Singapore Variable Capital Companies - A New Corporate Structure for Collective Investment Schemes

Jan 28 2019 | by OrionW

The Variable Capital Companies Act 2018 (No. 43 of 2018) (Act) became law on 31 October 2018.  The Act enables the incorporation of variable capital companies (VCCs), which are companies formed for the sole purpose of embodying one or more collective investment schemes (CISes).  The Act will become effective on a future date to be specified by the Minister of Finance.

Attractive Attributes for Fund Organisers

The objective of the Act is to strengthen Singapore’s position as a regional centre for fund management activities and investment fund domiciliation.  The VCC entity type is intended to provide fund organisers with an attractive alternative to the current choices of unit trusts, limited partnerships and traditional companies.

Fund organisers are expected to find the following attributes of VCCs to be of interest:

  • Shares of VCCs may be freely repurchased or redeemed for their net asset value without shareholder approval.
  • VCCs may be organised as non-umbrella VCCs (consisting of a single CIS) or as umbrella VCCs (consisting of multiple CISes (referred to in the Act as sub-funds)).
  • VCCs and sub-funds may be open-end or closed-end funds.
  • VCCs may pay dividends out of capital, not only profits.
  • VCCs maintain their own registers of members, which are not required to be open to the public for inspection.
  • VCCs may use Singapore accounting standards or other approved standards such as the International Financial Reporting Standards and US Generally Accepted Accounting Principles.
  • VCCs are intended to be treated as companies and single entities for tax purposes and should enjoy the benefits of the tax treaties Singapore has concluded with other countries.

Umbrella VCCs

An umbrella VCC is a single legal entity; its sub-funds are not legal persons but in certain cases they can be treated as if they were, for example to subject a sub-fund’s property to court orders or to wind it up.  Sub-funds must be registered separately and their assets and liabilities must be segregated.  Segregation of assets and liabilities means the liabilities of a sub-fund would be discharged only out of the assets of that sub-fund and the assets of one sub-fund will not be available to discharge liabilities or claims against the VCC or any other sub-fund.

The structure of umbrella VCCs allows fund managers to have different investment objectives for each sub-fund and to achieve economies of scale by having a common board of directors and combining administrative functions and service providers.

Share Capital

Unlike companies incorporated under the Companies Act (Chapter 50) of Singapore (Companies Act), VCCs will be permitted to freely redeem shares and pay dividends out of share capital.  This is intended to facilitate the operation of CISes that make use of the new structure.

The paid-up share capital of a VCC is always equal to its net asset value.

Company Administration and Governance

At least one director of a VCC must be a director or qualified representative of the VCC’s manager (i.e., the manager appointed to manage the property of the VCC or to operate its CIS or CISes).  Directors will be subject to similar duties and disqualifications as for directors of companies incorporated under the Companies Act.  VCC directors will also be required to meet a ‘fit and proper person’ standard.

VCCs must maintain their registered office in Singapore, have at least one Singapore-resident director (who may be the director of the VCC’s manager mentioned above) and have a Singapore-based company secretary as well.

VCC managers must be regulated or exempted under the Securities and Futures Act (Chapter 289) of Singapore.   A VCC cannot be its own manager.

VCCs must prepare audited annual accounts.  Although the financial information of each sub-fund must be kept separately, a single accounting standard must be applied across all the sub-funds in a VCC.  The VCC’s audited financial statements must be provided to shareholders entitled to receive notice of general meetings.

VCCs will be subject to regulations and directions from the Monetary Authority of Singapore (MAS) relating to anti-money laundering and countering the financing of terrorism (AML/CFT), including customer due diligence measures.  MAS may inspect VCCs to determine compliance with AML/CFT regulations and may require VCCs to cooperate with international and domestic authorities in relation to AML/CFT matters.


To enable safeguards similar to those offered by approved trustees of unit trusts, the Act expressly accommodates the appointment of custodians for the assets of a VCC (or sub-fund for an umbrella VCC).


In line with recent changes to the Companies Act, foreign corporate entities will be permitted to re-domicile as VCCs in Singapore.

Administration of the Act

The Accounting and Corporate Regulatory Authority will administer the Act except with respect to its provisions concerning AML/CFT, which MAS will administer.

Application of the Companies Act

The Companies Act generally applies to VCCs except as modified or excluded by the Act.