Liquidation Advisor Guide - Singapore Liquidation Process for a Variable Capital Company
A Variable Capital Company (VCC) is a unique corporate structure in Singapore designed to cater specifically to investment funds. Introduced in 2020, the VCC framework allows fund managers to establish investment funds as either standalone entities or as umbrella entities with multiple sub-funds, each holding different assets and liabilities. This structure provides significant flexibility in terms of capital allocation, governance, and regulatory compliance, making it an attractive option for both domestic and international fund managers.
Pros of a VCC Structure:
- Flexibility in Capital Structure: VCCs allow for flexible capital structures where shares can be issued and redeemed without the need for shareholder approval. This enables seamless and efficient management of fund inflows and outflows.
- Segregation of Assets and Liabilities: For umbrella VCCs with multiple sub-funds, assets and liabilities of each sub-fund are legally segregated. This ensures that the assets of one sub-fund are protected from the liabilities of another.
- Tax Benefits: VCCs enjoy tax incentives, including access to Singapore’s tax treaties and the Enhanced-Tier Fund Scheme. This can result in significant tax savings for fund managers and investors.
- Ease of Redomiciliation: Foreign investment funds can easily re-domicile to Singapore as a VCC, benefiting from Singapore’s robust regulatory framework and favorable business environment.
- Operational Efficiency: VCCs provide operational efficiencies through consolidated financial statements and simplified administrative processes, particularly for umbrella VCCs with multiple sub-funds.
Cons of a VCC Structure:
- Regulatory Compliance: VCCs are subject to stringent regulatory requirements, including compliance with the Securities and Futures Act and oversight by the Monetary Authority of Singapore (MAS). This can increase the administrative burden for fund managers.
- Higher Setup and Maintenance Costs: The costs associated with establishing and maintaining a VCC can be higher compared to other business structures, particularly due to regulatory compliance and audit requirements.
- Limited to Investment Funds: The VCC structure is specifically designed for investment funds and may not be suitable for other types of businesses or entities.
- Disclosure Requirements: VCCs are required to disclose their beneficial ownership information, which may be a concern for fund managers and investors seeking privacy and confidentiality.
Closing a VCC involves several steps to ensure that all legal and financial obligations are properly addressed. Here is the process to close a VCC in Singapore:
- Board Resolution: The board of directors must pass a resolution to wind up the VCC. For umbrella VCCs, separate resolutions may be needed for each sub-fund.
- Appointment of Liquidator: Appoint a licensed liquidator to oversee the winding-up process. The liquidator’s role is to settle the VCC’s debts, distribute remaining assets to shareholders, and ensure all legal obligations are met.
- Notification to MAS and ACRA: Notify the Monetary Authority of Singapore (MAS) and the Accounting and Corporate Regulatory Authority (ACRA) of the intention to wind up the VCC. This must be done promptly to comply with regulatory requirements.
- Settlement of Debts and Obligations: The liquidator will settle all outstanding debts and liabilities of the VCC. This includes paying off creditors, suppliers, and any other financial obligations.
- Distribution of Remaining Assets: After settling all debts, the liquidator will distribute any remaining assets to the shareholders according to their shareholdings.
- Cancellation of Licenses and Permits: Cancel any business licenses, permits, or registrations obtained for the VCC.
- Final Meeting and Dissolution: A final meeting of shareholders is held to present the liquidator’s report. Once the report is accepted, the VCC is formally dissolved, and the liquidator files the necessary documents with ACRA and MAS.
- Notification to Stakeholders: Inform all relevant stakeholders, including investors, clients, and service providers, about the closure of the VCC. This helps maintain goodwill and ensures a smooth transition for any ongoing transactions.
By following these steps, you can effectively close a VCC in Singapore while ensuring all legal and financial responsibilities are properly managed.
Guardian Advisory - Singapore Insolvency Practitioner
Your trusted partner in restructuring and liquidation services in Singapore. We provide restructuring advisory services and are approved liquidators in Singapore.