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HJM Asia Law & Co LLC
Singapore, Singapore


On January 14th, 2020 the Variable Capital Companies Act 2018 was passed into Singapore law[1]. The creation of the Variable Capital Company (which shall be referred to as the “VCC”) represents Singapore’s efforts to boost its fund management industry by providing a fund-friendly legal entity.

The VCC has raised several questions in the Singapore and outside professional community, such as:

  1. What are the reasons for the creation of the VCC?
  1. What are the features of a VCC?
  1. Who benefits under the VCC?
  1. How popular has the VCC been since January 2020?

This article aims to answer all the above as well as clarify the current investment fund landscape to which the VCC now joins.

Singapore’s fund management industry

Funds are typically of two types, being either an open-ended fund or a closed-ended fund. An open-ended fund is an investment fund in which there are options of the investors capital to be returned and, conversely, a closed-ended fund is one in which the investors capital may not be returned or is curtailed by restrictions.

According to the latest survey conducted by the Monetary Authority of Singapore[2], there was a total of SGD 3.4 trillion worth of assets under management including a total of 787 registered and licensed fund managers.

Despite these numbers, until recently, many funds where these assets were managed by Singapore licensed fund managers, were domiciled outside of Singapore. The aim of the VCC is to attract the fund, as well as the management of the assets, to Singapore.[3] This was due to the fact that an overseas fund was required to meet certain financial criteria before it could be redomiciled in Singapore[4].

What is a VCC?

A VCC is a separate legal entity from its owners and directors in identical fashion to a Singapore private limited company.

However, unlike a Singapore Limited Liability Company, the VCC possesses four unique distinguishing characteristics:

  1. Unlike a limited liability company, a VCC is not subject to any procedural restrictions in returning capital back to investors;


  1. A VCC may be created as an umbrella fund or, alternatively, be divided into several sub-funds which provides flexibility when segregating assets under management;


  1. A VCC may declare dividends to its investors not only out of distributable profits, but also out of capital; and
  2. A VCC is not required to adhere to the Singapore Financial Reporting Standards but may adopt another form of accounting standard suitable to the location of the fund’s assets (for example, International Financial Reporting Standards or US Generally Accepted Accounting Principles).

In addition to providing a new corporate fund-friendly vehicle for the creation of new investment funds, the Variable Capital Companies Act has provided for a flexible re-domiciliation regime which encourages overseas based funds to transfer to Singapore without the need of recreating a new entity[5].

A VCC must appoint the following individuals before it may be registered:

  1. A board of director(s);
  1. A fund manager licensed by the Monetary Authority of Singapore;
  1. A manager; and
  1. A custodian[6].

The VCC must create its own model set of rules (commonly known as a constitution) and to further encourage the use of the VCC the Singapore Academy of Law has published its own model constitutions for both open-ended and closed-ended VCC’s.[7]

Tax treatment of the VCC

The tax treatment of the VCC will be identical to that of a Limited Liability Company. This means, that a VCC will be eligible for both the Partial Tax Exemption and Start-Up Tax Exemption. This means that a VCC will equally receive a 75% exemption on the first SGD 100,000 of income as well as a further 50% exemption on the next SGD 100,000 of its income resulting in a net saving of SGD 125,000.

The markets response to the VCC

The VCC has been received well by the fund management industry. Since January 14th, 2020, 29 VCC’s have been incorporated in Singapore[8] and this trend is expected to rise in the coming months however only time will tell the creation of the VCC has further enhanced Singapore’s reputation as a key finance and fund management centre.

With the positive take up of the VCC it is likely that the fund management sector will see significant cost reductions in the management of their funds and sub-funds due to the ability to now house all funds into one entity.



[2] Singapore Asset Management Survey 2018

[3] Historically, funds have been held in either Limited Liability Companies or Limited Partnerships (which carry restrictions on redemption of capital).


[5] The Variable Capital Companies Act, Part 12

[6] A custodian is required to be appointed where the fund attracts investment from retail investors.