The variable capital company regime in Singapore was launched originally at the start of 2020. Now policymakers in the city-state want to adjust the system to appeal to entities including single-family offices. The author examines the terrain.
Singapore introduced its variable capital company (VCC) regime in January 2020, and already VCCs have been embraced by scores of wealth management groups in the Asian city-state. Authorities in the jurisdiction are considering adjusting the system to make VCCs attractive to single-family offices and other entities. This shows how Singapore is planning to build structures to make it the dominant wealth management hub in Asia, competing against Hong Kong in particular.
In this article, Dario Acconci, managing director for Southeast Asia at Hawksford Group, examines what is on the table and how the industry should think of VCCs. The editors are grateful for this analysis and hope readers find it useful. The usual editorial disclaimers apply. Email email@example.com and firstname.lastname@example.org
Proposed variable capital company framework enhancements are expected to attract more family offices into Singapore. The VCC was introduced in January 2020, along with some enticing incentives from the government; there are now reported to be more than 200 VCCs set up, with more under way.
At present, single-family offices are not able to manage
VCCs in Singapore
The VCC is an investment vehicle for investment funds in Singapore; it can be formed as a single standalone fund, or as an umbrella fund with two or more sub-funds, each holding different assets. The current VCC framework provides fund managers, asset managers and SFOs with numerous benefits, such as division of sub-funds, preservation of corporate history and cost efficiencies.
Key benefits include:
1, The division of sub-funds may decrease risks since the assets of one sub-fund cannot be used to discharge the liabilities of another fund under the same VCC umbrella;
2, The VCC can redomicile in Singapore through a registration process, if it includes one or more investment schemes;
3, VCCs can generate cost efficiencies through assigning fund administrators or auditors such as fund managers; and
4, The share registry and audited accounts of a VCC are not required to be made public which provides confidentiality.
Potential enhancements proposed in broadening the scope of SFOs
to manage VCCs:
Although the timeline hasn’t been confirmed yet, Singapore may consider broadening the scope of permissible fund managers to include single-family offices that do not fall within this list:
- Fund managers with a capital markets licence;
- Fund management companies which are registered; and
- Certain financial institutions which have obtained exemptions.
Broadening the scope of permissible fund managers may allow single-family offices to manage variable capital companies and expand the range of structures available to ultra-high net worth families and support their diverse needs when establishing structures domiciled in Singapore. It would likely see Singapore’s attractiveness as a competitive asset and wealth management hub in Asia-Pacific continue to grow. This would in turn generate greater demand for the fund’s ecosystem, including the requirements for service providers such as lawyers, corporate and private client services, fund administrators and custodians.
Increase in structure choice and confidentiality for
ultra-high net worth families and individuals
If SFOs are allowed to manage VCCs, the range of structures available to SFOs in Singapore would increase and help support the complex and diverse requirements of ultra-high net worth families and individuals; the change will provide flexibility and confidentiality for established structures which are domiciled within Singapore and provide a peace of mind for long-term wealth preservation in Asia.
Advisors and ultra-high net worth individuals and families starting to explore and familiarising themselves with SFOs and the VCC structures for incorporating or re-domiciling their funds in Singapore as these are likely to become more prevalent over the coming months and provide attractive benefits.
At Hawksford we are trusted to deliver efficient administration and services to large and multinational corporates, FTSE listed companies, and SMEs as well as entrepreneurs, UHNW individuals and intermediaries.
In Singapore, we have a dedicated multilingual corporate and private client team, which provides independent expertise in corporate structuring, and family governance for international families.
About the author
Dario Acconci is the managing director for Southeast Asia at Hawksford while managing a strategic portfolio of clients in China and Hong Kong. He started his career in Hong Kong in 2003 working for an international law firm and developed deep experience in assisting foreign investments into China, Hong Kong and Southeast Asia advising clients in connection to various aspects ranging from corporate, commercial to labour law. He has built a practice of multinational clients and has expertise in company formation, corporate governance, and compliance in Asia.