Understanding Variable Capital Companiesy (VCC) in Singapore

Fund Management Company Singapore

Singapore is recognised as a leading fund management hub in the world. Over the last decade, the government proactively took important steps to develop the country’s fund management sector and aggressively promote and enhance Singapore’s attractiveness in the global fund management industry.

In 2018, the Singapore Parliament passed the Variable Capital Companies Act 2018 (the “VCC Act”). The Act came into force in January 2020, when the Monetary Authority of Singapore announced the launch of the variable capital companies regulatory framework. The VCC Act provides for the incorporation and operational details of a new corporate vehicle that is suitable for investment funds.

The Singapore government created this new corporate structure to attract hedge funds and family offices that have their assets registered in low-tax jurisdictions such as the Cayman Islands. This was in response to the EU’s decision in February 2020 to add the Cayman Islands to its blacklist of non-cooperative tax jurisdictions.

The legislation is also designed to enhance Singapore’s position as a full-service international fund management companies and is expected to be a game-changer for Singapore’s asset and wealth management industry, cementing Singapore’s role in the region.

This article explains the key features of the VCC, the legal framework relating to the incorporation and establishment of a VCC, sets out the advantages of a VCC structure over other fund structures and provides an overview of the tax incentive scheme available under the VCC.

Understanding the VCC Umbrella and Sub-Funds

A VCC can be established as a standalone fund or an umbrella structure with multiple sub-funds and share classes. The umbrella VCC would have provisions for the segregation of assets and liabilities between sub-funds, such that the assets of one sub-fund may not be used to satisfy the liabilities of another sub-fund.

To address the key risk of cross-cell contagion within a VCC, any provisions (e.g. in the constitution or agreements entered into by VCCs) which are inconsistent with the segregation of assets and liabilities of sub-funds, would be void.

VCCs with multiple sub-funds must have the same fund manager for all the sub-funds under the umbrella fund. Furthermore, the winding up of the individual sub-funds does not automatically initiate the winding up of the entire umbrella fund.

A sub-fund of a VCC may invest in other sub-funds of the same VCC.

It is to be noted that the sub-fund is subject to the orders of the court as it would have been had the sub-fund been a separate legal person. The VCC may sue or be sued in respect of a particular sub-fund and may exercise the same rights of set-off in relation to that sub-fund as it may apply for a company incorporated under the Singapore Companies Act.

VCC Fund Management - Rockstead

Key Features of VCC Further Explained

Fund Managers

A VCC must be managed by a fund manager regulated or licenced by the MAS unless exempted. This exemption is only applicable to those financial institutions exempt under specific provisions of the SFA (securities and futures act) only. 

The exemption means that those fund managers currently exempt from licensing and registration due to being a real estate fund cannot use a VCC

However, this does not invalidate VCC’s use by a real estate fund manager or a single-family office in Singapore, if they find the use of VCC a compelling proposition, they can get themselves licensed and then launch a VCC. 


The VCC is to be governed by a Board of Directors which will hold primary responsibility for the governance of the VCC. 

It must have a minimum of one director who is ordinarily a resident of Singapore. The sole director can also be a sole shareholder of the VCC. 

A VCC must have at least one director who is also a director or qualified representative of the fund management company that will be managing the VCC. 

A VCC cannot have a body corporate as its director, irrespective of the residency of the said body corporate.


A VCC is required to safeguard its assets by entrusting a “custodian” unless exempted. The custodian must be an approved CIS trustee under the SFA. Such custodians must comply with the CIS Code, which will set out the operational obligations of custodians of the authorised scheme.

VCCs which comprise of restricted or exempt schemes that are PE/RE/VC funds may be exempted from requiring a custodian. To avail themselves of this exemption, the VCC must disclose the lack of a custodian to its investors, obtain investors’ acknowledgement of this custody arrangement, and ensure that the scheme is audited on an annual basis and that the auditor’s report is provided to investors.

Annual General Meetings

 A VCC should host an annual general meeting every year within six months from the end of the financial year. The first financial year cannot be longer than 18 months (unless ACRA approves otherwise).

VCCs are not subjected to a mandatory requirement to hold an annual general meeting (AGM) and have the option to dispense with holding an annual general meeting by giving at least 60 days’ notice to its shareholders.

