Part of a comprehensive analysis of the Variable Capital Companies Act 2018
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Key Provisions and Their Purpose under the Variable Capital Companies Act 2018
The Variable Capital Companies Act 2018 (the "Act") establishes a comprehensive legal framework for the formation, operation, and regulation of Variable Capital Companies (VCCs) in Singapore. The Act's primary purpose is succinctly stated in Section 5(1):
"The purpose of this Act is to enable a body corporate known as a variable capital company or VCC, to be formed, and to provide for its operation and regulation." — Section 5(1), Variable Capital Companies Act 2018
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This provision exists to introduce a new corporate vehicle tailored for investment funds and asset management, allowing flexibility in capital structure and sub-fund segregation, which traditional company structures do not readily provide.
Further, Section 5(2) clarifies the relationship between the VCC Act and existing legislation:
"This Act (except for Part 7) applies the provisions of the Companies Act and Part 6, Part 8 and Part 9 (as it applies to winding up) of the IRDA, subject to the modifications set out by this Act." — Section 5(2), Variable Capital Companies Act 2018
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This cross-application ensures that the well-established regulatory framework under the Companies Act and the Insurance and Reinsurance Act (IRDA) is leveraged, providing consistency and regulatory certainty while allowing necessary modifications to accommodate the unique features of VCCs.
Definitions Related to the Affairs of the Corporation and Sub-Funds
Understanding the scope of "affairs of the corporation" and "affairs of a sub-fund" is critical for interpreting the Act's provisions. Section 1 provides detailed definitions that encompass a broad range of corporate activities and interests, including:
"the promotion, formation, membership, control, business, trading, transactions and dealings (whether alone or jointly with another person and including transactions and dealings as agent, bailee or trustee), property (whether held alone or jointly with another person and including property held as agent, bailee or trustee), liabilities (including liabilities owed jointly with another person and liabilities as trustee), profits and other income, receipts, losses, outgoings and expenditure of the corporation;" — Section 1(g), Variable Capital Companies Act 2018
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"the internal management and proceeding of the corporation;" — Section 1(i), Variable Capital Companies Act 2018
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"the ownership of shares in, debentures of, and interests issued by, the corporation;" — Section 1(k), Variable Capital Companies Act 2018
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"the power of persons to exercise, or to control the exercise of, the rights to vote attached to shares in the corporation or to dispose of, or to exercise control over the disposal of, such shares;" — Section 1(l), Variable Capital Companies Act 2018
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"matters concerned with the ascertainment of the persons who are or have been financially interested in the success or failure, or apparent success or failure, of the corporation or are or have been able to control or materially influence the policy of the corporation;" — Section 1(m), Variable Capital Companies Act 2018
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These definitions exist to provide clarity on the scope of corporate governance, ownership, and control matters within the VCC structure, which is particularly important given the VCC’s ability to establish multiple sub-funds with segregated assets and liabilities.
Section 1(n) and (p) further extend these definitions to cover acquisition and disposal of shares and audit-related matters, ensuring comprehensive coverage of corporate affairs:
"the circumstances under which a person acquired or disposed of, or became entitled to acquire or dispose of, shares in, debentures of, or interests issued by, the corporation;" — Section 1(n), Variable Capital Companies Act 2018
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"matters relating to or arising out of the audit of, or working papers or reports of an auditor concerning, any matters in paragraphs (g) to (o)." — Section 1(p), Variable Capital Companies Act 2018
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Additionally, Section 4 defines related corporations within the VCC context:
"For the purposes of this Act, where a corporation — (a) is the holding company of another corporation; (b) is a subsidiary of another corporation; or (c) is a subsidiary of the holding company of another corporation, then the firstmentioned corporation and the other corporation are treated as related to each other." — Section 4, Variable Capital Companies Act 2018
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This provision ensures that the Act’s application to corporate groups is coherent, particularly where VCCs may be part of larger corporate structures.
Penalties for Non-Compliance
The Act incorporates penalties for non-compliance by referencing existing penalty provisions under the Companies Act. Specifically, Section 5(3)(f) and 5(3A)(e) provide:
"a reference in the incorporated provision to a default penalty is to the default penalty in section 147;" — Section 5(3)(f) and 5(3A)(e), Variable Capital Companies Act 2018
Verify Section 5 in source document →
Although the exact penalties under Section 147 are not reproduced here, this cross-reference ensures that breaches of the VCC Act are subject to established penalty regimes, promoting compliance and enforcement consistency.
The rationale for this approach is to avoid duplication and maintain uniformity in penalty structures across related legislation, thereby simplifying enforcement and providing clear deterrents against non-compliance.
