Lecture Notes: Variable Capital Company (VCC) Overview

Introduction

• Agenda:
  • Key features of the VCC.
  • Comparison between VCC and Cayman SPC.
  • Understanding the hype around VCC and its advantages.
• Background:
  • VCC introduced on January 15, 2020, by the Monetary Authority of Singapore (MAS) and the Accounting and Corporate Regulatory Authority (ACRA).
  • Enhances Singapore's position in asset and wealth management.

Challenges of Current Corporate Structures

• Lack of Variable Capital Structure:
  • Existing structures with fixed capital do not allow easy investment entry/exit.
• Solvency Tests:
  • Required before capital repayment, adding complexity.
• Privacy Issues:
  • Shareholder lists are publicly accessible.
• Classification Issues:
  • Complications with redeemable preferred shares.

Key Features of VCC

• Incorporation:
  • VCC is incorporated under its own Act, separate from Companies Act.
• Flexibility:
  • Can be set up as open or closed-end funds.
• Structure:
  • Stand-alone or umbrella with multiple sub-funds.
  • Asset and liability segregation among sub-funds.
• Capital Flexibility:
  • Share capital equals net asset value, allowing flexible share issuance and redemption.
• Privacy and Reporting:
  • Shareholder privacy maintained; various accounting standards permitted.
• Tax Benefits:
  • Eligible for U.S. 'check the box' election for tax transparency.
  • Potential for tax incentives under Singapore's 13R and 13X schemes.

Comparison with Cayman SPC

• Governance:
  • VCC requires more local directors compared to Cayman.
• Fund Management:
  • VCC mandates Singapore-based management.
• Tax and Regulatory:
  • VCC benefits from Singapore's tax treaties.
  • VCC financial statements not public; flexibility in accounting standards.

Utilization of VCC for Investors

• Wealth Management:
  • Consolidation and cost efficiency through pooling.
• Private Wealth Planning:
  • Enhanced privacy and flexibility over traditional structures.
• Tiered and Master Feeder Structures:
  • Allows diverse asset allocation and tax-efficient structures.

Setting Up a VCC

• Requirements:
  • Fund manager licensed by MAS.
  • Local directors, secretary, and registered office in Singapore.
• Tax Incentives:
  • Comparison of 13R and 13X schemes showing benefits of using VCC.
• Setup Process:
  • Application with ACRA and is efficient with clear steps.

Conclusion

• VCC provides a modern and flexible corporate structure for funds in Singapore.
• Comparable to Cayman SPC, but offers local benefits and efficiencies.
• Positioned to enhance Singapore's competitiveness in global fund management.

These notes provide a comprehensive summary of the key points covered in the lecture on Variable Capital Companies (VCCs). They should be useful for understanding the advantages and processes associated with VCCs in Singapore.