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Podcast

Opportunities presented by the Singapore VCC

28 May 2020

IQ-EQ is pleased to introduce the first in our new CFO e-Lab Series, focused on Singapore’s new variable capital company (VCC) regime, which launched in January 2020. 

The session explored: Is the Singapore VCC creating new opportunities for asset managers looking to unlock ASEAN markets?

Feng Fumin, Deputy Director at MAS provided an overview of the Singapore funds landscape and share insight into the development and detail of the VCC framework.

Mark Voumard, Founder of Gordian Capital shared his own experience with the VCC structure and discuss its practical advantages.

Listen to the IQ-EQ podcast on

Transcript

Speaker name
Justin Partington
Spoken content

Welcome to the first edition of the IQ-EQ CFO e-Lab. As the private equity real estate and private debt industries continue to evolve, we understand that the role of the CFO is transforming into a more critical one than ever before and in these unprecedented times, CFOs are asked to act as the central hub to drive value and business performance by finding new ways to deploy innovative solutions that will bring operational efficiency, as well as help managing partners and CEOs steer the strategic direction of the firm by discharging their duties as forward-looking data keepers. With this in mind, we have designed a special program which will consist of a series of online masterclasses provided by industry experts with each master class in the form of a video. Topics such as the Singapore VCC, big data, ESG metrics, and best practices, and the methods of enhancing business performance through data management and measurement will all be discussed during the course of our webinar series.

Speaker name
Justin Partington
Spoken content

What differentiates this program from others is that for each session, there will be a technical expert alongside a private funds expert to share their knowledge on a particular topic. We hope that this format will allow you to have both the technical and practical sides of the theme discussed. For our first session. I'm very pleased to have Fumin Feng deputy director, the monetary authority of Singapore and Mark Voumard from Gordian capital, a key player in the Singapore fund industry. We will now discuss Singapore's VCC and how it is creating new opportunities for asset managers willing to unlock as young opportunities. You can submit your questions at any point and they will reply to your questions at the end of the presentation in 20 minutes from now. Without any further delay, I now leave the virtual floor to Fumin Feng have a great day and thank you for joining us. Good afternoon.

Speaker name
Fumin Feng
Spoken content

I hope everyone is keeping well during this period. My name is Fumin and I'm from the monetary authority of Singapore. Many thanks to the IQ-EQ team for inviting me and I'm very happy to be here to share my thoughts about the VCC framework with the audience.

Speaker name
Fumin Feng
Spoken content

So firstly I will discuss this is these key features and advantages for youth. By think about based on managers. I will also share the industry traction and use cases following the launch of the BCC framework in January this year and finally I will look forward into the future and discuss the next steps for MAS to enhance the BCC framework. Next. Now for the benefit of those in the audience who may not be familiar with Singapore, I thought it would be useful for me to do a quick introduction of Singapore's fund management and industry before getting into the discussion on the VCC framework proper.

Speaker name
Fumin Feng
Spoken content

Today Singapore is a leading pen Asian asset management hub with a strong base of nine hundred traditional and other than these managers based in Singapore. Collectively, they manage a total of three point $4 trillion or in U S terms, two point 5 trillion in assets under management. And over the years we are seeing very strong growth in SM management in industry in Singapore and in particular within the alternative sector, right weakness, double digit growth from 2017 to 2018. Singapore is also well positioned to serve global investors seeking a gateway into investment opportunities in Asia as a key finance distribution hub. 75% of the asset under management in Singapore, are sourced from outside of Singapore and in turn about two thirds of this AUM is then reinvested into APEC and emerging as yeah. Next.

Speaker name
Fumin Feng
Spoken content

So looking ahead to enhance samples, rather the proposition as a fund management and on the solution hub, we would like to support the industry's next phase of growth through the introduction of the verbal capital companies in short, VCC framework and then designing this VCC framework. We sought to study the best in class features across various jurisdictions and we've done features in the legislation that will meet the needs of sample based fund managers through the VCT framework. We seek to bring new business collaboration opportunities among fund managers together with their advisors and service providers and through this we seek to provide good jobs for the finance professionals in that industry.

