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Singapore is widely-known for its openness to investments – both foreign and domestic. Variable Capital Companies (VCC), introduced to Singapore in 2018, established in the country to provide investors with a vehicle to manage their assets efficiently through fund managers.
In this article, we’ll take a look at a brief overview of what a VCC is, and how to set up your own Variable Capital Company within Singapore.
What is a Variable Capital Company (VCC)?
A Variable Capital Company, or VCC, is a business that specialises in investments. Specifically, a VCC employs a fund manager who will pool investor funds together to invest in various assets for higher returns.
Variable Capital Companies are meant to reduce the costs of shareholder meetings. VCCs are also exempt from income tax, which further entices investors to take part in the mutual fund. At the same time, VCCs are meant to optimise investor funds to achieve the best return on investment for the mutual fund as a whole.
VCC strategies may be open-ended or closed-ended funds, where an open-ended fund has unlimited shares in its mutual fund, and does not require shareholders to approve of an issuance or redemption of shares; meanwhile, closed-ended funds are limited in the quantity of shares per time period.
There are two main types of VCCs in Singapore: public VCC, and private VCC. Public VCCs are open to all investors wherein anyone can pool funds together to invest in various assets. Private VCCs, on the other hand, are only open to high-net worth individuals and accredited investors.
As such, startup VCCs can choose to be a public or private VCC. In the next section, we’ll provide the step-by-step process in starting a Variable Capital Company in Singapore.
How to Start a VCC in Singapore
Step 1: Register the Business Name
As with any business or startup, the first step is to decide on a business name, and register it. Companies can register their business name through the BizFile+ site, and pay the $15 fee to reserve the name for 120 days.
The business name cannot be the same or similar to an already existing business. The Accounting and Corporate Regulatory Authority (ACRA) may also refuse to register business names that have obscene or inappropriate language, or similarities that may confuse the business with another existing company.
Step 2: Locate an Office Address
Every business needs an office, and in Singapore, part of the requirements of business registration is to have a local office address. Find a location that fits the nature of your business, such as a business hub, commercial area, or places that are known to have multiple similar businesses. However, ACRA simply requires the company to have a local address regardless of the space – as long as the space can be used for business purposes.
Step 3: Register the Company
The next step is to register the company. A VCC is a unique business structure compared to sole proprietorships and partnerships, and has its own set of requirements when registering with ACRA. The requirements to register a VCC are as follows:
- A resident director;
- A qualified representative;
- A permissible fund manager;
Other requirements include a local office address, a corporate secretary, and at least SG$ 1 in capital, which are all standard requirements to incorporate a company in Singapore.
Step 4: Register with MAS
The VCC will also need licences and approvals from the Monetary Authority of Singapore (MAS) before doing any business operations. Submit necessary files, supporting documents, and articles of incorporation to MAS for approval to establish the company as a VCC.
Step 5: Plan Out the Company Strategy
It is also a good idea at this stage to plan out the investment strategies and company objectives. Doing so will enable the company to determine the type of risk appetite it is willing to handle, the number of fund managers needed, types of investments to pursue, and other details that will help in establishing the company.
Step 6: Set Up a Custodian Bank Account and Appoint a Fund Manager
Set up the custodian bank account for the company, and appoint an experienced fund manager who will be in charge of the operations as these are the two basic necessities to start a VCC. The custodian bank account is where funds will be pooled together, and will make it easier for the company to monitor the in and out of cash flow.
Step 7: Open a Securities Account
Open a securities account to facilitate the transactions, investments, and trades of the VCC. This is done only after getting approval from MAS, so make sure to acquire the necessary permits and licences before opening a securities account.
Step 8: Start Accepting Investors
The VCC can now accept investors. Public VCCs can market their services to retail investors as these are open to the general public. The minimum requirement to invest is smaller, but the available investor pool is much larger compared to that of private VCCs.
Private VCCs have different promotion strategies, and often rely on word-of-mouth marketing from other high-profile investors. Whether the VCC is public or private, it is worth noting that you will need to consider the type of funds as well, which is either open-ended, or closed-ended.
Step 9: Prepare the Offering Documents, and Risk Management Policies
Secure the offering documents, and don’t forget to make risk management policies clear to avoid liabilities within the VCC. The company must clarify the pros and cons of their investment strategies to investors, and make sure that investors understand that each investment involves some risks.
Step 10: Launch the Company
Lastly, it’s time to launch the company and start with business operations. Regardless of the type of investment option that the VCC undertakes, the investors are only after one thing: profits. By keeping up with the latest investment trends, and studying the market, the VCC can be able to optimise their mutual funds.
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