27 September 2018

On 10 September 2018, the Variable Capital Companies Bill (“Bill”) was tabled for first reading in Parliament. The Bill will establish a regime for the incorporation and regulation of variable capital companies (“VCCs”), also referred to as S-VACCs. VCCs are investment funds that are constituted as bodies corporate.

Tailored for collective investment schemes (“CIS”), the VCC structure will complement the existing CIS structures currently available in Singapore, namely unit trusts (constituted by way of trust deeds), companies incorporated under the Companies Act (“CA”) and limited partnerships governed under the Limited Partnerships Act. The VCC framework seeks to provide investment managers with greater operational flexibility in Singapore and allow CIS to consolidate the fund domicile with the respective fund management activities.

The Bill applies the CA provisions with modifications appropriate to the nature and operation of a VCC. In particular, the restrictions on capital reduction, the requirement to disclose substantial shareholdings and the judicial management regime under the CA will not apply to a VCC.

Background information

By way of background, on 23 March 2017, MAS issued a “Consultation Paper on the Proposed Framework for Singapore Variable Capital Companies” (“Consultation Paper”). The consultation closed on 24 April 2017. On 10 September 2018, MAS issued its Response to feedback received on the Consultation Paper. In drafting the Bill, MAS has incorporated the feedback received where appropriate.

Legislative regime for VCCs

The Bill allows a VCC, a body corporate, to be formed. ACRA will administer the Variable Capital Companies Act (“VCC Act”) save for matters relating to AML/CFT, which will be administered by MAS. Details on the regulation of offerings of investments in VCCs will be set out in amendments to the Securities and Futures Act (“SFA”) and its subsidiary legislation.

At this juncture, MAS will not provide a legislative regime to facilitate the conversion of existing domestic CIS structures (e.g. unit trusts) to VCCs. Such domestic CIS structures may adopt the VCC structure through corporate restructuring mechanisms (e.g. mergers with VCCs).

Permitted use of VCC structure and name

VCCs will only be used as a vehicle for CIS at this initial stage. A VCC may consist of both open-ended and closed-end funds as its sub-funds. Only a VCC incorporated under the VCC Act may use any name or title that includes the words “Variable Capital Company” (or an abbreviation) or hold out that its business is incorporated under the VCC Act.

Sub-funds with segregated assets and liabilities

The Bill allows VCCs to use a cellular structure under which a VCC is a single legal entity incorporated under the VCC Act that can choose to set up cells known as sub-funds. A VCC that chooses to set up sub-funds will be an Umbrella VCC and it must apply to ACRA for the registration of a sub-fund after forming it.

The Umbrella VCC structure allows a VCC to have multiple sub-funds that may have different investment objectives, investors as well as assets and liabilities. These sub-funds can share a board of directors and have common service providers, such as the same fund manager, custodian, auditor and administrative agent.

However, to address risks of cross-cell contagion among sub-funds arising from a cellular structure, the Bill provides for the rule that sub-funds are segregated portfolios of assets and liabilities. Creditors of a sub-fund can only fulfil their claims out of the assets of that sub-fund, and not from assets of the other sub-funds or the Umbrella VCC itself. Any provisions (e.g. in the constitution or contracts entered into by VCCs) which are inconsistent with the segregation of assets and liabilities of sub-funds will be void to the extent of the inconsistency. Each sub-fund may be wound up separately, as if it were a legal person, to ensure that the ring-fencing of each sub-fund’s assets and liabilities applies during insolvency.

In addition, MAS will proceed with its proposals to require a VCC consisting of Authorised or Restricted Schemes to clearly disclose to shareholders the risks of cross-cell contagion and an Authorised Scheme to reasonably mitigate cross-cell contagion risk before investing in assets located in a jurisdiction that does not have a cellular structure. An Authorised Scheme refers to a CIS that is constituted in Singapore and authorised by MAS under section 286(1) of the SFA. A Restricted Scheme refers to a CIS that is offered only to accredited investors and certain other persons, or offered on terms that the units may only be acquired for consideration of at least S$200,000 (or equivalent in foreign currency) per transaction, and is exempted from authorisation or recognition and prospectus requirements. These requirements will be set out in the SFA, its subsidiary legislation and/or the Code on Collective Investment Schemes (“CIS Code”).

Valuation and redemption of shares at NAV

VCCs will be allowed to issue or redeem their own shares in accordance with their constitutions without having to seek shareholders’ approval, thus enabling investors to exit their investments in the investment fund when they wish to, and pay dividends using its capital. The Bill provides that certain provisions are implied in the constitution of a VCC, including a requirement that the actual value of its paid-up share capital is at all times equal to its NAV, and the issuance, repurchase or redemption of its shares must be carried out at a price equal to the proportion of the VCC’s NAV represented by each share. However, this will not apply where the VCC is a closed-end fund listed for quotation on a securities exchange.

