Further Consultation on Singapore Variable Capital Company Regime

​The Monetary Authority of Singapore has issued additional consultation papers relating to the Variable Capital Company regime in Singapore.

Following the passing of the Variable Capital Companies Act (No. 44 of 2018) of Singapore (the VCC Act) into law last year, the Monetary Authority of Singapore (the MAS) has on 30 April 2019 released consultation papers on: (1) the proposed regulations and amendments to existing regulations to implement the VCC framework; and (2) the proposed notice on prevention of money laundering and countering the financing of terrorism for variable capital companies (the AML Notice).

Any comments and feedback on the consultation papers should be submitted to the MAS by 30 May 2019. If you would like us to submit any comments to the MAS on your behalf, please feel free to reach out to Jek Aun Long.

A brief overview of the proposals set out in the consultation papers are set out below:

Key Proposals  Details 
Proposed Variable Capital Companies (Composition of Offences) Regulations 2019 and Variable Capital Companies (Composition of Offences - Part 7) Regulations 2019  Sets out offences under the VCC Act that may be compounded.
Proposed Variable Capital Companies (Fees and Late Lodgment Penalties) Regulations 2019  Sets out the fees payable for the late lodgement of documents. 
Proposed Variable Capital Companies (Filing of Documents) Regulations 2019  Sets out the procedure for filing VCC related documents. 
Proposed Variable Capital Companies (Fit and Proper) Regulations 2019  Sets out the fit and proper criteria applicable to directors and proposed directors of a VCC. 
Proposed Variable Capital Companies (Identical Names) Regulations 2019  Sets out the rules for determining when the name of a VCC is identical to another name. 
Proposed Variable Capital Companies (Prescribed Accounting Standards) Regulations 2019  Sets out the accounting standards to be used by VCCs for preparing their financial statements. 
Proposed Variable Capital Companies Regulations 2019 

Sets out various miscellaneous regulations applicable to VCCs, including forms and statements for:

  • declaration of consent to act as manager of a VCC and statement of compliance with section 46(2) of the VCC Act
  • declaration of consent to act as director of a VCC and statement of non-disqualification to act as director, in accordance with section 73 of the VCC Act, and
  • the statement by both the VCC, and the person to be named as a director or proposed director of VCC, as to the person’s compliance with fit and proper factors prescribed in section 53(3) of the VCC Act.
Proposed Variable Capital Companies (Revision of Defective Financial Statements, or Consolidated Financial Statements or Balance-sheet) Regulations 2019  Sets out the regulations in relation to the revision of financial statements by a VCC. 
Proposed Variable Capital Companies (Transfer of Registration) Regulations 2019  Sets out the details of the re-domiciliation regime, which generally applies the current re-domiciliation regime as set out under the current Companies Act; however, there is no minimum company size requirement to qualify for re-domiciliation as a VCC.  
Proposed Variable Capital Companies (Striking Off) Regulations 2019  Sets out the procedure for the striking off and restoring VCCs and their sub-funds. 
Proposed amendments to the Securities and Futures (Offer of Investments)(Collective Investment Scheme) Regulations 2005 

Sets out certain amendments to implement the VCC framework, including with regard to:

  • operational requirements for custodians of VCCs
  • provisions to be included in a VCC constitution
  • provisions to be included in contractual agreements between a VCC and its directors, manager and custodian, and
  • prospectus disclosure requirements.

These amendments are expected to primarily impact VCCs which will be authorised by the MAS for public offer to retail investors in Singapore. 

Proposed amendments to the Code on Collective Investment Schemes (the Code) 

Sets out certain amendments to the Code, including:

  • to extend certain existing responsibilities and independence requirements relating to approved trustees and managers of authorised funds, to the VCC, its directors and custodians
  • requiring authorised VCCs to prepare their financial standards using RAP 7, and
  • to allow authorised VCCs and authorised sub-funds of a VCC to invest in assets located in a jurisdiction that does not have a cellular structure after reasonably mitigating cross-cell contagion risk

These amendments are expected to primarily impact VCCs which will be authorised by the MAS for public offer to retail investors in Singapore. 

Proposed AML Notice 

This sets out the proposed anti-money laundering and countering the financing of terrorism obligations (AML/CFT) to be imposed on VCCs, including:

  • VCCs will be subject to AML/CFT obligations under the AML Notice, including to identify its customers, beneficial owners of its customers, connected parties to its customers, as well as natural persons appointed to act on behalf of its customers.
  • VCCs are required to engage an eligible financial institution (which itself would be subject to AML/CFT obligations under the relevant MAS AML Notice) to conduct the necessary checks and perform the measures in order for the VCC to comply with the AML Notice.
  • VCCs will (subject to certain exemptions) be required to maintain registers of beneficial owners and nominee directors. The registers will not be available to the public, but will be accessible to supervisory and law enforcement agencies as required under applicable laws.

Eligible financial institutions include:

  • Banks in Singapore licensed under section 7 of the Banking Act (Cap.19).
  • Merchant banks approved under section 28 of the Monetary Authority of Singapore Act (Cap. 186).
  • Finance companies licensed under section 6 of the Finance Companies Act (Cap. 108).
  • Financial advisers licensed under section 6 of the Financial Advisers Act (Cap. 110) except those which only provide advice by issuing or promulgating research analyses or research reports, whether in electronic, print or other form, concerning any investment product. 
  • Holders of a capital markets services licence under section 82 of the Securities and Futures Act (Cap. 289).
  • Fund management companies registered under paragraph 5(1)(i) of the Second Schedule to the Securities and Futures (Licensing and Conduct of Business) Regulations (Rg. 10).
  • Persons exempted under section 23(1)(f) of the Financial Advisers Act read with regulation 27(1)(d) of the Financial Advisers Regulations (Rg. 2) except those which only provide advice by issuing or promulgating research analyses or research reports, whether in electronic, print or other form, concerning any investment product.
  • Persons exempted under section 99(1)(h) of the Securities and Futures Act read with paragraph 7(1)(b) of the Second Schedule to the Securities and Futures (Licensing and Conduct of Business) Regulations.
  • Approved trustees approved under section 289 of the Securities and Futures Act.
  • Trust companies licensed under section 5 of the Trust Companies Act (Cap. 336).
  • Direct life insurers licensed under section 8 of the Insurance Act (Cap. 142).
  • Insurance brokers registered under the Insurance Act which, by virtue of such registration, are exempted under section 23(1)(c) of the Financial Advisers Act except those which only provide advice by issuing or promulgating research analyses or research reports, whether in electronic, print or other form, concerning any investment product. 

With regard to the provisions of the VCC Act governing the winding up of a VCC and its sub-funds, the MAS noted that the VCC Act will be amended later in 2019 to align the provisions with those of the Insolvency, Restructuring and Dissolution Act 2018, subject to any necessary modifications specific to VCCs. The MAS will be consulting separately on the regulations relating to the insolvency and winding up of a VCC and its sub-funds.

If you have any questions or would like to find out more, please contact our Singapore team.

This document (and any information accessed through links in this document) is provided for information purposes only and does not constitute legal advice. Professional legal advice should be obtained before taking or refraining from any action as a result of the contents of this document.