Understanding the Singapore Variable Capital Company - IMC Group
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Singapore Variable Capital Company

Understanding the Singapore Variable Capital Company

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The Ministry of Finance announced in the 2018 Singapore Budget Statement that a VCC would be treated as a company and a single entity for tax purposes. On 10 September 2018, a draft bill for the VCC was presented for the first reading in the parliament, and the bill was subsequently passed in the parliament on 1 October 2018. The VCC Act will come into effect in end of 2019.

Originally it was named as Open-End Investment Company (OEIC), it came to be known as Singapore Variable Capital Company (“S-VACC”). Now, it has been renamed again, as the Variable Capital Company.

The VCC framework incorporates several key features of open-ended/flexible capital vehicles that are already available in jurisdictions such as Luxembourg, Ireland, the UK, and the USA and allows for investment funds to issue shares and debt instruments.

What is the Variable Capital Company?

A Variable Capital Company is an alternative form of corporate vehicle that will soon become available for Collective Investment Schemes (CIS). Presently, the organisational structures available to CIS are the company, limited partnerships, and the unit trust structures. The VCC can be used for both open-ended and closed-ended alternative and traditional fund strategies. As a corporate vehicle with flexible capital, shares are created when investments are made, and the shares are readily redeemable by the shareholders. This kind of flexibility was lacking in the existing vehicle of corporations available under The Companies Act that has several restrictions when it comes to capital reduction and dividend distribution. This new vehicle, exclusively designed for the fund management industry, will strengthen Singapore’s position as a fund management hub in the region.

What are the Benefits of Variable Capital Company?

  • Solvency Test and Resolutions – There is no need for solvency tests and corporate resolutions for issue and redemption of shares. Relief from such conditions ensures seamless movement of capital.
  • Easy entry and exit for Shareholders – Shareholders have greater freedom and flexibility to enter and exit a fund through easy subscription and redemption of shares. Such fluidity and flexibility are very critical for the efficiency of investment funds.
  • Distribution of Dividends – the Company under the Companies Act that requires dividends to be distributed from the profits only, VCCs can distribute dividends from the capital itself.
  • Register of Members – Although VCCs are required to maintain a register of shareholders, they need not disclose the register publicly.
  • Umbrella Fund – The VCCs can be constituted as umbrella funds with several sub-funds that have different investment objectives, investors, and asset classes. The sub-funds could share a board of directors and have the same fund manager, custodian, auditor and administrative agent.
  • Financial Statements – The Financial statements are not required to be made public.
  • Variety of Investment – The VCC can be used for different types of investment strategies namely – traditional, hedge funds, private equity, and real estate funds

Basic Requirements of Variable Capital Company

  • Capital of VCC – The capital of a VCC will always be equal to its net assets, thereby providing flexibility in the distribution and reduction of capital.
  • Licenses Fund ManagersIt will require a Singapore based licensed or regulated fund manager (unless exempted under the regulations)
  • Securities and Futures Act – The VCCs are required to follow Securities and Futures Act (SFA) requirements for investment funds.
  • Directorship – It must have at least one Singapore resident director for non-authorised schemes and at least three directors for authorised schemes.
  • Secretary and Registered Office AddressIt must have its registered office in Singapore and must appoint a Singapore based company secretary.
  • AuditorsIt must be subject to audit by a Singapore-based auditor and must present its financial statements as per IFRS, Singapore FRS, or US GAAP.


