Benefits of a VCC

There are many benefits to creating a VCC. These are the top 3 advantages.

1. Operational Flexibility

Due to its operational flexibility, some advantages of the VCC structure over a traditional private limited company are that:

- A VCC can readily issue and redeem shares without seeking the approval of its shareholders;

- A VCC is not restricted from paying dividends only out of profits, and can also do so out of capital thereby giving fund managers the flexibility to meet dividend payment obligations;

- Solvency statements do not have to be made by the directors at the point of share redemption;

- A VCC can be set up as a single standalone fund or an umbrella fund with two or more sub-funds, each holding a portfolio of segregated assets and liabilities. For fund managers that structure their funds as umbrella VCCs, there may be cost efficiencies from using common service providers across the umbrella and its sub-funds; and

- The assets and liabilities of each sub-fund are ringfenced.

2. Increased Privacy

The constitution, financial statements and the Register of Members (Investors) cannot be retrieved by the public. However, the register of members must be disclosed to the public authorities upon request for regulatory and law enforcement purposes.

3. Tax Incentives

A VCC is treated as a company and a single entity for tax purposes. An umbrella VCC only needs to submit a single corporate income tax return to the IRAS. VCCs are required to pay corporate tax rate of 17%, and dividend payouts to shareholders are not taxable. The Enhanced Tier Fund (“ETF”) Scheme and Singapore Resident Fund (“SRF”) Scheme under the Income Tax Act are extended to VCCs. Under these schemes, the "specified income” (includes gains) derived by the fund from ‘‘designated investments’’ is exempt from tax.

Key Features of a VCC

• The VCC may be incorporated with a minimum of 1 member. There is no limit to the total members a VCC may have
• A minimum of 1 share must be issued in the VCC. Shares have no par value – the actual value of the paid-up capital of the VCC is always equal to its net asset value
• The VCC must be managed by a manager, who must in general, hold a capital markets services license
• Each VCC must have a least 1 director who is ordinarily resident in Singapore, and at least 1 director who is either a director or qualified representative of the manager. This may be the same person
• The VCC must have at least 1 director for non-authorised schemes and at least 3 directors for authorised schemes
• The VCC must have a Singapore registered address and must appoint a company secretary resident in Singapore
• The Constitution of the VCC which is to be filed as part of the incorporation process must contain various mandatory provisions prescribed by relevant legislation
• The VCC must prepare audited financial statements each year which are to be filed with the Accounting and Corporate Regulatory Authority

It is an exciting opportunity to set up a VCC in Singapore to enjoy all the potential benefits. If you are looking to set up a VCC, email us for more information.