Speaker name
Fumin Feng
Spoken content

And so what is a BCC in a nutshell? It is a corporate structure introduced for youth I investment funds. In other words it is currently only used as a vehicle for collective investment themes. The VCC framework. It's administered by Singapore corporate registrar. The, accounting and corporate regulation authority. ALCRAN. Next. In the next few slides I will discuss the key features and advantages of the BCC framework for use by Singapore based fund managers. Next. One of the key features of the VCC framework is that a VCC has available tactical structure and this means that VCCS are able to vary their share capital to facilitate issuance and redemption of hairs without having to seek shareholders' approval.

Speaker name
Fumin Feng
Spoken content

This in fact is a common feature in investment funds as it allows the investors to have the flexibility to subscribe and exit investments as and when they prefer. VCC is also flexible to pay dividends out of capital. This is alike companies when it is used as an investment eco as they can only pay dividends out of profits. Next, from the structuring angle, BCC is flexible to be set up as an open ended all tools and funds and therefore providing a suitable corporate structure for use by both traditional and alternative fund managers in Singapore and also to cater to the needs of global investors. BCC is flexible to allow the use of international accounting standards such as U S debt, or IFRS in addition to Singapore FRS.

Speaker name
Fumin Feng
Spoken content

Next, another key feature of the BCC framework. It's the ability for fund managers to constitute their investment funds as umbrella structures with multiple sub funds using a VCC. This will allow them to enjoy economies of scale and cost efficiencies through the use of a single board of directors and homeless service providers. For the various top funds, they are constituted under the same umbrella. Next, the VCC framework also provides enhanced safeguards for investors, firstly, the VCC act requires the assets and liabilities of each sub fund to be segregated such that the asset of one fund and not be used to discharge the liabilities of the umbrella fund all and not a sub fund within the same umbrella.

Speaker name
Fumin Feng
Spoken content

Secondly, to mitigate the risks or VCC being used for unlawful purposes. The VCC master point fund manager that is regulated by MES to provide supervisory oversight on the use of VCCS for investment funds. And thirdly, the VCC is also subject to AML CFT obligations in line with international standards. Next please from the tech angle, VCCs can enjoy fund tax incentive schemes and GST remission for fund managers managing and incentivize VCC fund. Their income may also enjoy a 10% concessionary rates. For fund managers under the FSI fund managers scheme. At this point, I'd like to mention that the VCC is treated as a company and a single legal entity and the application of this is that economic commitments applied at the umbrella fund level under the act or enhanced tier scheme.

Speaker name
Fumin Feng
Spoken content

Fund managers will also have access, to Singapore's extensive network of more than 80 double tax treaty agreements ETAs for their investments. Next, this is the act provides the redomicilliation mechanism for existing overseas investment funds constituted as corporate structures. Another two VCCS to be the, we did read all the South into Singapore SPCC and this will also allow fund managers to co-locate and consolidate their fund management activities with the our fund on the South in Singapore and at the same time minimize cross border compliance hurdles. Next please and as mentioned previously, the incorporation of VCCS and the registration of ESOP funds are met with ACRA. Next in the next segment, I would like to share more with the audience on the industry traction and the Davis initiative that we have introduced.

Speaker name
Fumin Feng
Spoken content

The visiting framework was launched in January this year with a successful completion of the pilot program in total, but these certificates were issued on day one of the launch of the VCC framework and these 30 VCC is comprised PVC hedge funds, ESG strategies among others. This demonstrates the flexibility and feasibility of the VCC as an investment fund vehicle or used by fund managers seeking to launch different investments, strategies and products for their clients. And in fact, it is interesting to note that there were five BCC funds which were made on the South from Cayman Bahamas and Mauritius. And this demonstrates the growing demand for one shot of the South such as and Singapore.

Speaker name
Fumin Feng
Spoken content

Next please. And fast forwarding four months after the launch of the VCC framework in January, we are delighted to share with the industry that we have now more than 50 VCCs incorporated with ACRA, including those anchored to the pilot program on day one of the launch of the VCC framework. And not surprisingly, most VCCs are constituted as umbrella structures to take advantage of the cost efficiencies and economies as mentioned by data. And in terms of the strategies used by this VCCS, they are actually quite evenly distributed across traditional and various alternative strategies such as PEDC hedge funds as well as wealth management strategies managed by multifamily process or excellent asset managers regulated by MAs in Singapore. And again, this demonstrates the fifth, the flexibility of the BCC framework to be used for different investments.

