Unlocking opportunities:  Singapore variable capital companies

This innovative structure not only appeals to funds, it also proves to be suitable for family offices seeking a more dynamic and efficient wealth management vehicle. It is a breakthrough in the industry, changing how funds are managed, and ushering in a new paradigm of versatility and operational efficiencies.

VCCs offer flexible and efficient structures, with the option of a standalone VCC or an umbrella VCC with multiple sub-funds, and cater to a wide range of investment strategies, both open-ended and close-ended, across traditional and alternative asset classes. The hallmark feature of the VCC lies in its adaptable capital management, whereby the value of the paid-up share capital is always equal to the net asset value of the VCC. This differentiating characteristic enables VCCs to distribute dividends to shareholders out of capital or profits, enhancing their operational agility.

The tax efficiency of VCCs becomes evident through various advantageous provisions. With a certificate of residence, VCCs can leverage Singapore’s extensive network of double taxation agreements with over 90 jurisdictions. Furthermore, VCCs can maximise their tax benefits at the umbrella level through Singapore’s 13O/U tax incentive schemes. 

With a focus on privacy and confidentiality, a VCC’s constitution, financial statements, and shareholder register are kept private, ensuring the protection of sensitive information. VCCs also practice segregation and ringfencing of assets and liabilities, guarding against commingling and cross contamination to safeguard investor interests and minimise risks. Furthermore, VCCs allow for inward re-domiciliation, enabling foreign corporate fund structures to transition efficiently to the VCC framework.

The VCC framework continues to evolve to ensure its competitiveness and meet the needs of investors. Singapore has introduced the Extended VCC Grant Scheme, providing 30% co-funding of qualifying expenses with a cap of SGD 30,000 per VCC to encourage greater adoption. Furthermore, it plans to introduce enhancements through VCC 2.0, potentially allowing fund managers to convert their existing funds structured as companies or unit trusts into VCCs, and expanding the scope of eligible fund managers to include licence-exempt managers like single-family offices.

As more investors and family offices recognise the benefits of VCCs, there is tremendous potential for further growth and adoption of this innovative structure. To fully leverage the advantages offered, it is essential to engage the expertise of trusted advisors who can offer valuable guidance and support.

Jolene Tan is a Managing Partner at SingAlliance, with more than 17 years of client advisory and private wealth management experience. She specialises in providing independent advice to HNWIs and their families to build holistic wealth planning solutions.