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Launching of the Variable Capital Companies Framework by MAS and ACRA

Published : 1st Feb 2020

On the 15th January 2020, the Monetary Authority of Singapore (MAS) together with the Accounting and Corporate Regulatory Authority (ACRA) launched the Variable Capital Companies (VCC) framework. The VCC is intended to be a new corporate structure that can cater to a wide range of investment funds.  It is meant to provide fund managers with better operational flexibility and cost savings. The savings is possible with the centralisation of fund management activities and the flexibility to structure funds more efficiently.

2020年1月15日，新加坡金融管理局（MAS）与会计与企业管理局（ACRA）共同启动了可变动资本公司（VCC）框架。 VCC旨在成为一种新的公司结构，可以满足各种投资基金的要求。它旨在为基金经理提供更好的运营灵活性和成本节省。通过集中的基金管理以及灵活组织基金架构，可以达到节省开支的目的。

 

To encourage industry adoption of the VCC framework, MAS has introduced a Variable Capital Companies Grant Scheme. The grant scheme will help defray costs involved in incorporating or registering a VCC by co-funding up to 70% of eligible expenses paid to Singapore-based service providers. The grant is capped at S$150,000 for each application, with a maximum of three VCCs per fund manager. The grant scheme will be funded by the Financial Sector Development Fund (FSDF) and will take immediate effect and applicable for a period of up to three years. Applicants for the VCC Grant Scheme should be Qualifying Fund Managers (*) that have incorporated a VCC or have successfully re-domiciled a foreign corporate entity to Singapore as a VCC, and have obtained a notice of incorporation or transfer of registration from ACRA. Additionally, fund managers will have to submit an application to MAS, should they wish to apply for the 13R or 13X tax exemption schemes. This is done post-incorporation of the VCC. 

为了鼓励业界采用VCC框架，MAS推出了可变动资本公司补助计划。该补助计划将补贴最高70%的注册VCC时产生的费用。每项申请的补助金上限为15万新币，每位基金经理最多可在三个VCC享受这项补助。该补助计划将由金融部门发展基金（FSDF）资助，并立即生效，有效期达三年。VCC补助计划的申请者应为合格的基金经理*，他们已经注册了VCC或已成功将外国公司实体重新注册为VCC到新加坡，并已从ACRA获得注册成立或转让的通知。此外，如果基金经理希望申请13R或13X免税计划，必须向MAS提交申请。申请13R或13X免税计划可在注册VCC后操作。

Last September 2019, MAS and ACRA initiated a VCC Pilot Programme that was well participated by a group of fund managers. This group of managers currently have incorporated or re-domiciled a total of 20 investment funds as VCCs.  These investment funds comprise venture capital, private equity, hedge fund and Environmental, Social, and Governance (ESG) strategies. This substantiates that the VCC framework is able to support a diverse range of investment funds.

2019年9月，MAS和ACRA发起了VCC试点计划，该计划得到了一组基金经理的积极参与。这组基金经理目前已注册或重组了20个投资基金作为VCC。这些投资基金包括风险投资、私募股权、对冲基金以及环境、社会和治理（ESG）策略基金。这证实了VCC框架能够支持各种投资基金。

The VCC framework should also create new opportunities for Singapore-based fund service providers such as legal and tax advisors, accountants, fund administrators and fund custodians. Overall, this advances Singapore another step towards being a full-service international fund management centre.

VCC框架还应该可为新加坡的基金服务提供商（例如法律和税务顾问、会计师，、基金管理人和基金托管人）创造新的机会。总体而言，这是新加坡迈向提供全方位服务的国际基金管理中心的又一步。

 

Note (*) : A Qualifying Fund Manager is defined as:  

(i)      a licensed fund management company, i.e., a holder of a capital markets services license for fund management under section 86 of the Securities and Futures Act (Cap. 289);

(ii)    a registered fund management company, i.e. a corporation which is exempted from holding a capital markets services licence under paragraph 5(1)(i) of the Second Schedule to the Securities and Futures (Licensing and Conduct of Business) Regulations; or

(iii)   a financial institution exempted under sections 99(1)(a), (b), (c) or (d) of the SFA from the requirement to hold a capital markets services licence to carry on business in fund management i.e., a bank licensed under the Banking Act (Cap. 19), a merchant bank approved under the MAS Act (Cap. 186), a finance company licensed under the Finance Companies Act (Cap. 108) or a company or co-operative society licensed under the Insurance Act (Cap. 142).

注*：合格的基金经理的定义为：

（i）持牌基金管理公司，即《证券和期货法》第289章第86条规定的资本市场服务基金管理许可持有人；

（ii）注册基金管理公司，即根据《证券和期货（许可和经营行为）条例》附表2第5(1)(i)条获豁免持有资本市场服务许可证的公司；或

（iii）根据SFA第99(1)(a), (b), (c)或(d)条获豁免的金融机构，其无需持有资本市场服务许可证即可从事基金管理业务，即根据《银行法》第19章获得许可的银行，根据《金融服务法案》第186章获得批准的商业银行，根据《金融公司法》第108章获得许可的金融公司或经《保险法》第142章许可的公司

The Variable Capital Company

Published: 11th November

BACKGROUND

The recent introduction of the Singapore Variable Capital Company (“VCC”) structure into the fund management industry is a move by the government to bring Singapore on par with other established global fund centres like Luxembourg, Ireland, Cayman Islands and Mauritius. This development brings a new beginning of options for fund and wealth managers and creates new business opportunities for Singaporean accountants, custodians, lawyers and tax advisors.