Cross-References to Other Acts and Their Modifications
The VCC Act extensively cross-references the Companies Act 1967 and the Insurance and Reinsurance Act (IRDA) to leverage existing corporate and regulatory frameworks. Section 5(2) states:
"This Act (except for Part 7) applies the provisions of the Companies Act and Part 6, Part 8 and Part 9 (as it applies to winding up) of the IRDA, subject to the modifications set out by this Act." — Section 5(2), Variable Capital Companies Act 2018
Verify Section 5 in source document →
Section 5(3) and 5(3A) provide detailed rules on how incorporated provisions from these Acts apply with necessary modifications:
"Where a provision of the Companies Act 1967 (called in this subsection an incorporated provision) is incorporated by reference in this Act... the incorporated provision applies with the necessary modifications;" — Section 5(3)(a), Variable Capital Companies Act 2018
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"a reference in the incorporated provision to the Registrar of Companies is to the Registrar;" — Section 5(3)(c), Variable Capital Companies Act 2018
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"a reference in the incorporated provision to the Minister is to the Minister having charge of this Act;" — Section 5(3)(d), Variable Capital Companies Act 2018
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"a reference in the incorporated provision to the Authority is to ACRA;" — Section 5(3)(e), Variable Capital Companies Act 2018
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"Where a provision of the IRDA (called in this subsection an incorporated provision) is incorporated by reference in this Act... the incorporated provision applies with the necessary modifications;" — Section 5(3A)(a), Variable Capital Companies Act 2018
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"a reference in the incorporated provision to the Registrar of Companies is to the Registrar;" — Section 5(3A)(c), Variable Capital Companies Act 2018
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"a reference in the incorporated provision (being section 124(1)(g) or (2)(c), 125(5), 127(3) or 198 of the IRDA) to the Minister, is to the Minister having charge of this Act;" — Section 5(3A)(d), Variable Capital Companies Act 2018
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These provisions exist to ensure that references within the incorporated legislation are correctly interpreted within the VCC regulatory context, avoiding ambiguity and ensuring administrative coherence.
Sections 5(4) and 5(5) empower the Minister to make regulations prescribing further modifications to incorporated provisions for a limited transitional period:
"The Minister may, for a period of 2 years starting on 14 January 2020, make regulations to prescribe further modifications to an incorporated provision mentioned in subsection (3) in its application by this Act." — Section 5(4), Variable Capital Companies Act 2018
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"The Minister may, for a period of 2 years starting on the date of commencement of section 19 of the Variable Capital Companies (Miscellaneous Amendments) Act 2019, make regulations to prescribe further modifications to an incorporated provision mentioned in subsection (3A) in its application by this Act." — Section 5(5), Variable Capital Companies Act 2018
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This regulatory flexibility allows the legal framework to adapt to practical issues arising from the novel VCC structure during its initial implementation phase.
Sections 6(1) and 6A(1) clarify the disapplication of overlapping provisions:
"Where a provision of the Companies Act 1967 is incorporated by reference in this Act and applies to or in relation to a VCC... the Companies Act 1967 provision is disapplied, but only to the extent of such application in this Act." — Section 6(1), Variable Capital Companies Act 2018
Verify Section 6 in source document →
"Where a provision of the IRDA is incorporated by reference in this Act and applies to or in relation to a VCC... the IRDA provision is disapplied, but only to the extent of such application in this Act." — Section 6A(1), Variable Capital Companies Act 2018
Verify Section 6A in source document →
This ensures that the VCC Act provisions take precedence where there is overlap, preventing conflicting obligations and legal uncertainty.
Finally, Section 6A(3)(a) excludes Division 1 of Part 10 of the IRDA from applying to the winding up of a VCC or its sub-funds:
"Division 1 of Part 10 of the IRDA does not apply for the purpose of the winding up of a VCC or a sub-fund of an umbrella VCC;" — Section 6A(3)(a), Variable Capital Companies Act 2018
Verify Section 6A in source document →
This exclusion recognizes the unique structure of VCCs and their sub-funds, which require specialized winding-up procedures distinct from those applicable to insurance entities under the IRDA.
Conclusion
The Variable Capital Companies Act 2018 carefully integrates new corporate structures with existing legislative frameworks to facilitate the formation and regulation of VCCs in Singapore. Its key provisions establish the purpose of the Act, define critical corporate affairs, prescribe penalties for non-compliance, and incorporate relevant provisions from the Companies Act and IRDA with necessary modifications. This approach ensures regulatory consistency, clarity, and flexibility, supporting Singapore’s position as a leading fund domicile.
Sections Covered in This Analysis
- Section 1 (Definitions)
- Section 4 (Related Corporations)
- Section 5(1), 5(2), 5(3), 5(3A), 5(4), 5(5) (Purpose, Application, and Incorporation of Other Acts)
- Section 6(1) (Disapplication of Companies Act Provisions)
- Section 6A(1), 6A(3)(a) (Disapplication of IRDA Provisions and Winding Up)
- Section 147 (Referenced Penalties under Companies Act)
Source Documents
For the authoritative text, consult SSO.