On 10 September 2018, the Monetary Authority of Singapore (MAS) published its response to feedback (the Response Paper) on its public consultation on the proposed framework for Variable Capital Company (“VCC”), which was issued on 23 March 2017. MAS also moved the Variable Capital Companies Bill (the Bill) for its first reading in Parliament.

The Variable Capital Company (“VCC”) is a new corporate structure for the investment funds to incorporate and operate. Fund Managers will have an option to establish the domicile of their investment funds in Singapore and get benefited its network of Avoidance of Double Taxation Agreements (DTAs) with other jurisdictions and also help strengthen Singapore’s position as a full-service international fund management centre.

Variable Capital Company(VCC) will work as an alternative type of a corporate vehicle for the use of collective Investment scheme (CIS). It is a Legal entity for investment of funds that can be used for traditional and alternative strategies. It can be used for both open ended and close ended funds. This structure would not change or replace Singapore’s existing regulation for investment of funds.

The current SFA regime allows funds to be categorized into

  1. Authorized ( Only for retail investors)
  2. Restricted (for accredited investors)
  3. Exempted ( for small offerings, private placement and investors schemes)

The new VCC structure will be suitable for all the above three regimes.

Singapore’s position as a Fund Management Centre with Variable Capital Company

Singapore as a country offers a variety of fund investment vehicles in the form of Limited Partnership, Trusts, Business trust, Private Limited Companies and Real estate Investment Trusts (REIT). With the addition of VCC in this category of fund investment vehicles, Singapore will become an important asset management hub in the South-East Asia region.

The main reason to introduce Variable Capital Company(VCC) is

  1. No Variable capital structures

In Singapore, there are no fund management companies (FMC) with variable capital structure. An FMC should allow an investor to invest or remove money from a share as and when the investor wants to.

  1. Accounting classification of redeemable shares

Singapore funds are usually in the form of redeemable preferred shares. This actually poses a challenge when solvency tests are conducted prior to capital reduction.

  1. Privacy

Currently, in Singapore, the Financial statements of the corporation are available publicly. Privacy is an important factor when an accredited investor or a private investor wants to make an investment and does not want to declare the details publicly.

With the new VCC structure, the above problem can be overcome.

Some of the features of the Variable Capital Company(VCC) are given below,

  1. The register of the shareholder of the VCC, will not be required to disclose it to the public, but it would be required to disclose it to Accounting & Corporate Regulatory Authority (“ACRA”), Monetary Authority of Singapore (“MAS”) and other authorities as and when required.
  2. It is not subjected to declare its solvency prior to repayment /redemption of capital, & can also repay out of its net assets.
  3. It will provide greater flexibility as it can be used for both open ended and close ended investment funds
  4. It can be used to achieve cost efficiency


  • A VCC can be used as a vehicle for both traditional as well as alternative funds, such as hedge funds, private equity, real estate funds and infrastructure funds.
  • The share capital of VCC will always be equal to the net assets value (NAV) of the VCC

Fund Manager

  • The VCC cannot be self-managed. It will be required to be managed by a Fund management company which is licensed by the MAS.
  • The registration of the VCC shall be done under ACRA, whereas the AML/CFT compliance will be under the purview of the MAS


  • VCC can be set up as a standalone fund as well as in the form of an umbrella structure
  • The umbrella structure can be set up with multiple sub-funds
  • Within the umbrella structure, the VCC has a provision of segregating the assets and liabilities of each sub-fund, it is done this way so that the liabilities of one fund will not affect the other
  • When dealing with third parties, it is necessary for the VCC to disclose everything about the sub-fund along with the fact that there is segregation of the asset and liabilities
  • Authorized Schemes that form part of a VCC may invest in assets located in a jurisdiction that does not have a cellular structure only after reasonably mitigating cross-cell contagion risk;
  • a VCC consisting of Authorized or Restricted Schemes must clearly disclose risks of cross-cell contagion to shareholders of these schemes
  • Every sub-fund will need to be registered with ACRA , who will then provide a unique identification number for each of them
  • The VCC with multiple sub-funds must have the same fund manager for all the sub-funds under the umbrella fund
  • Winding up of a sub-funds would not lead to the winding up of the entire umbrella fund
  • A liquidator is appointed when there is a winding up of the VCC or a sub-fund

Shares & share Capital

  • The VCC bill says that the Shares are to be issued, redeemed, or purchased at a price which is equal to the proportion of the NAV represented by each share
  • Any kind of switching, subscription, or redemption of shareholdings between funds is prohibited