Speaker name
Fumin Feng
Spoken content

Next to capitalize early adoption of the VCC framework and may I have introduced the VCC grand scheme on the same day as the launch of the VCC framework on January 2020. The VCC grant scheme is intended to defray the costs of setting up VCCS and to lower the fund cost of performing due diligence on the new structure and the setting up of internal processes by fund managers. The VCC grant scheme were extend, 70% level of co-funding support for eligible setup expenses such as legal, tax, administration as well as regulatory compliance services. The overall grant per VCC is subject to a cap of $150,000 Singapore Dollars and each manager can apply for up to treat that all registered VCC and by registered a mean speed on the Southeast and the scheme will be available for three years from the launch of the VCC framework in January this year. So I do a urge managers well currently thinking about setting up new investment funds, so actively consider the VCC framework.

Speaker name
Fumin Feng
Spoken content

Next. I've almost come to the end of my presentation. So I would like to share is that the VCC framework Is a good starting point for fund managers in Singapore and we are very happy by the strong traction TASFA. So MAS will be very happy to continue to hear industry's feedback as we look to continue to enhance the VCC framework going forward. In fact, one such feature that we have already heard feedback from the industry is that some fund managers, which has their investment funds constituted as companies or unique trusts are keen to be converted into VCCS and another example is the interest from exam managers such as single family office. To use the VCC framework.

Speaker name
Fumin Feng
Spoken content

So MAS will collate these feedback and explore, you know, the conversion feature as well as the widening of the scope of permissible fund managers to potentially include exempt entities in the future. And also looking beyond the VCC framework being used for as a CIS collective investment scheme. We know that the concept of protected cell structures may also be used for other specialized purposes. For instance, um, in insurance products, Autotraumatization activities, so MES, will also study the visibility of these new use cases going forward. I've now come to the end of my presentation. Thank you very much for your attention and as a handle at a time to Mark. Thank you.

Speaker name
Mark Voumard
Spoken content

Okay, thank you Justin for your kind introduction. Thank you to IQ-EQ for inviting me to speak today and thank you to the audience and participation and I hope you're all well and Fumin is always a hard act to follow. But I'll do my best today. I'm going to look at five issues on who we introduce our firm, compare some of the key fund domiciles, talk about our VCC journey, uh, cover a number of the protection savings schemes and um, but if I went to the VCC and it goes through a few you VCC punch directory examples. So I'd like to introduce our firm.

Speaker name
Mark Voumard
Spoken content

So on a personal note, I've been living and working in Asia since 1983. Uh, as you can see, Gordian capital has a 15 year track record, uh, establishing and operating over a hundred funds and for a wide range of clients and across most public and private alternative strategies and key domicile jurisdictions. We have two key offerings. But today I wanted to highlight, our fund solutions. This offering is of interest to those managers, limited partners and corporate space outside Singapore and the family offices everywhere. As a permissible fund manager, we establish operate, Mmm bespoke investment vehicles such as closed end and opening the VCCS, the client's seeking to purchase private assets in Asia. Right? The tax efficiency of what domicle ontrel structure. It's important to understand that we didn't invest in the funds, see the funds that we don't do planning for project capital, Northern Gordian capital funds. Thus removing any potential conflicts of interest. I've listed a few of our recent VCC mandates. At the bottom of the page you can find a longer list of our recent mandates on our website. Moving on to the next slide, which, okay, so here I've listed to three key onshore domiciles and Cayman. Whilst you're looking at the table, which you can also find on our VCC page on our website, I wanted to highlight the two business models that have evolved in onshore fund domiciles. The first one we call D M M that's a delegated management model. And in this model of management service provider companies, essentially Mancos act as a manager and delegate management of the fund to licensed regulated managers in other countries. In this model there are thousands of funds, but very few on short physical managers. This is a case of Luxembourg and Dublin.