Variable Capital Company Company
Legal Form
  • Body corporate incorporated under the VCC Act for investment funds and having a separate legal personality.
  • It can be set up as a stand-alone entity or an umbrella entity with multiple sub-funds. VCC will be a single legal entity, with its sub-funds operating as separate cells (each without legal personality)
A business form which is a legal entity separate and distinct from its shareholders and directors
Legislative Framework
  • Variable Capital Companies Act 2018 for the incorporation, operation and regulation of the structure (with certain provisions ‘borrowed’ from the Companies Act i.e. registration of charges etc)
  • The Securities and Futures Act will govern the offering of shares in a VCC and all other aspects concerning the VCC as a fund.
Companies Act, Chapter 50
Administering authority
  • Accounting and Corporate Regulatory Authority (ACRA) will administer the VCC Act.
  • The Monetary Authority of Singapore (MAS) will oversee its anti-money laundering and countering the financing of terrorism obligations.
Accounting and Corporate Regulatory Authority (ACRA)
Owned By The subscribers to the constitution of the VCC and every other person who agrees to become a member of the VCC and whose name is entered in the register of members.
  • Exempt Private Company – 20 members or less and no corporation holds beneficial interest in the company’s shares
  • Private Company – 50 members or less
  • Public Company – more than 50 members
Legal Status For VCC, a sub-fund of an umbrella VCC is not a legal person separate from the VCC, but the VCC may sue or be sued in respect of a sub-fund. The property of a sub-fund is subject to orders of a court as it would have been if the sub-fund were a separate legal person. It is a separate legal entity from its members and directors, entity can sue or be sued in own name and also own property in own name.
  • The liability of a member of the VCC is limited to the amount, (if any) unpaid on the shares held by the member.
  • Members are not personally liable for debts and losses of Company
Members of the Companies have limited liability.
Yearly statutory obligations Annual returns must be filed after its AGM and within 7 months after the end of its financial year Annual returns must be filed after its AGM (a) in the case of a listed company, within 5 months after the end of its financial year; and (b) in any other case, within 7 months after the end of its financial year
Accounting and governance The wider scope of accounting standards to be used in preparing a VCC’s financial statements thus allowing more flexibility in financial reporting:

  • Apart from Singapore accounting standards and recommended accounting principles, the use of International Financial Reporting Standards and US Generally Accepted Accounting Principles would also be permitted.
  • Audit by a Singapore based auditor
  • Accounting standards should be consistently applied across all the sub-funds
  • Umbrella VCC must also keep separate accounting and other records for each sub-fund that sufficiently explains the transactions and financial position of each sub-fund.
Singapore accounting standards and recommended accounting principles for companies which are consistent with Singapore Financial Reporting Standards
  • Foreign corporate fund structures can re-domicile as VCCs in Singapore.
  • This will encourage fund managers with funds domiciled in offshore jurisdictions such as Cayman Islands, to shift fund domiciliation with their fund management activities to Singapore.
Foreign corporate entity can re-domicile to Singapore and become a Singapore entity (provided the host country recognises or authorises re-domiciliation)
Appointment of company secretary and auditors Company Secretary: Must appoint at least 1 company secretary within 6 months of incorporation.
Auditor: Must appoint an auditor within 3 months after incorporation, unless the company is exempt from audit requirements
Requirement for fund manager
  • VCC must appoint a fund manager that is regulated by MAS to manage its investments.
  • This will enable supervisory oversight on the use of the VCC, including to prevent a VCC from being abused for unlawful purposes and to help ensure that it is not used as an offshore vehicle without actual investment management activities in Singapore
No such requirement for fund manager.
Number of Shareholders At least one shareholder. (Note: s16 and s17 VCC Act states that any person may incorporate a VCC and the subscribers to the constitution of a VCC are considered to have agreed to become members of the VCC) At least one shareholder
Number of Directors
  • At least one director of the VCC must be a Director of the Fund Manager or must be at least a Qualified Representative.
  • Directors of a VCC must also be “fit and proper persons”.
  • At least one Singapore resident director for non-authorised schemes and at least 3 directors for authorised schemes.
Must have at least one director who is ordinarily resident in Singapore
Registration requirements The registering party must submit to ACRA:

  • the constitution of the proposed VCC and other prescribed documents;
  • the name of the manager of the proposed VCC;
  • the names of the director(s) of the proposed VCC;
  • provide ACRA the last day of the first financial year of the proposed VCC and such other information as may be prescribed; and
  • pay ACRA the prescribed fee.
  • Declaration by either a registered qualified individual or a director or secretary of the proposed that all requirements for formation of company have been complied with and identities of subscribers and officers of the VCC have been verified.
The registering party shall submit to ACRA:

