Is Your Fund Looking to Invest in Asia? Consider a Singapore VCC
Prior to 2020, funds looking to invest in Asia faced varying levels of complexity, compliance requirements, and operational considerations with the options that were available to them.
In a game-changing move, the Monetary Authority of Singapore (MAS) and the Accounting and Corporate Regulatory Authority (ACRA) introduced the Variable Capital Company (VCC) structure in 2020.
The move aimed to streamline and enhance the investment process by providing a more flexible and efficient vehicle tailored to the needs of asset management and collective investment schemes. Also geared to bolster Singapore's competitive stance as an asset management hub in the region, this dynamic development has already made significant strides in transforming the Asian fund space.
What is a Variable Capital Company (VCC)?
A VCC is a tailor-made corporate entity exclusively designed to cater to Singapore's asset management industry and collective investment schemes (CIS). This innovative structure is built to offer unparalleled flexibility and convenience to fund managers seeking to navigate the dynamic landscape of Asian investments.
Key features that make the VCC a preferred choice for investors include:
1. Flexible structure: VCCs accommodate open- and closed-ended strategies, allowing fund managers to customise investment objectives according to their unique needs. The elimination of multi-tiered fund structures paves the way for more streamlined operations.
2. Tax incentives: Attractive tax incentives make VCCs the go-to option for investment firms spanning diverse asset classes such as venture capital, private equity, real estate, and hedge funds.
3. Dividends from capital: Gain greater control over cash flows as dividends can be paid from capital, meeting investor obligations with ease.
4. Segregated Assets and Liabilities: Under a single corporate entity, multiple collective investment schemes can flourish while assets and liabilities remain securely ring-fenced. This legal protection ensures robust risk mitigation for fund managers.
5. Governing framework: VCCs operate under the Variable Companies Act (VCA), providing investors with a clear legal framework and instilling confidence in their investment decisions.
6. Redemption of shares: Careful management of redemptions and reallocations in open-ended structures ensures liquidity, fostering stability for investors.
7. Complementary Options: VCCs can be issued as an additional option alongside companies, unit trusts, and limited partnerships.
8. VCC Grant Scheme (VCCGS): To encourage fund managers, MAS provides the VCCGS, assisting with setup costs and incentivising funds to redomicile to Singapore.
Unlocking Potential While Being Mindful of Limitations
As with any innovation, the VCC comes with its considerations. Some potential limitations include:
1. Contagion Risk: Though rare, assets and liabilities can get mixed up between sub-funds, raising cautious concerns.
2. Jurisdictional Availability: VCCs may not be recognised in all jurisdictions, and laws in other regions may not acknowledge sub-funds' ring-fencing, necessitating due diligence.
3. Tax Implications: While VCCs present tax advantages, eligibility may depend on factors like investor residency status. Additionally, specific tax incentives provided by the VCC may have expiration dates, affecting their attractiveness to investment firms.
Taking the Next Step
Setting up a VCC can be seamless with the proper support. Detailed information is available in the ACRA ‘how to guide’. The incorporation typically takes 15-60 days and costs around $8,000.
Accela Finance: Your Trusted Partner in VCC Incorporation
At Accela Finance, we strive to offer you peace of mind throughout your VCC incorporation journey. Our finance experts are ready to provide you with comprehensive assistance and can even serve as your trusted Company Secretary.
If you are curious about your eligibility for VCC setup or need guidance during the application process, don't hesitate to contact us at hello@accela.asia.
