There are several key requirements of Variable Capital Company (VCC) that need to be fulfilled. The requirements of the Securities and Futures Act (SFA) will apply to the VCC as a fund. This also means that the VCC has to comply with Anti-Money Laundering/Countering the Financing of Terrorism procedures.
The VCC will be regulated by the Variable Capital Companies Act enacted in 2018. The Accounting and Corporate Regulatory Authority (ACRA) will administer the VCC Act, and the Monetary Authority of Singapore (MAS) will oversee its anti-money laundering and countering the financing of terrorism obligations.
We highlight key requirements of the Variable Capital Company below:
Singapore-based Fund Manager
The assets held by the VCC must be managed by a fund manager regulated or licensed by the MAS. However, those listed below are exempted from this requirement:
- Entities under section 99(1) (a),(b),(c) or (d) of the Securities and Futures Act (Cap. 289). These are typically regulated financial institutions such as banks, merchant banks, finance companies or insurance companies.
- Real estate fund managers exempt from licensing and registration
- Self-managed family offices that use VCCs without any third-party monies.
The fund management duties associated with the VCC can be delegated to a third-party such as a sub-manager. However, the sub-manager is required to be regulated as fund managers in the jurisdiction that it operates in. In terms of overall responsibility, it still lies with the main fund manager and, thereby, it must not engage in any activity that will breach its fiduciary duty to the VCC.
Singapore resident director
The VCC is required to have at least one director as a resident in Singapore. One of the directors of the VCC must be a Qualified Representative of the fund management company managing the VCC. Lastly, all of the directors must fulfill the Fit And Proper Criteria set out by MAS.
Singapore registered office
The address of the registered office for the VCC is required to be in Singapore.
Singapore company secretary
The company secretary of the VCC is required to be Singapore-based.
The VCC is required to be audited by Singapore-based auditor. The accounts must be separate for each sub-fund and prepared in accordance as per IFRS, Singapore FRS or US GAAP. Although the audited statements need not be publicly available, they shall be made available to the shareholders.
Similar to unit trusts under the Collective Investment Schemes (CIS) Code. VCC operating as retail CIS is required to use RAP7 accounting. Non-retail CIS has the option to have their financial statement in US GAAP format.
Only an approved custodian could be appointed to supervise the custody of the assets held by VCC. The only exemption is that of CIS which is marketed only to institutional investors or by way of the private placement exemption. There should not be more than 50 offers in Singapore in any 12 months for such CIS.
For more information, readers can refer to the tax treatment of Variable Capital Company.