  • the constitution of the proposed company (unless the company use model constitution) and such other documents as may be prescribed;
  • furnish ACRA with the last day of the proposed company’s first financial year and such other information as may be prescribed; and
  • pay ACRA the prescribed fee.
  • Declaration by either a registered qualified individual engaged in the formation of the proposed company or a director or secretary of the proposed that all requirements for formation of company have been complied with and identities of subscribers and officers of the proposed company have been verified.
  •  VCC will be treated as company and a single tax entity under ITA, subject to such modification and rules made under the ITA.
  • Tax exemption schemes under s13R and s13x (i.e the Resident Fund Scheme and Enhanced Fund Scheme respectively, which are two main tax exemption schemes for fund management available for Singapore based funds.
  • The tax residency will be determined at umbrella level for an umbrella VCC
  • Profit taxed at Corporate Tax Rates
  • New company can avail Start-up tax exemption subject to fulfilment of exemption conditions
  • Other companies are applicable for partial tax exemption
Continuity in law A VCC has perpetual succession until it is wound up A company has perpetual succession until it is wound up or struck off
Closing the business
  • Winding up- voluntarily by members or creditors, or compulsorily by the High Court. When winding up a sub-fund, all shareholders of a sub-fund should redeem their shares (where appropriate) and the VCC shall be required to apply to the MAS to be de-authorised.
  • No striking off for VCC unlike for companies under the CA
  • Winding up-voluntarily by members or creditors or compulsorily by High Court.
  • Striking off

Variable Capital Company can be used Standalone Fund or Umbrella Fund

Umbrella Fund

  • Standalone Fund comprises of single investment portfolio.
  • The tax treatment of a stand-alone VCC will remain the same as that of a Singapore company.
  • The Enhanced Tier Fund (“ETF”) Scheme and Singapore Resident Fund (“SRF”) Scheme under the Income Tax Act will apply to a stand-alone VCC similar to how it would apply to a Singapore company

Stand Alone Fund

  • An umbrella fund consist of multiple sub-funds;
  • All sub-funds can share the same directors and service providers;
  • Each sub-funds acts as a separate legal entity;
  • If need be, each sub-fund should be wounded up seperatly to ensure ring-fencing of each fund’s assests and liabilities


Mutual Funds Hedge Funds Private Equity Real Estate Funds Venture Capital
Singapore Regulated Fund Manager Capital Market Services Licence Registered Fund Management Company/ Capital Market Services Licence Registered Fund Management Company/ Capital Market Services Licence Registered Fund Management Company/ Capital Market Services Licence VC Manager regime/ Registered Fund Management Company/ Capital Market Services Licence
Fund Type Authorised Restricted, Or, if offered to Institutional investors/Private placement, then Exempt
Compliance to code of collective investment schemes Yes No No No No
Custodian requirement Yes, Approved trustee only Yes* Typically, No
Local administrator Yes Yes Yes Yes Yes
Number of Board of Director members required 3 1 1 1 1
Number of Board of Independent Directors required 1
Number of Board of Directors required to be Residents 1 1 1 1 1

* Prescribed entities are (i) a bank licensed under the Banking Act (Cap. 19); (ii) a merchant bank approved as a financial institution under the MAS Act (Cap. 186); (iii) a finance company licensed under the Finance Companies Act (Cap. 108); (iv) a depository agent within the meaning of section 81SF of the SFA for the custody of securities listed for quotation or quoted on Singapore Exchange Securities Trading Limited or deposited with the Central Depository (Pte) Ltd; (v) an Approved Trustee; (vi) any person licensed under SFA to provide custodial services for securities; or (vii) a foreign custodian that is licensed, registered or authorised to conduct banking business or to act as a custodian in the country or territory where the account is maintained.

Author bio information

Pankaj Kumar

Mr. Pankaj Kumar is a member of ICAI (Indian Institute of Chartered Accountants of India) since 2002. He has over 17 years of experience in cross border advisory, international taxation, structured finance, trade finance and management consulting. He advises MNCs and SMEs on formation of cross border corporations and business structures and structuring commercial transactions.

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