The Variable Capital Company structure has gained popular appeal as one of the selected choices for fund administration in Singapore. The VCC Singapore framework offers a flexible and highly effective solution for investment fund managers and investors alike. This shall provide substantial benefits in compliance, tax benefits, and flexibility in operation. In this article, we consider why the VCC structure is well-suited for the administration of funds and how, in turn, the structure can further improve efficiency in managing investment funds.
What is the VCC Structure?
The VCC is an entity that caters to investment funds and operates with an umbrella structure. Multiple sub-funds can operate under one umbrella while having different assets and liabilities. It provides much flexibility for managing various investment strategies under the same scheme and regulatory framework accorded by Singapore’s financial system.
One of the benefits of VCC incorporation is that it can support open-ended or closed-ended funds. Therefore, investors can enter or exit the fund without restrictions; hence, it has become an attractive avenue for hedge funds, private equity funds, and other investment vehicles. Additionally, under the VCC structure, various asset classes are possible to enable fund managers to be able to serve a myriad of investor needs.
Why Choose VCC for Fund Administration?
The VCC incorporation has several advantages in providing fund administration services because it is ideal for fund managers. A fund manager can combine operations within a single VCC, thus releasing significant cost savings.
In addition, the VCC structure provides for the segregation of assets and liabilities between sub-funds. It means that assets in one sub-fund are well guarded from the liabilities arising in another, an aspect of risk management. This assurance brings investors closer to security from their investments, thus making the VCC structure very attractive concerning fund administration.
Tax Benefits of the VCC Structure
Apart from the above, tax efficiency under the VCC structure is also one of the reasons why many fund managers favour Singapore. For tax treatment purposes, the VCC is considered a single entity; therefore, all sub-funds under the VCC roof may enjoy Singapore’s tax incentives, including its comprehensive network of double tax treaties. It will allow fund managers to optimise tax efficiency for different investment portfolios.
Also, the VCC structure is not required to disclose shareholder information and thus provides extra confidentiality for investors. This feature makes the VCC an attractive proposition for international investors seeking tax-efficient and compliant fund administration solutions.
Flexibility in Fund Management
The VCC in Singapore is structured to be flexible to enable the fund manager to respond to the different investor requirements efficiently. A fund manager can establish various sub-funds under the same umbrella, through which he may conduct different strategies without setting a separate legal entity. This kind of flexibility also extends to the conduct of governance of the fund, whereby the VCC allows adjustments to internal rules to suit the specific requirements of the fund stakeholders.
Besides that, the VCC structure also offers fund managers the option of creating multiple share classes, each with different rights in dividends, voting, and capital returns. It enables fund managers to tailor their investment vehicles to a wide range of investors.
Compliance and Regulation in Singapore
The important precincts of fund administration services relate to ensuring regulatory compliance. The VCC Singapore framework is undergirded by the Variable Capital Companies Act and regulated by the Monetary Authority of Singapore. It ensures the establishment of VCCs in a legal and regulatory regime.
With Singapore’s reputation as a leading financial centre, the regulatory framework is stringent to contain undesirable elements yet supportive of innovation in the fund administration business. The structure of VCC enjoys the same high standards of corporate governance and financial reporting accorded to other Singaporean corporate entities to ensure VCCs maintain transparency and accountability.
Apart from that, the structure of the VCC follows international best practices, so it would be easier for fund managers to attract foreign investors. Stronger regulations and Singapore’s commitment to high standards of financial compliance provide a good base for fund administration within the VCC framework.
The Singapore VCC incorporates an entirely different perspective on flexibility, tax efficiency, and regulatory compliance rolled into one package most suiting the needs of fund administration. Because it can house many sub-funds under a single framework, the fund manager will be able to balance operational efficiency with the highest level of protection and management of risks for the assets. However, the additional attractiveness of the VCC framework will also come through its benefits from tax and confidentiality for both local and foreign investors.
For professional advice on the incorporation of a VCC and fund administration services, contact VCC HUB today. We will assist in providing one with the best seamless experience of the VCC structure and ensure that one’s investment fund operates in an efficient and compliant manner.
