MAS Finalises New Corporate Structure for Funds

The VCC – formerly S-VACC – will position Singapore to become a key fund domicile for fund managers and create opportunities for fund services providers.

The MAS (Monetary Authority of Singapore) has finalised the features of the VCC (Variable Capital Company) – formerly known as the S-VACC – a new corporate structure for investment funds in Singapore.

Traditionally, only unit trust structures and investment companies have been available to fund managers in Singapore. However, unit trusts are unfamiliar to much of the Western world and investment companies are considered too rigid.

“The introduction of the VCC structure will position Singapore to become a key fund domiciliation hub, and strengthen Singapore’s position as a full-service international fund management centre,” said the MAS in a press statement.

A VCC will allow fund managers greater flexibility, allowing for both open- or closed-ended funds, whether using traditional and alternative investment strategies. The variable capital structure of a VCC allows shares to be issued and redeemed without approval from shareholders, while also allowing dividends to be paid using its capital.

The new structure can either be used as standalone or as an umbrella structure, with multiple sub-funds, each with separate objectives, investors, and assets and liabilities (which must be segregated to prevent commingling). This allows for greater economies of scale as sub-funds can share the same directors and service providers, as well as consolidate administrative functions.

The VCC framework allows the use of Singapore or international accounting standards in preparing financial statements and will permit foreign-domiciled funds with similar structures to re-domicile as VCCs in Singapore.

VCCs will be subject to AML/CFT (anti-money laundering / countering the financing of terrorism) requirements and will be required to appoint a fund manager regulated by the MAS.

“The new VCC framework will encourage the consolidation of fund domiciliation and fund management activities locally, creating a full-service fund ecosystem in Singapore,” said MAS assistant managing director Mg Yao Loong.

“The growth of fund domiciliation activities will create opportunities for a wide range of service providers such as lawyers, accountants, fund administrators, and fund custodians.”

The explanatory brief of the VCC Bill submitted to Parliament can be found here.

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