Setting up a VCC in Singapore

Despite being one of Asia’s main financial hubs, Singapore continues to push for growth in various industries, including asset management. With its reputation and transparent governance, the country has long been appealing to entrepreneurs and investors alike. In a bid to attract more fund managers, the VCC was introduced in January 2020 as a flexible investment fund structure providing a wider range of use.

What is a VCC?

VCC stands for Variable Capital Companies, which is a fairly new type of Singapore corporate structure for investment funds. It is governed by the Variable Capital Companies Act and functions as an additional option to other investment fund structures in Singapore such as trust structures under private limited companies and limited partnerships.

What are the benefits of setting up a VCC in Singapore?

With the establishment of rising numbers of VCCs in Singapore, it is quickly becoming a familiar structure which has increased investors’ confidence in the platform. Please find the below information and benefits:

VCC Type

The VCC can be set up either as a stand-alone fund or an umbrella fund with several sub-funds. If the VCC had initially been set up as a stand-alone fund, the option to switch to an umbrella VCC is always available as long as ACRA is notified within 14 days of the change.

This key aspect of the VCC structure, from which it earns its name, allows the issuance and redemption of shares without shareholders’ approvals, and the payment of dividends from its capital, providing considerable ease for investors to move their investments.

Sub-fund Types

For umbrella VCCs, both open-end and closed-end fund types can be used under the same structure, allowing greater flexibility, operational efficiency and cost benefits. There are also no restrictions for the sub-funds to have the same investors or investment objectives.

Transferability

Fund managers can choose to transfer the registration of comparable foreign investment funds to Singapore using a VCC instead of setting up a new one. Currently, only a one-to-one transfer is possible, but this could change in the future.

Privacy

The VCC’s shareholder list does not have to be disclosed to the public. This affords a level of privacy for VCCs which cannot be enjoyed by a typical company structure. However, the updated register of members (i.e. shareholders) must be maintained internally and made available to authorities if required.

VCC Grant Scheme

A qualifying fund manager setting up a VCC or re-domiciling an existing foreign entity for the first time can receive funding under the extended Variable Capital Companies Grant Scheme (VCCGS). This scheme initially set to expire on 15 January 2023, has been extended for a period of two years until 15 January 2025.

Tax Benefits

As with any other dividends paid by a Singapore company to its shareholders, the dividends paid out by Singapore VCCs are also exempted from tax. In addition, the start-up tax exemption scheme and the partial tax exemption scheme for Singapore companies are applicable to VCCs as well.

Stability and Growth

Singapore is renowned for its well-developed infrastructure, political stability, business-friendly environment, skilled workforce and global connections, making it one of the best countries in the world to start a business. These same benefits apply to the setting up of a VCC. In addition, MAS is revisiting the VCC structure to see how it can increase its attractiveness. Singapore can expect to see improvements to the structure in the next few years.

What are the requirements for setting up a VCC?

Similar to a private limited company in Singapore, VCCs need to have the following information/documents ready for incorporation:

• VCC Name
• Financial Year End
• Particulars of VCC Officers with at least 1 resident director and resident company secretary
• Details of Subscriber(s)
• Local Registered Office Address
• Constitution

The following are also additional requirements for the VCC structure:

Directors

Besides the resident director stated above, there must be at least 1 director who is a qualified representative or director of the VCC’s fund manager. This can be the same person as the resident director. Additionally, if the VCC has Authorised Schemes (i.e. collective investment schemes or CIS), a minimum of 3 directors is required with 1 of them being an independent director. An independent director refers to one who is not connected to the VCC in any way other than in the capacity of a working director.

Fund Manager

The VCC needs to appoint a fund management company that is licensed or registered, or an exempted financial institution to manage their assets. At the point of incorporation, the following information/documents from the Singapore-based fund manager must be ready for submission:

• Unique Entity Number (UEN)
• Full Name
• Address of Principal Place of Business
• Country of Incorporation
• Declaration by Fund Manager

Sub-Funds

If the VCC is an umbrella VCC, its sub-fund will need to be registered with ACRA within 7 days of its formation. The following information is required for registration:

• Sub-Fund Name
• Date of Formation

AML/CFT

VCCs must abide by the requirements from MAS on anti-money laundering (AML) and countering the financing of terrorism (CFT) and are expected to have in place a robust system with due diligence measures and other controls to detect and deter the flow of related funds. All information collected and transactions recorded have to be maintained for availability to authorities if required.

VCC Fees

The ACRA fees for a VCC are much higher than that of a private limited company. Below are some of the application/submission fees in relation to VCCs and sub-funds.

• Name Registration: $15
• Incorporation: $8,000
• Certificate Confirming Incorporation of VCC: $50
• Transfer of Registration: $9,000 + $400 (sub-fund registration) x No. of sub-funds
• Sub-fund Registration: $400
• Change in VCC or sub-fund name: $15
• Annual Return: $1,600

What are the accounting and audit requirements for a VCC?

The same accounting requirements for a private limited company apply to VCCs. However, since its structure differs from that of a normal company, here are some points to take note of.

Financial Reporting Standards

Besides the Singapore Financial Reporting Standards (SFRS), a VCC can also choose to use other internationally recognised accounting standards such as the International Financial Reporting Standards (IFRS) or US Generally Accepted Accounting Principles (US GAAP) while preparing its financial statements.

Sub-Funds

Each sub-fund under an umbrella VCC is required to have its own accounting records and financial statements, even though only a single annual return is to be filed under the umbrella VCC with its full set of financial statements. All sub-funds under the umbrella VCC are also required to have the same accounting period.

Although sub-funds will each have a unique sub-fund number, they do not have separate legal identities but must have segregated assets and liabilities. This is to protect the interests of investors from different sub-funds as the liabilities of one sub-fund cannot be discharged by the assets of another sub-fund.

Statutory Audits

Unlike private limited companies, VCCs cannot be exempted from audits. Therefore, an auditor must be appointed within 3 months of incorporation and audited financial statements must be submitted during the annual return filing for each financial year.

Frequently Asked Questions