Variable Capital Company
Both investors and asset managers globally, are actively seeking and implementing alternative options to traditional offshore and onshore fund domiciliation hubs.
Singapore, with the introduction of the Variable Capital Company (“VCC”) is now the Gateway to Asia for international funds with over 1,000 on the ground licensed/regulated Managers, supported by a broad and deep ecosystem of service providers.
The introduction of the VCC signaled the shift of Singapore from a predominantly asset management center, to a leading onshore international fund domiciliation hub.
The VCC provides a world class fund framework, allows for vertical integration with fund management activities, fund servicing and fund domiciliation, all in the same locale.

Variable Capital Company
Offshore
Well established service provider network
Fast / No tax treaties (Cayman/BVI)
Growing pressure from EU and OECD to demonstrate substance
Being forced into requirements for economic substance – will become more expensive and time consuming
Enhanced KYC/AML and disclosure requirements
Investor KYC, AML and due diligence reviews
One key advantage – confidentiality, is gone due to CRS, FATCA, FATF etc.
Tax regulators demanding that managers demonstrate substance around their structures - BEPs
Onshore
Growing global trend amongst institutional investors to prefer onshore
In the case of Singapore, tax incentive schemes allow for same tax outcome as offshore vehicles
Two models - letterbox regime (Luxembourg & Dublin) and substance model (Singapore)
Substantive fund management activities and investment vehicles co-exist only in Singapore
Onshore international investment fund centers will grow in popularity
Onshore centers offer international tax treaties
International Onshore Fund domiciles

Dublin
Luxembourg
Singapore
Midshore and Offshore Fund domiciles
Bahama’s, Bermuda, British Virgin Islands, Cayman Islands, Cyprus, Delaware, Dominica, Isle of Man, Jersey, Guernsey, Macau, Malta, Mauritius, Netherlands, Nevis, New Zealand, Panama, Seychelles, Switzerland, Uruguay
VCC - Key Features and Benefits
Flexibility
- The VCC is a collective investment scheme with either a standalone fund vehicle or an umbrella fund structure, these can be open-ended or closed-end vehicles
- Each Sub-Fund can employ a different strategy, each with a different set of investors
- Flexible Capital Structure - dividends can be distributed and capital can be redeemed from a Sub Fund’s net asset value/capital (as opposed to profits under the Companies Act ) adding flexibility in the distribution and return of capital
- Vertical integration with fund management activities, fund servicing and fund domiciliation, all in the same locale provides flexibility and cost savings
Features
- Common law, corporate structure issuing shares
- Segregated and statutorily protected Sub-Funds under an umbrella structure – each Sub-Fund is a separate legal entity
- The VCC is a legal entity, however each Sub-Fund is not. Sub-Funds do not have a legal personality however there are legal safeguards to ensure segregation of assets and liabilities across sub-funds in an umbrella VCC. As a result, a Sub-Fund can be established and wound up independently of each other Sub-Fund
- Annual General Meeting (“AGM”) can be dispensed with, subject to certain conditions being met
- Re-domiciliation of offshore corporate vehicles which need to be collective investment schemes (i.e. funds) into a VCC is permitted
- Able to be listed
- Access to regional passporting schemes
Managers
- Cost efficiencies from using common service providers across the VCC and each of its Sub-Funds
- For an umbrella VCC, as long as the VCC collectively across all Sub-Funds, meets the 13U or 13O requirements and the annual minimum expenditure, the tax incentives will be granted at the umbrella level and cover all Sub-Funds
- Simple notification to MAS of the new Sub-Fund investment strategy as the VCC adds additional Sub-Funds
- Singapore based Managers are allowed to redomicile their overseas domiciled investment funds which are required to be in a VCC-type structure (e.g. a Cayman SPC) to Singapore as VCCs
- Non-Singapore based Managers can engage a Permissible Fund Manager such as Gordian Capital to manage the re-domiciliation process and subsequently manage the VCC on their behalf
Investors
- Register of members are not publicly accessible thus providing investor confidentiality
- Financial statements are not publicly accessible thus providing investor confidentiality
- Ability to perform the US “check-the box” election to be treated as a "pass-through" entity for US federal income tax purposes
- Investors can easily redeem shares without the capital maintenance requirements of Singapore companies
- Optionality to select only certain Sub-Funds within an umbrella VCC to invest in
- Ring-fencing of assets via multiple Sub-Funds and share classes
- Cost efficiencies via economies of scale
Regulatory/Operational
- Regulated by MAS and ACRA
- Accounting standards - Singapore FRS, IFRS, US GAAP
- A VCC’s assets must be managed by a fund manager which is registered or licensed by the MAS such as Gordian Capital, known as a “Permissible Fund Manager”
- VCC requires a Singapore based Corporate Secretary, Auditor, Registered Office, Custodian (for Restricted and Authorized funds) and Manager. A Singapore based Fund Administrator is required for the 13U/13O tax incentives.
- The minimum number of directors for a VCC targeting accredited and institutional investors is one. At all times, at least one director must be a qualified representative or a director of the VCC’s fund manager and ordinarily resident in Singapore
Tax & Other benefits
- Access to the Singapore Fund Tax Incentive Schemes - 13U Scheme and the 13O Scheme
- Access to Singapore’s extensive double-tax treaty network (95)
- GST remission scheme available to VCCs
- Only a single income tax return is required regardless of the number of Sub-Funds
- No minimum capital requirements
- Cross Sub-fund investments permitted
- Not compulsory to appoint a custodian which is an approved CIS Trustee unless the VCC is an authorised and recognised VCC (targeting retail investors)
- For restricted VCCs (offered only to accredited investors), there must be a custodian unless (i) units in the scheme are exclusively or primarily non-redeemable at the election of the holders; and (ii) the scheme is to be used for the purposes of private equity or venture capital investments
Who can manage a VCC?
Permissible Fund Manager
Holders of a Capital Markets Services (CMS) license such as Gordian Capital; or
A specified exempt fund manager (bank, merchant bank, finance company or insurer licensed or approved in Singapore)

The VCC is regulated via the MAS regulation of the investment Manager (must be Singapore-based)

A Permissible Fund Manager is ideally one which does not manage their own funds to avoid conflicts of interest

The Permissible Fund Manager must be able to demonstrate considerable onshore substance
Our Thoughts on the VCC
(March 2020)

Supporting the VCC via
Participation in industry events in Singapore
Regular dialogue with the MAS
New York and other international VCC roadshows with the MAS
Industry roundtables
Media interviews, articles and opinion pieces
Gordian Capital newsletters on the VCC and other trends in Singapore
MAS Pilot program participant – VCC pioneer