Reed Smith Client Alerts

The Singapore Variable Capital Company (commonly referred to as VCC) is a new type of investment fund vehicle that aims to further strengthen and consolidate Singapore’s position as a hub for fund management activities. In a short space of time, more than 70 VCCs have been registered and numerous further VCCs are in the process of being set up, confirming a swift rate of adoption in the investment community. Given the increasing international interest in the VCC regime, we set out below an overview of its key features and use cases, as well as examples of how Reed Smith is assisting clients in this fast-evolving area.

作者: Hagen Rooke Panos Katsambas Matthew Gorman M. Tamara Box Gerald Licnachan Kohe Hasan Johnny Lim (Resource Law LLC)

Overview of the VCC regime

Traditionally, many Singapore-based fund managers have established their funds in locations such as the Cayman Islands, Luxembourg and Ireland, with Singapore-based investment vehicles often only being used as holding subsidiaries for the overseas pooled structure. The VCC framework is designed to encourage the domiciliation of funds in Singapore and to level the playing field with those jurisdictions.

The structure of the VCC also draws inspiration from features of fund vehicles found in other jurisdictions, and offers some key operational advantages over Singapore legal entity types that have traditionally been used as funds, such as private limited companies, limited partnerships, unit trusts, business trusts and real estate investment trusts. The VCC can be set up as an open-ended or closed-end fund, and therefore caters to the full spectrum of fund vehicle types, ranging from mutual funds to hedge funds, private equity funds and real estate funds.

The VCC is governed by the Variable Capital Companies Act 2018 and its subsidiary legislation, which took effect on 14 January 2020. The VCC legal framework is principally administered by the Accounting and Corporate Regulatory Authority (ACRA), and VCCs (and where applicable, their sub-funds) must be registered with ACRA. However, the Monetary Authority of Singapore (MAS) – Singapore’s central bank and unitary financial regulator – supervises compliance with the anti-money laundering and countering-the-financing-of-terrorism (AML/CFT) requirements that apply to VCCs, and also regulates the Singapore-based fund managers of VCCs.

While the operation of VCCs is subject to a novel and specific legal regime, the introduction of the VCC has not coincided with more far-reaching material changes to the Singapore legal and regulatory framework. For example, the management and offering of a VCC gives rise to the same licensing and prospectus considerations as other types of fund vehicle, and a VCC can be established either as a regulated fund to be offered to the public in Singapore or as an alternative fund subject to lighter-touch requirements to be offered to non-retail investors.