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Governance and Management of Variable Capital Companies (VCCs)

  • Ingenia Consultants
  • August 12, 2025

The Monetary Authority of Singapore (“MAS”) reminded fund managers of their obligations in managing variable capital companies (“VCCs”) in a special circular on the Governance and Management of Variable Capital Companies (VCCs) (Circular no: IID 04/2025), published on 26 June 2025. Fund managers ensure compliance with the following key requirements for VCCs: 

  1. A VCC must be used as a collective investment scheme (“CIS”). 
  1. A Singaporean fund manager must manage the property of the VCC. 
  1. A director or representative of the fund manager must be appointed as a director of the VCC. 
  1. A VCC must engage an eligible financial institution (“EFI”) to carry out the necessary anti-money laundering (“AML”) and countering the financing of terrorism (“CFT”) measures. 
  1. The assets of the VCC must be segregated and maintained with an independent custodian. 
  1. All individuals engaging in fund management activity for the VCC must be appointed as representatives of the fund manager. 

Rapid Rise of Variable Capital Companies 

Since the launch of the VCC framework in January 2020, fund managers have rapidly adopted VCCs as an investment vehicle of choice. By 31 March 2025, approximately 1,200 VCCs were incorporated, managed by about 500 financial institutions carrying out fund management activities in Singapore. 

Based on their filings and a survey of VCC managers in 2024, the MAS carried out a thematic review. The MAS’ reminders and expectations in its circular IID 04/2025 reflect the findings of this survey and the review. To the greatest extent, they reiterate existing regulatory requirements. 

Substantive Fund Management 

“The sole object of a VCC is to be one or more collective investment schemes in the form of a body corporate.” (sec. 15(1) VCC Act)  

For every CIS/fund it manages, including every VCC and sub-fund of a VCC that it manages, the fund management company (“FMC”) shall conduct substantive fund management activity (para. 4.7 SFA04-G05), such as portfolio management, investment research or trade execution (para. 3.2 SFA04-G05). In contrast, the following activities or structures do not qualify as substantive fund management and, therefore, no VCC should be established for these purposes. 

  1. A VCC should not solely hold illiquid assets previously owned by the investor(s) on behalf of a single investor or a few connected investors (para. 10 IDD 04/2025). The “MAS is of the view that VCC managers who merely help transfer investors’ existing investments or assets into the VCC without providing investment inputs would not be considered as carrying out substantive fund management activity.” (para. 10 IDD 04/2025) 
  1. An FMC must not “merely provide[.] a conduit or channel for its customer to structure its investments or assets in the form of fund units, without providing any substantive input or influence over the merits or suitability of the investment or assets, or assuming responsibility for their investment performance. This includes cases where an FMC executes trades purely based on customers’ instructions” (para. 10 IID 04/2025, para. 3.3.1 SFA04-G05) or the VCC “merely serve[s] as a conduit for the offer of funds managed by other fund managers “para. 10 IDD 04/2025), i.e. a feeder fund for a CIS managed by a third-party fund manager.
  2. The FMC “purely engage[s] in marketing of the VCC[.]” (para. 10 IDD 04/2025) 

The MAS also expects VCCs to hold assets and have investors within one year after their incorporation. Accordingly, fund managers should periodically assess their VCCs and wind down VCCs that hold no assets or have no investors (para. 9 IDD 04/2025). 

Appointment of Representatives 

VCCs may appoint directors who are not directors or representatives of the VCC manager to strengthen oversight and corporate governance (para. 8 IDD 04/2025). However, they must be mindful that every individual engaged in a regulated activity must be appointed as a representative of the fund manager (sec. 99B(1) SFA). Regulated activities for fund managers include 

  1. deal sourcing, investment research, portfolio management, investment decision making, or trade execution for the VCC’s investments; or 
  1. client-facing activities such as marketing, business development, or account/client servicing (para. 8 IDD 04/2025, para. (iv) of Appendix 1 to SFA04-G05). 

All representatives are subject to the fund manager’s policies and procedures and supervision. 

Custody Arrangement 

“VCC managers must ensure that assets under management are subject to independent custody, unless the assets are private equity or venture capital investments offered only to accredited/institutional investors.” (para. 7 IID 04/2025) 

A fund management company must segregate assets under its management from its own assets (or assets of related companies and connected persons) (reg. 13B SF(LCB)R). It must deposit the money and assets of the CIS in an account designated by the CIS or in a custody account held on trust for the CIS, separate from its own assets money or assets (reg. 13B(1)(c), 16 and 26 SF(LCB)R, para. 4.1.1 SFA04-G05). Certain exemptions apply, namely, for private market investments by closed-end venture capital (“VC”) or private equity (“PE”) funds restricted to accredited investors or institutional investors (reg. 13B(4) SF(LCB)R) 

Eligible Financial Institution for AML/CFT 

Every VCC “shall put in place adequate controls and processes to comply with [its] AML/CFT obligations, including those outlined in the MAS Notice VCC-N01 and Variable Capital Companies (Sanctions and Freezing of Assets of Persons) Regulations 2020.” (para. 11 IDD 04/2025) These obligations, namely, include the identification and verification of the identities of VCCs’ investors and their beneficial owners, maintaining an accurate and up-to-date register of beneficial owners of VCCs, performing screening, as well as conducting enhanced due diligence measures on higher-risk customers (para. 12 IDD 4/2025). 

or the execution of its respective required checks and measures, the VCC must engage an eligible financial institution (“EFI”), essentially a financial institution supervised by the MAS1 (para. 4.1 VCC-N01). Nonetheless, the VCC remains responsible for its AML/CFT obligations. Accordingly, the VCC and its directors must ensure that they sufficiently supervise the appointed EFI (para. 11 IDD 04/2025). 

How We Can Help 

Ingenia Consultants Pte. Ltd. provides regulatory support services for financial institutions, including compliance and internal audit. We provide compliance advice regarding the fund management company’s regulatory obligations or carry out its compliance obligations to ensure that it remains compliant with its regulatory requirements and aligned with the MAS’ expectations. In addition, we carry out internal audits to provide the fund management company’s board of directors, management, and other stakeholders with assurance regarding the company’s compliance conduct. 

Further, Auto-Comply, our group company, provides easy, inexpensive screening services. 

For more information on our compliance and internal audit services and capabilities, please contact: 

Rolf Haudenschild 

Co-founder 

Ingenia Consultants Pte. Ltd. 

rolf.haudenschild@ingenia-consultants.com 

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