Speaker name
Mark Voumard
Spoken content

Then you have the VIM the vertical integration model, so in this model, the actual manager is physically based in the fund domicile. There is no external delegation. The managers, regulators, and service writers, are all in the same on shore, locale providing substance and demonstrating control. In other words, per location. This is the case in Singapore. So although Singapore has always had the VIM model with unit trusts and corporate vehicles. Gordian capital canal offer a variation of the DMA model as well using the VCC. If you look at those three key, um, onshore domiciles on the table, they're all going to be able to benefit from three key points. The first one is taxing city schemes and allow the same or better tax outcome as offshore vehicles. Secondly, well-established, highly regulated, onshore service provider network, and third, a domicile that ticks the boxes for the growing number. Global institutional investors that prefer on shore hubs. In the case of Singapore in particular, I'd like to highlight the six points firstly it's a well-regarded as a legal and regulatory jurisdiction with the MAS seen as the gold standard of regulators in Asia, which reduces risk for the investor managers must be located in the jurisdiction to operate the VCC and they're also heavily regulated in a robust regulatory regime. Uh, thirdly, the VCC was developed over a number of years in heavy consultation with the industry. So it really reflects considerable input from all the key stakeholders and with a focus on the location, it has a greater chance of success. The MAS has a January grant scheme to defray cost associated with setting up a new fund structure. Fifthly Singapore is located in a dynamic region that's expected to see the fastest bounce back in economic terms from the COVID-19 global recession and in a region that's expected to show strong growth over the next few years.

Speaker name
Mark Voumard
Spoken content

Lastly, Singapore is a significant private banking center, Luxembourg and Dublin are not. It's ranked well ahead of Lux and Dublin in the global financial centers index. It rates highest of all the onshore centres ease of doing business and tops all the world banking metrics, that said. As long as Cayman and enjoys the support of the key US managers and investors, it will continue to be the key player of managing offshore centres and I believe coexist and compliment the onshore hubs. Yeah, there are really two key challenges for Singapore, lack of familiarity amongst international investors and to agree to a certain degree managers and inertia. So let's move on to the next slide and talk about our VCC journey, how it's been for, for us. So for me, his cava destructure and some of the key features and benefits of the VCC, but from a manager perspective, why would it be of interest? You know, for us, I think what the VCC provides is three things, firstly choice. It allows for further options and what both managers and investors need when contemplating a fund structure is choice. If you're investing in Asia, why wouldn't you consider an Asian pulling vehicle? You already have a Cayman or Lux a GPLP structure, you could pair it with a VCC for your Asian assets. Secondly, vertical integration, as I mentioned earlier, the co-location of the fund, the fund manager, service providers, the regulator, all in the same domicile, the solict duplication of efforts, and they pulled the third point, which is lower costs. So Singapore based manager managing a Cayman fund, has to meet Cayman requirements in regards to KYC AML, MRLLO AML offices, meet the Cayman privacy laws, engaged both Cayman and Singapore council and so on as well, as well as having to replicate all that in Singapore.

Speaker name
Mark Voumard
Spoken content

So if you only have to worry about meeting Singapore requirements, the process and the ongoing costs, are much cheaper, what's sort of the key variables for fund managers to consider. But we've launched over a hundred funds in five of the factors that we look at when deciding a domicile include the investor requirements do investors require on shore, off shore, uh, what kind of pressure are they seeing from their underlying investors? Rigorous regulatory obligations, uh, will a fund require additional filings, approval from the regulator, ongoing reporting cost considerations. You need to look at both your setup costs and your running costs. So the MAS has a generous grant, they cover much of the setup costs. As I mentioned, Eearlier. But in terms of operating costs Cayman and Singapore are now about the same. The VCC will become cheaper every time there's more vehicles of launched. However, the cost in Cayman would likely increase given the increasing substance requirements tax where it's relevant, especially in the case of private assets. It's all about structuring and lastly excess the excess to various passporting schemes allowing Asia, they're still nascent in terms of the investor reaction. So far so good at first VCC is an umbrella fund that uh, invest primarily in Asia, listed equities within the ESG focus. And the choice of Singapore was actually driven by initial investors who are all Asian family offices and we're very comfortable with Singapore and understood the structure very quickly. The client is a Hong Kong based manager. that will eventually, and in a few years set up in Singapore, at which point we will live at the fund the cross to them. A second. VCC is a standalone VCC fund that invested in the private equity. The client is a two point $5 billion a us space manager investing wire via a Delaware limited partnership into the VCC.

