The VCC structure is highly flexible to accommodate the creation of sub-funds with either open-ended or closed-ended strategies. The introduction of VCC into the asset management market will further augment Singapore as a global financial centre.
In this article, we have compiled some frequently asked questions regarding the VCC.
Some of the key features of a VCC are:
The VCC complements existing fund structures available in Singapore, primarily limited partnerships, companies and unit trusts. Some of the limitations with the existing corporate fund structures in Singapore include restrictions under the Companies Act on the return of capital to shareholders, public access to identities of shareholders and the ability to declare dividends only if there is distributable profit. A VCC structure removes the above restrictions.
The new VCC framework will encourage the consolidation of fund domiciliation and fund management activities locally, creating a full-service fund ecosystem in Singapore and maximising value from the full fund management value chain. It will also strengthen Singapore’s role as a key hub for fund managers to invest into the Asia-Pacific region.
An umbrella VCC essentially has segregated sub-funds under it, through a cellular structure. In this structure, the VCC will be a single legal entity, with its sub-funds operating as separate cells (each without legal personality).
A sub-fund will be constituted by registration with ACRA, which will in turn provide the sub-fund with a unique sub-fund identification number. To prevent cross-cell contagion, the VCC Act provides for the segregation of assets and liabilities of sub-funds, where:
To mitigate against cross-cell contagion, the VCC Act voids any provisions which are inconsistent with the segregation of assets and liabilities of sub-funds (e.g. provisions in the constitution or in agreements entered into by the VCC) and requires the VCC to ensure proper segregation of assets and liabilities of sub-funds. In circumstances where the VCC is dealing with a third party, the VCC must disclose the cellular structure to the third party.
There is no limit to the number of sub-funds within each VCC; however, an umbrella VCC must apply to ACRA for the registration of the sub-fund within seven (7) days of the sub-fund’s formation.
Some of the key compliance requirements are:
The tax incentives currently given to Singapore incorporated companies structured as funds (managed by a Singapore based fund manager) under Section 13R and Section 13X of the Income Tax Act are also being extended to VCCs.
A foreign corporate entity (e.g. a Cayman Segregated Portfolio Company or a BVI Protected Cell Company) that is structured similarly to the VCC can re-domicile to Singapore and become a Singapore entity (provided the host country recognises or authorises re-domiciliation).
This will encourage fund managers with funds domiciled in offshore jurisdictions such as Cayman Islands, to shift fund domiciliation with their fund management activities to Singapore, with minimal disruption to its corporate history and identity.