E-briefing: New Funds Framework- Singapore Variable Capital Companies

E-briefing: New Funds Framework- Singapore Variable Capital Companies
05 Oct 2018

The Variable Capital Companies (“VCC”) Bill was passed in the Singapore Parliament on 1st October 2018 and the key features of the VCC were elaborated by Second Minister for Finance Ms. Indranee Rajah.

This framework serves to encourage fund managers to domicile their investment funds in Singapore as it provides a flexible structure which may cater to various types of funds. A VCC also assists funds to streamline administrative and compliance costs for funds operating in Singapore but domiciled offshore. Given the versatility of the VCC to be able to constitute both open-ended and closed-end funds, it caters to the diverse needs of fund management community.


The table below highlights various characteristics of the VCC in contrast to the existing company structure.


Characteristics of a Singapore VCC

Characteristics of a Singapore Company

Varying Share Capital


VCCs may vary share capital without seeking investors’ approval. This provides flexibility to investors to exit their investments in the fund when they wish to do so.


Companies may not vary share capital without seeking investors’ approval.



Dividends Paid using Capital



VCCs may pay dividends using capital. This allows funds to meet dividend payment schedules.


Companies may pay dividends only out of profits.

Private Shareholder Information


Information of shareholders is not public, but  registers must be maintained by the VCCs and the register of shareholders must be produced on request by authorities.




Information of shareholders is public and available on the Accounting and Corporate Regulatory Authority Website (“ACRA”).


Ring-fenced sub-funds

An umbrella VCC will be allowed to have sub-funds on registration with ACRA.

The assets and liabilities of these sub-funds are segregated from the VCC umbrella and other sub-funds. This safeguards the shareholders and creditors of each sub-fund from the liabilities of another sub-fund under the same umbrella VCC.


No Equivalent.

Shared Board and Service Providers in Sub-funds

Sub-funds can share a board of directors and service providers (e.g. fund manager, custodian, auditor, and administrative agent). This would benefit fund managers who wish to group different funds under a single VCC umbrella.

No Equivalent.



Wider Scope of Accepted Accounting Standards

Notably, VCCs will be allowed to use the International Financial Reporting Standards (“IFRS”) and US Generally Accepted Accounting Principles (“US GAAP”) in addition to the Singapore Financial Reporting Standards (“SFRS”) in the reporting of their accounts. This feature was absent in the initial framework and added after the public consultation with the intent to provide investment funds with flexibility to serve the needs of global investors.

Re-Domiciliation of Offshore Entities

Under the VCC Bill, foreign corporate entities may re-domicile as a VCC by registering with ACRA. The effect of re-domiciliation is, inter alia, that the foreign corporate entity is treated as a VCC at the date of registration specified and all property, rights or obligations of the foreign corporate entity is not affected.

Tax Exemptions

The 2018 Singapore Budget Statement released in February 2018 has indicated that:

  1. a VCC will be treated as a company and a single entity for tax purposes;
  2. the tax exemptions under section 13R and 13X of the Income Tax Act will be extended to the VCCs;
  3. the 10% concessionary tax rate under the Financial Sector Incentive – Fund Management Scheme will be extended to approved fund managers managing an incentivised VCC; and
  4. Existing Goods and Service Tax remission for funds will be extended to incentivise VCCs.

The tax framework for VCCs will be separately set out in amendments to the relevant tax legislation. Further details are expected to be released by the Monetary Authority of Singapore this October 2018.

Requirements of a VCC

To establish a VCC, several requirements must also be met. First, the share capital of a VCC must always be equal to its net assets value such that shares are redeemed at their net asset value. This is to safeguard the interests of creditors and provide that the liabilities will be accounted for. Second, there must at least be 1 Singapore resident director for non-authorised schemes and at least 3 directors for authorised schemes. Third, each VCC must have its registered office in Singapore and appoint a Singapore-based company secretary. Fourth, each VCC must be subject to audit by a Singapore-based auditor and must present its financial statements in accordance with the IFRS, SFRS or US GAAP accounting standards.

The highlighted requirements above are not exhaustive.

Emphasis on the Fund Manager

The role of the fund manager is key in the VCC. As a preliminary point, VCCs will require a Singapore-based license or regulated fund manager. Further, a director of the fund manager is required to serve as a director on the VCC. The emphasis on fund managers is unsurprising and comparable to jurisdictions such as Ireland and Luxembourg, as regulators encourage “promoters” of the fund to have representation on its board. Fund management companies and funds alike should consider the involvement of the Fund Manager, in deciding whether to adopt the VCC structure.


Currently many funds managed out of Singapore are domiciled overseas.  VCC is expected to be a game-changer in Singapore’s drive to be the Asian hub for fund management and fund domiciliation.  Fund management companies should carefully evaluate whether operating their funds as a VCC will benefit their businesses in long-run and whether they are able to satisfy the requirements to establish a VCC, particularly when the tax treatment of VCC is released later this year.



Claudia Teo

Partner and Head of Corporate and Financial Services

Eversheds Harry Elias LLP

For more information, please contact our Business Development Manager, Ricky Soetikno at rickysoetikno@eversheds-harryelias.com


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