Speaker name
Mark Voumard
Spoken content

They wanted an Asian based vehicle to hold their Asian assets because the investors already pooled at the Delaware level. And all take the same exposure to the underlying asset. there was no need for an umbrella, rather a standalone VCC was selected, so clearly Asian investors had the most knowledge of an experience with Singapore, so that'll be the first movements here and UK investors are familiar with, ICAP and seek out structures and appreciate the comfort of another onshore locale with substance for the Asian assets. Alternatively, they can pull assets at the EU level and invested in the VCC. As for the U S investors, I think if you build a better mouse trap, they will participate. Different private assets. I think investments for some time at least will be via a limited partnership which they know well and which will feed down into the VCC. In terms of our VCC journey, the process took us no longer than a typical fund launch, so about two months, uh, for those familiar with a C CAB or I CAB or protect itself company in Cayman. The VCC umbrella concept at least is it's quite similar as part of the product program or the first 20 funds. We had access to the near final draft constitutions and on the documentation as well as being able contact the MAS for clarification, which was very helpful after the initial 20 VCCS. I understand now the 21 had been established and as a pipeline of another 40 or so. So with 81 VCC funds within the last three months, Oh, there's a lot of knowledge that has already been spread amongst the service provider community. Singapore tax is very critical. So let's talk about that. Let's move on to the next slide.

Speaker name
Mark Voumard
Spoken content

So let's cover the three Tax incentive schemes. The two relevant tax incentive schemes at the top, are the 13 hour and the 13 ex. 13 are for Funds with a commitment from investors of less than 50 million Singapore dollars and 13 ex is for those with a commitment of $50 million. Seeing or about both require an annual minimum span of $200,000 and this span can include legal and tax fees, management fees, audit admin, corp sec, and so on. In the case of private investments. Currently in the case of a Singapore corporate structure, each SPV requires a spend of 200,000 Sing, so a corporate vehicle with 4 SPVs would require combined annual spend of 1 million Sing with the VCC. Once a total spend on the umbrella and any existing, sub funds exceeds 200,000 dollars Sing in total. Then the entire structure and each sub fund also subsequent sub funds are covered and are eligible for the 13 out of the 13 ex, so that's a huge cost saving as well as refinancing the assets. The end result is it's specified income, which includes capital gain, dividends, interest income from designating investments, which are most asset types except where real estate is held directly is exempted from tax. What about the GST remission scheme? So a 7% GST is charged on all services provided to the VCC in Singapore. This includes legal and tax fees, management fees, audit, I mean I hope they can sell it. The GST remission scheme, which is applicable to VCCS allows for typically 88% of the GST charges to be reimbursed or VCC resulting. The VCC pay 12% of 7% or an effective tax GST of about 1%. Lastly, the double taxation agreements, the DTAs needless to say these can okay produce significant costs of income savings, boosting IRS and funds. However, the key requirements, are threefold a treaty needs to be in place and Singapore has 87. ETAs the most in the world. I need to be able to demonstrate economic substance and management control in the country where the vehicle is domiciled, which is a core focus as I'm sure many of you are aware of BEPS. Action six. And lastly, the vehicle needs to be in a corporate structure which the VCCS and we expect the VCC to be eligible for DTAs. So let's move on to the next slide and look at a practical example.

Speaker name
Mark Voumard
Spoken content

Okay. As you can see here, um, so to put together a basic fund ah fund structure, um, as you can see on the left hand side, the investor benefits. So typically investors will not pay tax in Singapore and if there's a fee to fund above the VCC, which will be common in the case of private assets, the returns will simply flow from the VCC to the feeder and onto the investor. The investors enjoy the same tax outcome as an offshore jurisdiction, but it's onshore, which provides a substance. US investors in particular can check can elect to check the box, the U S tax purposes. There's no withholding tax on dividends paid out of a VCC. And didto for interesting. Come pay too. Onshore investors, you look at the bottom right hand side of the chart in terms of the sub fund benefits, 39 of the 30 X tax exemption schemes that I mentioned that's applicable to each. Sub fund. There's a single application made for the umbrella and once it's approved, you just need to notify the MAS each time you put out a new, the new sub fund. In terms of tax returns as a single tax return, uh, you can apply for a certificate of residency, a COR, and that obviously assisted DTA DTA applications and the GST remission scheme, as mentioned. Looking at the bottom there where you see the first, Mmm. The first PE investment one, obviously that has access to the tax agrees. Let's move on to the next slide too. Talk a little bit about the structures, the key structure. So there are four key variations of a VCC structure. The first one is open-ended standalone VCC, enclosed and standalone VCC. Then you have opening to umbrella VCC closed end. Well, the VCC, uh, you can have master fetus structures feeding of the VCC. These could be by unlimited promise shifts and Cayman, Delaware and Luxembourg, Dublin, Singapore. It's also quite flexible so you can create parallel structures, double-decker VCCS path through structures. So let's move to the next slide and look at a couple of structures.

