure pursuant to tax incentives approved in writing by the local regulators;
  3. availability of the benefits of more than 80 double tax agreements; and
  4. substantial cost savings (eg offshore directors, offshore agents, offshore registered office, offshore shell fund manager, hefty CIMA registration fees and annual fees).

We have observed a growing trend of clients making the obvious choice of Singapore as a structuring venue, investment fund and asset/wealth management jurisdiction. In recent times, banks and investors have a strong say in whether the funds should be domiciled in a reputable international financial centre.

The next steps

A VCC can be used by fund/asset managers, wealth managers, private equity/real estate/venture capital managers and multi-family offices. It can be used for traditional, alternative, private equity/real estate/venture capital funds. It can also be used as an alternative to retail unit trust funds. Practically, we anticipate a significant take up rate for the private VCC, both for traditional and alternative fund strategies. We also anticipate a significant shift from conventional tax haven segregated portfolio company fund and protected cell company fund structures to private VCC funds in Singapore.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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