AML/CFT Requirements

To prevent the abuse of VCCs for money laundering and terrorist financing:

  1. AML/CFT requirements on VCCs will be supervised by the MAS for AML/CFT compliance
  2. VCCs are required to outsource the performance of AML/CFT duties to its fund manager, are held ultimately responsible for compliance with its AML/ CFT requirements
  3. VCC’s directors are subjected to fit and proper checks, and the VCC is required to have at least one director who is also a director of its fund manager
Family Office Services Singapore - VCC Rockstead

Understanding the Tax Incentive Scheme under VCC

A person in Singapore who manages a fund, whether offshore or onshore, on a discretionary basis creates a taxable presence for the fund in Singapore. In the absence of a tax treaty or tax incentive, income and gains of the fund due to the activities of a Singapore fund manager are potentially taxable in Singapore. However, Singapore’s domestic legislation provides for tax exemption for such funds.

Extension of Tax Exemption for VCCs

The tax exemption under section 13O referred to as “Singapore Resident Fund Scheme” or “SRF” and section 13U, referred to as “Enhanced-Tier Fund Scheme” or “ETF” of the Income Tax Act of Singapore will be extended to VCCs.

Singapore Resident Fund Scheme, 13O

The Singapore Resident Fund Scheme was introduced to encourage fund managers to base their fund vehicles in Singapore. The main advantage of using a Singapore fund over a tax haven-based fund is that the fund management company and investment team are based in the location of the fund itself (i.e. Singapore). 

A Singapore resident fund managed by a Singapore-based fund manager will be exempt from tax on “specified income” derived from “designated investments” if the fund is an “approved company”. For a fund to qualify as an approved company, the fund vehicle must (amongst others) have the legal form of a company, have its control and management exercised in Singapore, and use a Singapore-based fund administrator. In addition to this, there is a business spending requirement of at least S$200,000 each financial year. There is no minimum fund size requirement. 

The list of designated investments is broad, but a case-by-case analysis is needed. Some very clear exclusions are investments connected with Singapore real estate. 

It is important to note that the fund cannot be fully owned by Singaporeans. If the investor is a non-qualifying investor (NQI) who beneficially owned more than the prescribed percentage stated in Section 13O, the investor shall be liable to pay a penalty to the Singapore tax authorities. The penalty is effectively equivalent to the corporate income tax payable on his share of the income and gains of the fund.

Enhanced-Tier Fund Scheme, 13U

Similar to the SRF Scheme, the ETF Scheme provides for tax exemption on “specified income” derived from “designated investments” from funds managed by a Singapore-based fund manager. Unlike the SRF Scheme, a fund does not have to be incorporated or resident in Singapore to apply for the ETF Scheme.

However, the conditions to apply for the ETF Scheme include a minimum fund size of S$50 million at the time of application, and the fund management company managing the fund to have at least three investment professionals. Additionally, there is a requirement for business spending of S$500,000 each financial year to be in Singapore. The ETF Scheme does not have restrictions on investors’ profiles and ownership percentages. The fund can reside either offshore or onshore

A Singapore VCC is eligible for Enhanced-Tier Fund Scheme (if all conditions are fulfilled).

MAS-registered Fund Management Company - Singapore

How can Rockstead Capital Help?

Our dedicated Rockstead Family Office team, consisting of experienced portfolio managers, analysts, and operational, compliance and legal specialists, has accumulated extensive experiences in helping HNWIs establish family offices utilising the VCC structure.

Rockstead Capital owns a VCC, which allows us to manage the assets and investments of our family office clients through multiple sub-funds. Each family office client simply needs to register a sub-fund under the Rockstead VCC umbrella, which is a straightforward process that will be handled by our experienced onboarding team.

After establishing the sub-fund, we will continue to support you in:

  1. Investment portfolio analysis, construction, and implementation
  2. Portfolio, risk management and operations (e.g., fund management and administration, subscription/ redemption, etc.)
  3. Corporate service, audit, and reporting
  4. Continual advisory (e.g., tax advisory, legacy planning, deal sourcing, etc.)
Family Office Services Singapore - Rockstead


For more information on Rockstead Capital family office services and product offerings, please contact any of our relationship managers or write to us today.


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