Friday, 10 July 2020

MAS introduces new corporate structure to enhance fund ecosystem in Singapore

The Monetary Authority of Singapore (MAS) has finalised the features of the new corporate structure for investment funds, the Variable Capital Company (VCC). This follows from the public consultation in March 2017. The introduction of the VCC structure will position Singapore to become a key fund domiciliation hub, and strengthen Singapore’s position as a full-service international fund management centre.

Mr Ng Yao Loong, Assistant Managing Director (Development and International), MAS, said, “The new VCC framework will encourage the consolidation of fund domiciliation and fund management activities locally, creating a full-service fund ecosystem in Singapore. The growth of fund domiciliation activities will create opportunities for a wide range of service providers such as lawyers, accountants, fund administrators, and fund custodians.”

The new VCC legislative framework will provide:
Greater flexibility. A VCC can be used by both open-ended and closed-end investment funds, and for both traditional and alternative strategies. The variable capital structure of a VCC allows it to issue and redeem shares without having to seek shareholders’ approval, enabling investors to enter into and exit from their investments in an investment fund when they wish to. It can also pay dividends using its capital.

Achieve cost efficiencies. A VCC may be established as a standalone structure, or as an umbrella structure with multiple sub-funds with different investment objectives, investors as well as assets and liabilities. The umbrella structure creates economies of scale as sub-funds can share the same board of directors and common service providers and consolidate some administrative functions.

Cater to the needs of global investment funds. A VCC will be permitted to use Singapore and international accounting standards (such as the International Financial Reporting Standards and US Generally Accepted Accounting Principles) in preparing financial statements so that it can serve the needs of global investors. Fund managers with foreign-domiciled investment funds may take advantage of the statutory regime
for inward re-domiciliation under the VCC framework to transfer the domicile of their foreign investment funds to Singapore.

Enhance safeguards. The VCC framework provides safeguards against the
commingling of assets and liabilities between sub-funds, by requiring assets and liabilities of each sub-fund to be segregated. As such, the assets of one sub-fund may not be used to discharge the liabilities of another sub-fund, or of the umbrella fund, including in the event of insolvency. To prevent the VCC from being abused for unlawful purposes, a VCC will be subject to anti-money laundering and countering the financing of terrorism requirements, and are also required to appoint a fund manager that is regulated by MAS.

Re-dessiminated by The Asian Banker

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