Le­gal Brief­ing

The S-VACC will com­ple­ment ex­ist­ing col­lec­tive in­vest­ment schemes (CIS) avail­able in the coun­try.

Singapore Business Review - - CONTENTS -

In­dus­try ex­perts are buzzing over the pro­posed Sin­ga­pore Vari­able Cap­i­tal Com­pany (S-VACC) leg­is­la­tion that was pro­posed by the Mone­tary Au­thor­ity of Sin­ga­pore (MAS) early last year and opened for pub­lic con­sul­ta­tion in March this year. But is it re­ally the game changer that would pro­pel Sin­ga­pore to be­come the lead­ing hub for in­vest­ment funds and as­set man­age­ment?

S-VACC, in a nut­shell, is a new type of le­gal en­tity to struc­ture in­vest­ment funds in Sin­ga­pore that will com­ple­ment ex­ist­ing col­lec­tive in­vest­ment schemes (CIS) avail­able in the coun­try, in­clud­ing trusts, com­pa­nies in­cor­po­rated un­der the Com­pa­nies Act, and lim­ited part­ner­ships un­der the Lim­ited Part­ner­ships Act.

Who ben­e­fits from the new leg­is­la­tion?

Ac­cord­ing to MAS’ con­sul­ta­tion pa­per, the new frame­work pro­posed will help pro­vide in­vest­ment man­agers greater op­er­a­tional flex­i­bil­ity, and al­low CIS to consolidate the fund domi­cile with the re­spec­tive fund man­age­ment ac­tiv­i­ties. The struc­ture will also act as a plat­form for fund man­agers to an­chor their sub­stan­tive op­er­a­tions in Sin­ga­pore, where con­trol and man­age­ment will be ex­e­cuted from the South­east Asian na­tion.

In other words: S-VACC will pro­vide greater flex­i­bil­ity for the re­turn of cap­i­tal to share­hold­ers in or­der to fa­cil­i­tate redemp­tion rights of in­vestors as well as cater to the cre­ation of sub-funds with seg­re­gated as­sets and li­a­bil­i­ties within a sin­gle S-VACC.

The pro­posed leg­is­la­tion, and sub­se­quent pub­lic con­sul­ta­tion, marks the first time that Sin­ga­pore has made avail­able a flex­i­ble cor­po­rate ve­hi­cle de­signed with in­vest­ment funds in mind — some­thing that puts fur­ther shine to the al­ready at­trac­tive and lu­cra­tive in­vest­ment funds and as­set man­age­ment in­dus­try in Sin­ga­pore.

“The S-VACC has been de­signed to fur­ther de­velop Sin­ga­pore as a cen­tre for both fund man­age­ment ac­tiv­i­ties and in­vest­ment fund domi­cil­i­a­tion, pro­vid­ing CIS with an ad­di­tional op­tion to the unit trust struc­ture,” ac­cord­ing to Ni­cola Yeo­mans, part­ner at Her­bert Smith Free­hills. “The MAS also in­tends to al­low the seg­re­ga­tion of as­sets and li­a­bil­i­ties of sub-funds es­tab­lished un­der a sin­gle le­gal en­tity.”

Amy Ang part­ner at EY noted that the S-VACC has the po­ten­tial to be an ex­cit­ing ad­di­tion to Sin­ga­pore’s fund ecosys­tem, as long as the tax treat­ment, in­ter­na­tion­ally and in Sin­ga­pore, sup­ports the MAS’S in­ten­tions for in­tro­duc­ing the ve­hi­cle. Con­tin­u­ing from the key fea­tures is the pos­si­ble ef­fect to stake­hold­ers, par­tic­u­larly funds.

Den­tons Rodyk Se­nior Part­ner I-an Lim listed down some of the ad­van­tages that they’re see­ing from MAS’ lat­est in­vest­ment fund in­no­va­tion. For in­stance, S-VACCS can en­joy in­creased pri­vacy and anonymity as they will not be re­quired to dis­close their reg­is­ter of share­hold­ers and fi­nan­cial state­ment to the pub­lic (un­less re­quired by su­per­vi­sory and/or law en­force­ment agen­cies). They are also not ob­li­gated to hold an­nual gen­eral meet­ings, low­er­ing op­er­at­ing costs.

How will it af­fect stake­hold­ers?

With the leg­is­la­tion, for­eign in­vest­ment funds may also be re-domi­ciled in Sin­ga­pore, cre­at­ing more busi­ness for ser­vice providers, on top of op­por­tu­ni­ties pre­sented by the ASEAN CIS (tar­get­ing re­tail in­vestors in Malaysia and Thai­land) and the tax-treaties Sin­ga­pore is party to.

Fund di­rec­tors will not be re­quired to make sol­vency state­ments prior to the re­pay­ment of cap­i­tal, whilst in­vestors will be al­lowed to sub­scribe and re­deem shares or units at will due to S-VACC’S vari­able cap­i­tal struc­ture.

De­spite the positives, Lim shared that the ex­clu­siv­ity in terms of who can man­age S-VACCS, apart from larger in­vestor pro­tec­tion and po­lit­i­cal is­sues, may prove to be a sig­nif­i­cant hur­dle along the way.

“In or­der for S-VACC to be the ve­hi­cle of choice for global fund man­agers and to truly in­crease the com­pet­i­tive­ness of Sin­ga­pore as a fund man­age­ment hub, we be­lieve that the … leg­is­la­tion must be ex­panded to al­low for fund man­agers who are not based in Sin­ga­pore to take ad­van­tage of the S-VACC struc­ture,” Lim said.

The as­sess­ment fur­ther noted that al­though the pro­posed frame­work of­fers in­creased op­por­tu­ni­ties for cross-border col­lab­o­ra­tion, growth for stake­hold­ers in the fund in­dus­try, com­pet­i­tive­ness and ease of do­ing busi­ness for Sin­ga­pore, as well as a wider in­vestor base for fund man­agers to tap on, it also re­veals the po­ten­tial pit­falls for in­ex­pe­ri­enced in­vestors.

“S-VACCS can en­joy in­creased pri­vacy and anonymity as they will not be re­quired to dis­close their reg­is­ter of share­hold­ers and fi­nan­cial state­ment to the pub­lic.”

S-VACC has the po­ten­tial to be an ex­cit­ing ad­di­tion to Sin­ga­pore’s fund ecosys­tem.

Ni­cola Yeo­mans

Amy Ang

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