VCC Agreement: What It Is and Why It Matters
A VCC agreement, also known as a Variable Capital Company agreement, is a legal document that sets out the rules and regulations governing a company incorporated under the VCC Act in Singapore. The VCC Act, which came into effect on 14 January 2020, is aimed at creating a new type of investment fund structure that is both flexible and cost-effective.
Under the VCC Act, a VCC is a company that is incorporated in Singapore and can issue and redeem shares at net asset value (NAV). This means that the value of the shares is directly tied to the value of the underlying assets of the VCC. This makes it an attractive investment vehicle for fund managers who can benefit from the ease of set up and management of VCCs.
The VCC agreement sets out the terms and conditions of the VCC, including the investment objectives, investment strategies, and the rights and obligations of the shareholders. It also sets out the rules for the appointment and removal of fund managers, custodians, and other service providers.
One of the key benefits of the VCC structure is the ability to have multiple sub-funds under a single VCC. Each sub-fund can have its own investment objective and strategies, and investors can choose which sub-funds to invest in. This allows fund managers to offer a range of investment options to suit different investor needs.
Another benefit of the VCC structure is the ability to use the VCC as a holding company for investments in other companies. This can help to simplify the corporate structure of a group of companies and reduce administrative costs.
In order to qualify as a VCC, a company must meet certain criteria set out in the VCC Act. These include having a variable capital structure, having at least one director who is a resident in Singapore, and having a fund manager who is licensed or registered with the Monetary Authority of Singapore (MAS).
In conclusion, a VCC agreement is a crucial document for any VCC as it sets out the rules and regulations governing the company. The VCC structure offers a flexible and cost-effective investment vehicle for fund managers, and the ability to have multiple sub-funds under a single VCC allows for a range of investment options. If you are considering setting up a VCC, it is important to seek legal and tax advice to ensure that your VCC complies with the VCC Act and other relevant regulations.