Speaker name
Mark Voumard
Spoken content

So this one is an open ended standalone VCC fund. This one invests in listed equities. We've added the typical service providers on the left and the regulative manager on the right. Uh, they were appointed via any of management agreement or the manager may appoint an external's non Singapore based licensed regulated manager as an investment advisor if they choose to do so. There are many possible investment investor types where they typically fall into the direct and indirect bucket. And as you can see, I've listed a few here. I investors direct invest directly into the fund via a subscription agreement, which subsequently they invest into the selected equities. Moving on to the next slide. The next example, this is a closed end standalone VCC fund. So essentially this is a master feeder structure investing in Asia, private equity, private equity assets. It's identical to the prior example, but in this case we've simply added a GP and a limited partnership above it. We understand and acknowledge that a number of global investors at this stage prefer to invest in a limited partnership for you're familiar and comfortable with it. I mentioned inertia earlier by combining the GP GPLP with the VCC managers and investors can access the benefits of the VCC, but via familiar and preapproved legal investment structure. This allows the VCC to play a complementary role to existing structures you may already have. Moving on to the last slide and another diagram here we have, this looks a little more complicated but all we've done is add some more, sub funds and some other partnerships. This is an umbrella structure. This is a closed and umbrella structure. So here, the manager can offer the investors the optionality and being able to, in this example pick and choose which sub fund which set of investments they invest into. They can be significant cost savings.

Speaker name
Mark Voumard
Spoken content

By using an umbrella structure due to the economies of scale. Please note here the board of directors, it sits at the umbrella level, not at the sub fund level and each sub fund needs to qualify as a CIS. So lastly the VCC is here, a good number have launched despite the current economic environment. So we have proof of concept so please consider the VCC when next looking at fund structures, especially if your assets in Asia. So I think now we're going to move across to Jimmy and Fumin who will join us in the Q and a

Speaker name
Jimmy Leong
Spoken content

Great. Hello everyone. I am Jimmy Leong. IQ-EQ's chief commercial officer for Asia. Thank you very much again Justin for the introduction and thank you Fumin. Thank you Mark. Interesting presentation. We will now move on to the Q&A sessions. Um, I would like to remind you, um, that you can ask questions using the questions tab found on the right site, the right hand side of your screen. Okay. I would like to direct, um, let's have a look. It looks like we have a few questions. I would like to first direct the first question to Fumin. Mmm. So Fumin, uh, the first question is from the Singapore perspective, we understand that there are existing structures such as Singapore, private limited unit trusts and limited partnership that's available today. So what are the benefits of the VCC structure over these existing structures? And as a follow on question, can these structures be converted or restructured into VCC?

Speaker name
Fumin Feng
Spoken content

All right, thanks and thanks Jimmy asking this question. Just kick off by saying that, you know, the VCC framework that is a bespoke investment fund structure, which MES and Accra introduced to compliment existing investment structures available in Singapore. They need a company structure, unit trust and LPB Jeeps. So these are currently available for use by sample based fund managers. Okay. As a corporate structure, the VCC is actually intended to overcome the limitations of the company structure when use asset investment fund. So as I mentioned earlier, you know, they are um, specific, you know, limitations for the companies when you use an investment fund to date the very just capital and therefore unable to facilitate sufficient redemptions at a time that the investor would request for and it also cannot pay dividends out of. And as such, the use of the VCC framework would therefore, you know, overcome this limitation. As for unit trust and LPs, these are non-legal entities and therefore they are not able to assess the imposs extensive tax speaking network. Well that investment as Mark has addressed suggested earlier. So beyond that, no, I would just like to also mention that the features of the VCC framework is that you know, the power of the structures that are available in leading fund jurisdictions and it is actually flexible in that it can be structured as both, you know, open and close. End as well as a neat investment, uh, destination and not Gnostic, you know, across different ethical scope as well. So none of the fact that he has good traction in the industry so far has demonstrated its popularity among a sample base fund managers including all the capital.

Speaker name
Fumin Feng
Spoken content

Right. If we got to be on a second question with respect to whether, you know, structures can be converted or restructured as a BCC today, uh, I'd like to mention that, you know, on our end, uh, MEST is considering introducing a legislative reaching for a conversion. Um, but you will have to study this, you know, for the, uh, the first spectral company is probably easier because you're converting from legal entity to another legal entity SPCC but with respect to say unit trust and LPG, you need a bit more time to study this possibility, right? And in the meantime, but the fund managers tend to, uh, would be to work with their lawyers. You got to consider a potential corporate restructuring mechanisms such as mergers, if they're not between that assisting fund with Daniel, the set PCCs and transfer the assets.

