8 Key Reasons for Choosing a VCC

With the launch of the Variable Capital Company (VCC), a new corporate structure for investment funds in January 2020, businesses in the fund management sector looking to set up a VCC, can stand to benefit from a reduced tax compliance burden and flexibility in the distribution and return of capital, among others. Read on to learn more about other key reasons for choosing a VCC.
8 Key Reasons for Choosing a VCC
  1. A VCC is permitted to freely redeem shares and pay dividends using its net assets/capital, thereby providing flexibility in the distribution and return of capital.

  2. Subject to adhering to certain regulatory requirements, the register of members of a VCC is not required to be open for inspection by the public. Financial statements are also not publicly available. This provides confidentiality for investors.

  3. From a tax perspective, the compliance burden is less as an umbrella VCC will only need to file a single corporate income tax return with the IRAS regardless of the number of sub funds the umbrella VCC has.

  4. Apart from the Singapore Financial Reporting Standards, a VCC is permitted to prepare its financial statements using international accounting standards such as the International Financial Reporting Standards and US Generally Accepted Accounting Principles. This allows for greater flexibility to serve the needs of global investors.

  5. The umbrella structure creates economies of scale as sub-funds can share the same board of directors and common service providers and consolidate some administrative functions. In certain circumstances, a VCC need not hold an annual general meeting.

  6. As long as a VCC shares are fully paid, the shares can be repurchased or redeemed. Unlike a company, rules on shares buy back threshold (20% per annum) and solvency requirements for certain situations as set out in the Companies Act are not applicable to a VCC.

  7. For umbrella VCC's, the Section 13R and 13X tax incentives are granted at the umbrella level. This may make it easier for the tax incentive conditions to be met. For example, under the Section 13X tax exemption, the S$50 million fund size condition & business spending condition of S$200K will be imposed at the VCC level and not at the sub-fund level. Therefore, for a VCC with three (3) subs funds, the business spending will be set at S$200,000 for the VCC and not S$600,000 and the fund size requirement for the VCC will be S$50 million and not S$150 million.

  8. Fund managers are able to adopt open-ended and closed-ended investment strategies for different sub-funds within a single VCC entity. A particular sub-fund can register a charge for that sub-fund.

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