Singapore VCC Proposed Changes – What Wealth Managers Need to Know

The open-ended company scheme in Singapore was originally launched in early 2020. Now policymakers in the city-state want to adjust the system to attract entities, including single-family offices. The author examines the terrain.

Singapore introduced its Open-End Company (VCC) regime in January 2020, and VCCs have already been adopted by dozens of wealth management groups in the Asian city-state. Authorities in the jurisdiction are considering adapting the system to make VCCs attractive to single-family offices and other entities. This shows how Singapore plans to build structures to make it the dominant wealth management hub in Asia, in competition with Hong Kong in particular.

In this article, Dario Acconci, Managing Director for Southeast Asia at Hawksford Group, examines what’s on the table and how the industry should be thinking about CCTVs. The editors are grateful for this analysis and hope readers find it useful. The usual editorial disclaimers apply. E-mail [email protected]and [email protected]

Proposed improvements to the framework for open-ended companies are expected to attract more family offices to Singapore. The VCC was introduced in January 2020, along with some tempting incentives from the government; there are now reportedly over 200 VDCs in place, with more on the way.

Currently, single-family offices are unable to manage VCCs in Singapore
The VCC is an investment vehicle for investment funds in Singapore; it can be set up as a single stand-alone fund or as an umbrella fund with two or more compartments, each holding different assets. The current VCC framework provides fund managers, asset managers and SFOs with many benefits, such as the division of sub-funds, preservation of company history and cost savings.

Key benefits include:
1. Division of sub-funds may reduce risk since the assets of one sub-fund cannot be used to meet the liabilities of another fund under the same VCC umbrella;

2, The VCC may re-domicile to Singapore through a registration process, if it includes one or more investment schemes;

3, CCVs can generate cost savings by assigning fund administrators or auditors such as fund managers; and

4, The share register and audited accounts of a VCC are not required to be made public, which ensures confidentiality.

Potential improvements proposed to expand the scope of SFOs to manage VCCs:
Although the timing has yet to be confirmed, Singapore may consider expanding the scope of authorized fund managers to include single-family offices not included in this list:
– Fund managers holding a capital markets license;
– registered fund management companies; and
– Certain financial institutions that have obtained exemptions.

Expanding the scope of authorized fund managers can enable single-family offices to manage open-end companies and expand the range of structures available to ultra-high net worth families and meet their diverse needs when establishing structures domiciled in Singapore. This would likely see Singapore’s attractiveness as a competitive Asia-Pacific asset and wealth management center continue to grow. This would in turn generate greater demand for the fund ecosystem, including requirements for service providers such as lawyers, corporate and personal services, fund administrators and custodians.

Increased choice of structure and privacy for families and ultra-high net worth individuals
If SFOs are allowed to manage VCCs, the range of structures available to SFOs in Singapore would increase and help meet the complex and diverse needs of families and high net worth individuals; the change will bring flexibility and privacy to established structures domiciled in Singapore and provide peace of mind for the long-term preservation of heritage in Asia.

In summary
Advisors and ultra-high net worth individuals and families are beginning to explore and familiarize themselves with SFOs and VCC structures to incorporate or redomicile their funds to Singapore, as these are likely to become more prevalent over the coming months and d offer attractive benefits.

At Hawksford we are trusted to provide efficient administration and services to large and multinational corporations, 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 that provides independent expertise in corporate structuring and family governance for international families.

About the Author
Dario Acconci is 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 has developed extensive experience in assisting foreign investments in China, Hong Kong and South East Asia, advising clients in various aspects ranging from company law, commercial to labor law. He has built a practice of multinational clients and has expertise in business formation, corporate governance and compliance in Asia.

Dolores W. Simon