Speaker name
Jimmy Leong
Spoken content

Great. Thank you. Thank you for coming. Um, the second question, I would like to direct that to Mark. Um, Mark, the question is VCCS are flexible to be used for open-ended funds and, close ended investment funds and for both traditional and alternative private equity PE strategies. So can I first invite you to talk about, uh, comparable structures in Luxembourg and Cayman? And in particular, elaborate how the VCC structure, for example, close and the umbrella funds for private equity, you know, comparison with the lust seek AF Luxembourg, seek AF. And it came in SPC. It does that. Yes, please.

Speaker name
Mark Voumard
Spoken content

Okay. Do I have an hour? Okay. Let's maybe talk about, let's talk about the similarities between the VCC. Mmm. A Luxembourg rave kind of came in umbrella structure then looked at then was look at the differences. So first of all, in terms of illegal form, uh, all of them are single legal entities. Uh, all of them have some funds with segregated assets and liabilities, but they have no separate legal personality. Uh, the, some funds in each case, I believe, maybe wound up, uh, different classes have different, Shea is gonna have different, different rights in terms of insurance, in terms of incorporation. They all essentially register with a local company register. Uh, there's no regulatory approval, uh, arrived. So they're all very flexible across some fund investments are committed in Singapore and Luxembourg, but I believe came and had some restrictions. There's no restrictions on any investment strategy in Singapore and Cayman. But in Luxembourg, I understand there's a diversification requirement where I think you can already have a maximum of 30% in one in one to show up. Uh, in terms of amendments to the, uh, to the actual, uh, vehicle. Uh, there's no need for MAs CCSE SSF or a seamer approval requirements, but he came in there some finding requirements for registered funds. Yeah. I think you have to follow the register every time. You don't want your new and new sub funds. Um, in terms of the sort of differences, let's look at approval versus registration. So in Singapore you registered with, uh, ACRA Oh, there's no approval. Mmm. Required. You know, and if we comparing a race and a sick of and an SPC here, let's put that to one side for a moment and talk about maybe use, it's just just for a second. So the big advantage is the open-ended VCCS.

Speaker name
Mark Voumard
Spoken content

Again, you don't need that regulatory approval, whereas where they use it, I understand you do. And it can take a very long time. Getting back to the beginning, back to a question. So in the case of a Luxembourg rife, there's no CCF approval required. Mmm. But they do have to notify the regulator or the fund manager in the country, which they, which they, which they based. All right. In terms of Cayman, I understand this registration required for some, uh, open-ended funds out of the mutual funds law. Uh, and the summary illustrations. Many of you will know, I recently introduced, uh, for certain closing funds out of the private funds for in terms of the timeframe. Um, the VCC typically from accurate takes about 14 days from the date of submission well documents and incorporate the VCC. I suspect that will speed up over time. Uh, Luxembourg is faster, one to three days, a business stays incorporation and then you've got another five to 10 days to sort of register the, the uh, the fund came in about five to 10 days a business registration. So I think everybody's a little bit longer at the moment, but I suspect that's because Acura is really just getting started with this person. Uh, motor constitutions in Singapore. It's interesting. The, uh, industry illegal legal industry worked with the Singapore Academy of law to put together a model constitution for both open-ended closing funds. Uh, and they are openly available on that website. We have that on our, on our BCC website as well. Uh, I don't believe in Singapore, Luxembourg concentrations are available. Those are the directors. Uh, in each case you've got to have more than one director. In the case of Singapore. It's interesting. The director must be, it must be, I'm a Singapore resident and they also must be a representative director of the manager and they must be fit and proper in Luxembourg. Uh, I don't believe there's any residency requirement, but they are required. Um, but it's recommended that I think that they're, that they're a Luxembourg resident. There's no fit and proper requirement. Mmm [inaudible] if it's a non-regulated SPC, you can have one director. If it's a mutual fund, then typically you'll, you'll have to, and there's no reason as your climates in terms of, um, the manager. Lastly, in terms of the manager, the VCC must appoint the manager. The manager must be regulated by the MAs, licensed or registered. They cannot be an unregulated exam to a foreign licensed trial manager. Um, in Luxembourg I believe the seek out the points, the manager, um, and they've got to be, and the, and the actual manager that runs the fund has got to have an AFM in, in one of the EU as States. Whereas I believe in came and there's no, there's no sort of obligation to a point. Well that's, I mean I can talk for a long time, but they have a sort of key differences between, between the three.