Annual General Meetings (AGM)

  • Shareholders with at least 10% of the Voting rights can call for an AGM
  • A 14-day prior notice needs to be provided for an AGM

Audit & Accounting

  • All VCC should Audit their accounts on an annual basis
  • A separate audit committee is not required
  • For VCC Consisting of Authorized schemes will need to prepare their financial in the RAP7[2]format
  • For VCC not consisting of authorized schemes, can prepare their financials in accordance with the US GAAP, in addition to the IFRS format
  • The financials of all sub-funds must be prepared with the same standard as the financials of the VCC and must be audited by an accounting entity
  • The Financial statement can be sent to shareholder via electronic transmission. It also can be laid in the AGM, for investors from other sub-funds to see
  • The VCC can provide its statemets to potential investors if needed

Board of Directors

  • The VCC will require at least one director who is a qualified representative or director of its fund manager
  • The VCC consisting of authorized schemes, to have at least 3 directors, at least one of which is independent
  • All VCC directors must be fit & proper and will be subjected to disqualifications as similar to those of directors under the Company Act (“CA”)


  • AML/CFT compliance would be supervised by MAS
  • VCC would require to outsource it duties of AML/CFT to a fund manager, but will ultimately hold the VCC in case of any breach in the compliance


  • For authorized schemes the MAS will provide further details with regard to the custodian role


  • The name of the fund can be kept the same after being re-domiciled, as long as it does not breach the naming requirements, specified by the VCC Bill, which would further be known as VCC Statue
  • Foreign companies whose ‘home’ jurisdictions do not recognize or apply the concept of a cellular structure, may apply to re-domicile as a VCC. Once re-domiciled they will need to comply with the VCC bill, further known as VCC statue

Winding Up

  • For a VCC the MAS has proposed some rules for winding up some of which are as below
    • the VCC is being used to conduct business outside its permitted use as a vehicle for CIS only
    • the VCC does not have a Permissible Fund Manager to manage its property for such period as may be prescribed;
    • the VCC breaches its AML/CFT obligations
  • The VCC may wound up voluntarily only with the shareholders resolution

Benefits of the VCC

Provide greater Flexibility

A VCC can be used by both open-ended and closed-end investment funds, and for both traditional and alternative strategies. The variable capital structure of a VCC allows it to issue and redeem shares without having to seek shareholders’ approval, enabling investors to enter into and exit from their investments in an investment fund when they wish to. It can also pay dividends using its capita

Achieve Cost Efficiencies

A VCC may be established as a standalone structure, or as an umbrella structure with multiple sub-funds with different investment objectives, investors as well as assets and liabilities. The umbrella structure creates economies of scale as sub-funds can share the same board of directors and common service providers and consolidate some administrative functions

Cater to the need for global investment funds

A VCC will be permitted to use Singapore and international accounting standards (such as the International Financial Reporting Standards and US Generally Accepted Accounting Principles) in preparing financial statements so that it can serve the needs of global investors. Fund managers with foreign-domiciled investment funds may take advantage of the statutory regime for inward re-domiciliation under the VCC framework to transfer the domicile of their foreign investment funds to Singapore

Enhance Safeguards

The VCC framework provides safeguards against the mixing of assets and liabilities between sub-funds, by requiring assets and liabilities of each sub-fund to be segregated. As such, the assets of one sub-fund may not be used to discharge the liabilities of another sub-fund, or of the umbrella fund, including in the event of insolvency. To prevent the VCC from being abused for unlawful purposes, a VCC will be subject to anti-money laundering and countering the financing of terrorism requirements and are also required to appoint a fund manager that is regulated by MAS

Our View

The VCC Bill and most of the announcements will be appreciated by the investment funds industry in Singapore. MAS has also amended its proposals in a number of respects in response to public feedback.  As such industry may expect additional incentives to set the VCC structure such as tax incentives. When compared with the Hong Kong Open-ended Fund Company, which was launched earlier in 2018, the VCC is expected to have lesser ongoing compliance obligations and offer more flexibility in structuring different share classes. This comparative flexibility, together with a more certain tax status, will make the VCC a more functional alternative for funds.

Contact team Argus at to know more about the VCC structure, its implications and benefits.




This publication does not necessarily deal with every important topic or cover every aspect of the topics with which it deals. It is not designed to provide legal or other advice.




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