AGMs and register of members, controllers and nominee directors

  • Need not hold AGMs: A VCC need not hold an AGM if (1) its directors give at least 60 days’ written notice to the members before the last date on which the AGM must be held, or (2) the VCC has sent to all persons entitled to receive notice of general meetings a copy of the financial statements, or copies of the consolidated financial statements and balance sheet, relating to the relevant financial year, and accompanied by the auditor’s report on them, no later than five months after the end of the financial year. However, one or more members with 10% or more of the total voting rights may by notice to the VCC require the AGM to be held. 
  • Register of members: A VCC will be required to keep a register of members at its registered office. 
  • Register of controllers and nominee directors: MAS will impose the requirements to keep a register of controllers and nominee directors under the MAS Notice on AML/CFT and will consult industry further on the implementation details in the Notice, at a later stage.  

Fund manager

The manager of a VCC must be a holder of a capital markets services licence for fund management under the SFA (“LFMC”), a registered fund management company (“RFMC”) or a financial institution exempted under section 99(1)(a), (b), (c) or (d) of the SFA from having to hold a capital markets services licence (“Exempted Entity”) (collectively “Permissible Fund Manager”). The Permissible Fund Manager will carry out the day-to-day management and investment activities of the VCC under the oversight of the VCC’s board of directors.

Board of directors and residency requirements

At least one director of a VCC must be either a director or Qualified Representative of its fund manager. A Qualified Representative of a VCC’s fund manager means an appointed representative, provisional representative or temporary representative of an LFMC or an Exempted Entity, or a representative of an RFMC. With additional protection to retail investors in mind, MAS will require VCCs consisting of Authorised Schemes to have at least three directors, with at least one independent director. Details of the requirements applicable to independent directors of a VCC will be provided in the SFA, its subsidiary legislation and/or the CIS Code.

Residency requirements mirroring those in the CA will apply to VCCs and these include requiring VCCs to have (a) a registered office in Singapore, (b) at least one director who is ordinarily resident in Singapore, and (c) a Singapore-based company secretary.

AML/CFT requirements

VCCs will have to comply with AML/CFT requirements and will be supervised by MAS for compliance. MAS will allow a VCC to delegate the performance of its AML/CFT duties to a financial institution regulated and supervised by MAS for AML/CFT purposes.


A VCC which does not consist of Authorised Schemes will be allowed to prepare its financial statements using an applicable accounting standard set by the Accounting Standards Council (namely, Singapore Financial Reporting Standards (“SFRS”) or the SFRS (International)), the International Financial Reporting Standards (IFRS) or the US Generally Accepted Accounting Principles (US GAAP). VCCs consisting of Authorised Schemes will be required under the CIS Code to prepare their statements using RAP 7 (Statement of Recommended Accounting Practice 7).


MAS states that the following tax treatment, as announced by the Ministry of Finance (“MOF”) in its 2018 Budget Statement, will apply to VCCs:

  • A VCC will be treated as a company and a single entity for tax purposes;  
  • The tax exemption under sections 13R and 13X of the Income Tax Act will be extended to VCCs;  
  • The 10% concessionary tax rate under the Financial Sector Incentive – Fund Management scheme will be extended to approved fund managers managing incentivised VCCs; and 
  • The existing GST remission for funds will be extended to incentivised VCCs.

MAS, together with the Inland Revenue Authority of Singapore (IRAS) and MOF, will review the tax framework for VCCs. Further details will be released later this year.  


The Bill will provide for foreign corporate fund structures that are similar to VCCs to re-domicile as VCCs in Singapore. This will encourage fund managers with funds domiciled in offshore jurisdictions to co-locate fund domiciliation with their fund management activities in Singapore.

Insolvency provisions

The Bill provisions relating to the insolvency of a VCC and its sub-funds are adapted from the CA including a winding-up regime. A Bill to amend the VCC Act will be tabled in early 2019 (“2019 Amendment Bill”) to replace these provisions with the provisions under the Insolvency, Restructuring and Dissolution Bill, as well as to provide any necessary modifications specific to VCCs. The 2019 Amendment Bill will align the VCC insolvency regime with that of other corporate structures in Singapore.

Reference materials

The following materials relating to this development are available on the Singapore Parliament website www.parliament.gov.sg and the MAS website www.mas.gov.sg:


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