The Variable Capital Company (“VCC”) is an alternative to the existing Singapore fund structure. Existing available structures are company, limited partnerships, and unit trust structures. The VCC Act was passed in October 2018 and a draft regulation was released in Q2 2019 for public consultation and feedback. The implementation timeline is likely to be end 2019.

KEY FEATURES

  1. The VCC will be regulated by the Variable Capital Companies Act (“VCC Act”). The Accounting and Corporate Regulatory Authority (“ACRA”) will be the administrator of the VCC Act. The Monetary Authority of Singapore (MAS) will provide overview of the Anti-Money Laundering and Countering Financing of Terrorism (“AML/CFT”) obligations. The Securities and Futures Act will govern the share issue and other general activities of the VCC.
  2. The VCC can be set up as a Collective Investment Scheme in two ways :

(a) a stand-alone entity

(b) as an umbrella entity with multiple sub-funds (each with its own segregated assets and liabilities).

  1. The VCC can be used for traditional and alternative fund strategies (both open-ended and close-ended)
  1. The Annual General Meeting (“AGM”) can be waived at the discretion of the Board of Directors, subject to meeting certain conditions under the VCC Act
  1. The register of members of a VCC is not required to be open for inspection by the public, thus preserving privacy. However the register must be open for inspection by the following or upon a order of court:
    (a) Manager of the VCC;
    (b) Custodian of the VCC (being a non-umbrella VCC)
    (c) Public authorities (Government, ACRA and the MAS)

ADVANTAGES

  1. Free movement of capital as shareholders have more flexibility to enter and exit a fund through easy subscription and redemption of shares. A VCC can redeem shares and pay dividends using its net assets or capital. (This gives flexibility in distribution and return of capital).
  2. The VCCs can operate as umbrella funds with several sub-funds (with different investment objectives, investors, and asset classes). There is economies of scale as the sub-funds can share the same board of directors, fund manager, administrator, custodian and auditor
  1. Tax exemption under Section 13R (Fund Tax Exemption Scheme) and Section 13X (Enhanced Tier Fund Tax Exemption Scheme) of the Singapore Income Tax Act.

REQUIREMENTS

  1. Appoint a fund management company (“FMC”) that is licensed by MAS, or is an exempt financial institution in Singapore
  2. A Singapore registered office, Singapore resident company secretary and auditor, and at least one resident director
  3. At least one director must be a director or registered representative of the FMC. All directors must be fit and proper persons
  4. Comply with AML/CFT requirements. These can be outsourced to the FMC of the VCC or a regulated financial institution in Singapore

    5. For its accounting, adopt US GAAP, Singapore Accounting Standards Council or IFRS. For VCC offered to retail investors, RAP7 (Reporting For Unit Trusts, ISCA) must be adopted.

For further information on how to set up a VCC in Singapore, please contact us.

This article is for communication purposes only. Any act or omission made solely in whole or in part of this article is determined and therefore the consequences are the responsibility of the perpetrator. If you need to reprint or quote any of the content in this article, please indicate the source.

 

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Family Office and Funds in Singapore

Published: 11th November


Singapore has been considered as a one of the key locations for hedge funds, real estate funds and private equity. It has been positioned to be in the same league as the Cayman Islands, Bahamas and British Virgin Islands.

 

The growth of the fund industry in Singapore has been encouraged by tax incentives for funds and the business friendly environment. The Singapore Budget Statement for the financial year 2019 was delivered by Minister for Finance, Mr. Heng in Parliament on 18th  February 2019. The latest Budget extended the existing Tax Incentive Schemes which were due to expire on 31 March 2019, further until 31 December 2024. The Tax Incentive Schemes were also fine-tuned for relevance and to facilitate compliance.

 

Funds managed by a Singapore based fund manager are liable to tax in Singapore except where they qualify for various tax incentive schemes with specific conditions met. These tax incentive schemes allow for ‘‘specified income” derived by the qualifying fund from ‘‘designated investments’’ to be exempted from tax. These designated investments encompass a range of investments (shares, securities and derivatives) but exclude immovable property in Singapore. In order to qualify for tax incentive, the requirements for the fund manager are as follows :

  • register with the Monetary Authority of Singapore (‘‘MAS’’) or
  • hold a capital markets services (‘‘CMS’’) licence

The three main tax exemption schemes for funds currently available in Singapore are:

  • Section 13CA : Offshore Fund Tax Exemption Scheme
  • Section 13R : Onshore Fund Tax Exemption Scheme
  • Section 13X : Enhanced Tier Fund Tax Exemption Scheme
 

For more information, please reach out to us via email at admin@varicorp.com.sg