How SFOs could benefit from a relaxation of Singapore’s VCC requirements

Variable Capital Companies (VCC) in Singapore currently exclude Single Family Offices (SFO) as permissible fund managers

On January 15, 2020, the Variable Capital Companies Act 2018 (“VCC Act”) and its subsidiary legislation came into force to introduce a new legal framework for variable capital companies (VCCs). VCCs allow funds to be set up as a standalone, or as an umbrella entity with one or more sub-funds with different investment objectives, assets, debts and investors.

However, to date only fund managers that have a capital markets licence, fund management companies which are registered and certain financial institutions who have obtained exemptions are able to manage VCCs. These requirements exclude SFOs who are unable to manage VCCs.

In late 2020, the Monetary Authority of Singapore (MAS) announced that it was looking to relax some restrictions that govern permissible fund managers, widening the scope to allow SFOs to manage VCCs.

While details are not yet available, any relaxation could have a significant effect on Singapore’s wealth management industry. There are currently over 200 SFOs in the City State who have established themselves in Singapore thanks to its stability and rich ecosystem of service providers, including law firms, accountants and private banks.

Giving SFOs access to the VCC framework would offer a number of benefits including access to a number of double tax treaties networks that Singapore has with other countries as well as other tax advantages.

The VCC structure would also allow the SFO to segregate assets and liabilities into separate standalone funds, providing protection and safeguards against the co-mingling of assets. This would also allow different family branches to invest together and increase efficiencies as they would share a board of directors and other common service providers.

According to the MAS, the number of SFOs here has grown five times between 2017 and 2019. By allowing SFOs to manage VCCs, Singapore’s status as a wealth management hub will only grow stronger.

For more information, contact Alpadis Group.