Singapore Variable Capital Companies
02 March 2020
Singapore has launched a new corporate entity structure: Variable Capital Companies / VCCs.
The VCC structures are aimed at fund managers and will present them with a structure that provides operational flexibility and tax efficiency. VCCs will be used for one or more collective investment schemes and will allow these to be ‘grouped’ under the single umbrella of the VCC while remaining separate from each other. A VCC can also be used as a stand-alone entity.
It is thought that the vehicle will encourage foreign funds to re-domicile in Singapore as well as growing interest in incorporating new VCCs in the jurisdiction.
Competitive benefits of VCCs:
- Provide benefits for fulfilling conditions under fund tax incentive schemes
- Gain operational efficiency
- Financial statements do not have to be published
- Lends itself to several investment strategies
- VCCs allow for shares to be redeemed and dividends paid using net assets
- No maximum number of shareholders
We have already seen significant interest in VCCs. We are confident that the vehicle will reinforce Singapore’s position as an Asian alternative to leading fund jurisdictions in Europe, Cayman and Mauritius.
While the VCC is expected to be an attractive option, the Financial Sector Development Fund also announced the launch of the Variable Capital Companies Grant Scheme for a three-year period to encourage uptake further. Under the scheme, the cost of incorporating or registering a VCC is supported. Up to 70% of applicable expenses that have to be paid to the Singapore-based service providers that provide incorporation or re-domiciliation support can be co-funded. Grants are capped at S$150,000 for each application and can be applied to a maximum of three VCCs per fund manager.
Increasingly, Singapore is a top jurisdiction for funds, and the VCC is an attractive offering which allows us to be competitive with fund vehicles offered in countries like Cayman and Luxembourg that were predominantly used by fund managers in the past. We expect to see considerable uptake of the VCC, especially during the period in which fund managers can apply for grants.