Singapore: The Variable Capital Companies Bill

​On 10 September 2018, the Variable Capital Companies Bill was moved for its First Reading in Parliament.


On 10 September 2018, the Second Minister for Finance, Ms Indranee Rajah, moved the Variable Capital Companies Bill (VCC Bill) for its First Reading in Parliament. This represents significant progress in further enhancing Singapore’s credentials as a fund domicile and a full-service international fund management centre.

The Variable Capital Company (VCC), previously referred to as the S-VACC, is a new open-ended corporate legal vehicle specifically, designed for collective investment schemes. It is aimed at complementing the existing suite of legal vehicles available to fund managers in Singapore. It will also be useful for closed-end funds and underlying investment holding structures.

The Monetary Authority of Singapore (MAS) had previously conducted a public consultation on the proposed regulatory framework for VCCs, and on 10 September 2018 issued its response to feedback received on the earlier public consultation (Response).

Read the full Response here

Notable Features of the VCC

The VCC may be set up as an open-ended or closed-end fund: This open ups the possibility of utilising the VCC for traditional and alternative fund strategies, including hedge funds, private equity funds, venture capital funds, real estate funds, mutual funds and exchange traded funds.

The VCC can be established as an umbrella structure with multiple sub-funds or as a standalone vehicle: In an umbrella structure, each sub-fund will need to be registered with ACRA but will not have separate legal personality. An umbrella VCC will segregate the assets and liabilities between sub-funds, such that the assets of one sub-fund may not be used to satisfy the liabilities of another sub-fund.

The VCC can have a single shareholder: During the consultation phase, it was contemplated that VCCs should have at least 2 members. This has now been amended to allow for VCCs to be used in master-feeder structures.

Variable capital structure: This provides flexibility for the VCC to issue and redeem shares without having to seek shareholders’ approval, enabling investors to exit their investments in the VCC when they wish to in accordance with the terms of the fund, and pay dividends using its capital.

Redomiciliation: Foreign corporate entities set up as collective investment schemes could potentially be re-domiciled as VCCs in Singapore. This could be a potential “game changer” as it is intended to encourage fund managers in Singapore with funds domiciled in offshore jurisdictions to co-locate their fund domiciliation with their fund management activities in Singapore. There are obvious cost benefits and other efficiencies to this.

Tax Treatment: The VCC will be treated as a company and single entity for tax purposes such that only one set of income tax return needs to be filed. The tax exemption schemes under Section 13R and Section 13X of the Income Tax Act of Singapore will be extended to VCCs. The 10% concessionary tax rate under the Financial Services Incentive -Fund Management scheme will be extended to approved fund managers managing such incentivised VCCs. The existing goods and services tax remission for funds will also be extended to such incentivised VCCs.

Key Requirements of the VCC

Fund Manager: The VCC must be managed by a fund manager which is duly regulated by the Monetary Authority of Singapore (MAS). The fund manager may, however, delegate fund management and operational duties to other parties (eg a sub-manager) that are regulated as fund managers in other jurisdictions.

Directors: The VCC must have at least one Singapore resident director. For authorised schemes, the VCC must have at least 3 directors for authorised schemes (of which one must be an independent director). Additionally, at least one director of the VCC must be a director or representative of the fund manager.

Registered Office: The VCC must have its registered office in Singapore and a Singapore-based company secretary.

Audit: The VCC must be subject to audit by a Singapore-based auditor. The VCC allows for the use of Singapore accounting standards and recommended accounting principles, as well as the International Financial Reporting Standards and US Generally Accepted Accounting Principles.

Register of Members: The register of VCC shareholders (ie the fund investors) need not be made public, although the VCC must maintain an updated register of shareholders and disclose the information to regulatory and law enforcement authorities upon request.

Looking Forward

The moving of the VCC Bill in Parliament is a significant step forward. The industry is certainly anxious for the VCC regime to come into effect and be implemented soon.

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.