Singapore's financial development is evident, as it has rapidly grown into a global hub for the asset management industry, attracting numerous investors and asset managers!

In recent years, significant changes have occurred in Singapore's fund sector, with the official introduction of Limited Partnerships (LP) and Variable Capital Companies (VCC) as new structures for the private equity and venture capital industries.

I How VCC Came About

On October 1, 2018, the Singapore Parliament passed the Variable Capital Companies Act 2018.

This legislation was introduced to better meet the needs of global and regional fund managers seeking to establish fund structures in Singapore, further strengthening Singapore's position as a leading global asset management hub. On January 14, 2020, the Monetary Authority of Singapore (MAS) announced the launch of the regulatory framework for Variable Capital Companies (VCC).

This framework introduced a new company structure in Singapore known as the Variable Capital Company (VCC).

II What is VCC?

The Variable Capital Company (VCC) is a new investment fund company structure established under the Variable Capital Companies Act, which came into effect on January 14, 2020, by the Monetary Authority of Singapore (MAS) and the Accounting and Corporate Regulatory Authority (ACRA). It complements the existing set of investment fund structures and provides more options for fund and wealth management.

The VCC is established under the VCC Act rather than the Singapore Companies Act, offering a new legal entity structure applicable to all types of investment funds in Singapore. It can consist of a single standalone fund or be structured as an umbrella fund containing two or more sub-funds, each of which can hold different assets.

The VCC structure demonstrates significant flexibility in share issuance and dividend payments, making it highly attractive. As of October 2021, over 400 VCCs have been registered or relocated to Singapore. Additionally, the Monetary Authority of Singapore (MAS) has indicated that they are working on revising the VCC fund structure to attract more fund managers and facilitate easier fund conversions and the relocation of various offshore funds. For more information about the VCC, you can visit the ACRA official website: https://www.acra.gov.sg/business-entities/variable-capital-companies

III What Are the Advantages of VCC?

1 Risk Segregation

The VCC is an independent legal entity, and shareholders are only liable for the debts of the VCC up to the amount of their capital contributions. A VCC can be established as a standalone fund or structured as an umbrella fund with two or more sub-funds. The assets and liabilities of each sub-fund under the VCC umbrella fund structure are relatively independent. A VCC can be an open-ended fund (where investors are allowed to freely redeem their investments) or a closed-ended fund (where redemptions are restricted).

2 Privacy Protection

The shareholder register of a VCC does not need to be made public, and registration information cannot be directly purchased from ACRA, providing privacy protection for investors. This provision does not apply to ordinary companies. Only the fund manager of the VCC, the VCC's custodian, certain designated government agencies, or individuals permitted by court order are allowed to access this information.

3 Fewer Restrictions

The VCC has a variable capital structure and is not subject to any capital maintenance requirements. The issuance and redemption of shares do not require shareholder approval, nor is it necessary to hold an annual general meeting for the fiscal year, significantly improving process efficiency and reducing administrative costs. Additionally, it can pay dividends from capital, not just from profits.

4 Flexible Structure

A VCC must be managed by a licensed fund manager regulated by the Monetary Authority of Singapore (MAS) and must engage a qualified financial institution that is also regulated by MAS for AML/CFT compliance to ensure adherence to relevant parts of AML/CFT notifications. Fund managers can establish a new VCC by transferring their registration to Singapore as a Variable Capital Company or by re-registering their existing overseas investment funds with similar structures.

5 Diverse Applications

The VCC is versatile in its applications; it can be established as either an open-ended fund or a closed-ended fund. Additionally, VCCs are suitable for various strategies, including both traditional and alternative approaches.

6 Tax Benefits

Compared to traditional company structures, Variable Capital Companies (VCCs) can enjoy tax benefits, including exemptions from taxes. There are three tax exemption schemes available: A) Offshore Fund Tax Exemption Scheme, B) Singapore Onshore Tax Exemption Scheme, and C) Enhanced Fund Tax Exemption Scheme.

IV How to Register a VCC

All applicants must appoint a regulated or licensed fund manager in Singapore before applying to register a VCC and provide the relevant details to the authorities thereafter. Additionally, applicants can also register a VCC in collaboration with a third-party licensed manager.

1 Registering the VCC Name

1）Select and confirm the name of the VCC (applicants should avoid names that are identical to existing companies, refrain from using vulgar or offensive names, and not use names explicitly prohibited by the Ministry of Finance).
2）Choose the type of VCC (whether it will be an umbrella fund).
3）Provide detailed identification information of the proposed directors and personnel of the VCC (address, identification documents, nationality) and contact details.
4）Obtain preliminary approval from other relevant authorities.

2 Registering the VCC Entity

The following information is required to register the VCC entity:
1）Approval number for the VCC name application.
2）Details of the licensed fund management company, including UEN number, company address, and country of registration.
3）Identity information of the fund subscribers, such as ID, subscriber name, and email.
4）Address and operating hours of the registered office in Singapore.
5）At least one Singapore company secretary.
6）Company constitution and annual financial year-end date (which will serve as the compliance and tax filing deadline for the VCC).

Important Notes:
1）Only Singpass registrants and Corporate Service Providers (CSPs) can submit the VCC registration application form.
2）The processing time for the application form generally does not exceed 14 days (calculated from the date all required documents are submitted).
3）The VCC entity must pay an application fee of SGD 8,000 (non-refundable), and an additional application fee of SGD 400 is required for registering sub-funds (see below).
4）The assigned fund personnel will receive an email seeking consent from the relevant authorities, and all appointed directors, company secretaries, and participants must confirm the authenticity of their appointment on the government website within 60 days.
5）According to the Variable Capital Companies Act, the VCC must have at least one director as a board member or qualified representative of the fund, and at least one of the VCC directors must be a resident of Singapore (this individual must be a Singapore citizen, permanent resident, or holder of an Employment Pass with a residential address in Singapore).
6）If any director or shareholder is a foreigner, you are obligated to engage a CSP to register your VCC.

3 Obtaining the Company Registration Paper

Once registered successfully, you will receive a free company registration paper, which includes the Unique Entity Number (UEN) assigned to the VCC. This UEN serves as the identification number for the business entity and is essential for transactions with government agencies.

4 Sub-Fund Registration

If the VCC structure is an umbrella fund, each sub-fund must be registered with ACRA using a specific form, and each sub-fund is not considered an independent legal entity. You must submit the following information to complete this process:
1）UEN and the name of the umbrella VCC fund structure.
2）Proposed sub-fund name.
3）Sub-fund establishment date.

Please note that the application may be submitted to MAS, and you may be required to change the proposed name of your sub-fund. Additionally, a non-refundable application fee of SGD 400 is required for registering each sub-fund. Sub-fund registration only applies to umbrella VCCs; non-umbrella VCCs do not need to follow this step.

5 Timeframe

The review period for applying to establish a VCC takes between 14 to 60 days, which includes the time required for approval or review by other government agencies if necessary. The outcome of the application will be communicated via email.