Singapore Variable Capital Company - 新加坡晨星管理顾问

Variable Capital Company

OVERVIEW OF VCC

Singapore has long been recognized as one of the best fund management hubs in the world. Over the last decade, the government has taken the necessary steps to develop the country’s growing fund management industry. The goal was to enhance Singapore’s global fund management sector competitiveness.

The Variable Capital Companies Act officially came into effect on 14 January 2020. As of the time of writing, there are more than 500 family offices in operation in Singapore, with another 700 applications currently under review by the Monetary Authority of Singapore (MAS).

The new legal framework has similarities with existing fund vehicles in Singapore in the form of a trust, limited partnership, or a standard private company. However, the differences could be quite difficult to unravel.

Benefits of VCC

01

Enhanced flexibility in the issuance and redemption of shares

In a VCC structure, funds can issue and redeem shares without prior shareholders approval. This creates tremendous convenience for entry and exit for investors. Dividends can also be distributed out of capital or profits freely. This workaround provides extra options to fund managers when it comes time to meet dividend payment commitments.

The capital of a Variable Capital Company is always equal to its net assets. This allows for a measure of flexibility when distributing wealth among investors.

02

Umbrella structure allowing economies of scales and cost efficiencies

A VCC can work as a standalone fund or as an umbrella structure. The latter provides substantial cost savings since the sub-funds can share costs incurred in setting up and maintaining the entities. Sub-funds will also have the same service providers, including the same administrative agent, auditor, fund manager, and custodian.

03

Non-public register giving added anonymity and privacy

While VCCs need to maintain their register of shareholders, this information is not required to be made public, offering full privacy to ultimate beneficiaries. While there is a need to prepare financial statements for filing with ACRA and tax reporting with IRAS every year, the financial statements of all VCC standalone and sub-funds would not need to be made publicly available.

However, upon request, VCCs must send this information to regulating bodies, including MAS, IRAS, and ACRA.

04

Enhanced safeguards with segregation of assets and liabilities

Separating the assets and liabilities of all the sub funds within an umbrella VCC is important so that the investors in VCC and creditors of the sub funds are protected.

According to the Singapore VCC Act, a sub fund’s assets cannot be used to pay for any of the liabilities of the umbrella VCC or other sub funds. Any liability of a sub fund must be paid for with the assets of that sub fund only.

This can reduce the risk of contagion.

05

Tax Incentives Available at Umbrella Level

Any discussions about VCC would not be complete without mentioning tax incentives and exceptions available to the corporate structure.

The most notable tax exemption schemes are the 13O and 13U. Most of their investment gains will be tax exempt if a VCC has successfully applied for the tax exemption scheme. The “permitted investment gains” include almost every type of financial transaction you can think of, except for anything to do with Singapore real estate.

The tax incentive conditions will be granted to the umbrella VCC rather than the individual sub-funds. This is important because it could make it easier to meet the requirements for the tax incentive.

06

Relocation with Employment Passes

Besides attracting capital, Singapore is also committed to attracting international talent.

With the onshore fund tax incentive scheme of 13O and enhanced-tier fund tax incentive of 13U, a respective of one and three employment passes (EP) would be granted to senior managers/owners of the fund who are based overseas and intending to relocate to Singapore. This pass allows foreigners to legally work, stay in Singapore, and bring their immediate family dependents.