Speaker name
Jimmy Leong
Spoken content

Thank you. Thank you for that Mark. Perhaps the next question. Um, I would like to, um, ask Fumin, um, there's a question on is whether the VCC structure is the VCC structure only for funds and investing in Asia. So if my fund mandate is to invest outside of Asia, how can I still use a VCC structure?

Speaker name
Fumin Feng
Spoken content

Right. Uh, I think first and foremost what's mentioned that there is no restriction with respect to the investment destination of the VCC fund. But I would like to also, you know, uh, ask the fund manager to consider, you know, that investment or that investor these as well because they're so their requirements if a fund is distributed to retail, uh, you know, scope as, uh, as opposed to distribution to the AIS. So, uh, no, well there is no restrictions, you know, that it could be set then requirements, they'll follow the quit, uh, investments. Oh, the dentist go off authorized scheme for me too. Otherwise there wouldn't be any investment.

Speaker name
Jimmy Leong
Spoken content

Okay. Thank you. Um, perhaps another question, um, coming from the audience, um, for Mark. Um, so the question around income stream is as follows. So if the VCC has, for instance, to sub funds, can a decisions in respect of distribution be undertaken on us on a specific sub fund basis and for example, uh, would it be permissible or sub fund a to declare dividends [inaudible] B it doesn't. So in that regard, um, you know, to request your comments on the falling situation, um, if someone a has profits of say a hundred dollars and uh, so fund B has a loss of greater than a hundred dollars such that on an aggregate basis, the VCC does not have any profits. So can someone, a students declare a dividend to its to its shareholders?

Speaker name
Mark Voumard
Spoken content

Okay. All right. So the answer is yes. Uh, that's really the whole point of segregating the assets of each song fund. So each of which has a certain separate nev. So you have 10 cell phones, you have 10 navs. In the current corporate structure, uh, it wouldn't work really because the directors have to declare, uh, the solvency of the entire collective assets of the fund on an annual basis. And as you know, dividends can only be paid out of profits, but in the case of the VCC, uh, HR is segregated. I can pay dividends or capital. If you look under the VCC act, I believe it's in section 29, um, that's, that talks about the, um, the ring fencing in the, um, in the VCC. So they answered the, the short answer is yes.

Speaker name
Jimmy Leong
Spoken content

Okay. Thank you. Um, I'd like to direct the next question to Fumin. The question is considering that sub funds are not themselves legal counterparties, but I'll, but are only segregated accounts any and all agreements will be entered into by the VCC and not the sub fund directly. Please confirm assuming that just as the case, how will external kind of parties be made aware of, of which sub fund the contract pertains to?

Speaker name
Fumin Feng
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Yeah. Uh, and now I would like to say that the understanding is correct. So basically agreements can innate in the name of the VCC umbrella on behalf of the rest. So let me call it, you know, section 13 of the VCC subsection one. Where an umbrella VCC must set up, you know, the following in every agreement, you know, for example, this is letter, statement of accounts, uh, invoices, et cetera in the each. Any of it's sub fund is mentioned a tool, elaborate the name of the fund, firstly. Secondly, to mention the registration number of the sub fund, which is provided by Archrock during the registration process and the fact that the assets and liabilities of the stock funds, I segregate that all within the same umbrella in accordance with section 29 of the VC. So, so the short answer is yes. And the Anderson case. Right.

Speaker name
Jimmy Leong
Spoken content

Thank you for that for Fumin. Mmm. To the next question from the audience, um, uh, to Mark, uh, Mark does, does this grant the MAS grant, um, um, I mentioned, uh, does it cover costs involved in changing the fund administrator from say Luxembourg to Singapore when redomiciling?

Speaker name
Mark Voumard
Spoken content

okay, that's a good question. I'll throw every two Fumin actually, cause he's, he's in charge of the grants. No, it's, it covers the, you know, the legal costs and, and the, a due diligence costs, et cetera. It'd be legal and tax to set up the structure. Yeah. But I'll pass it. To Fumin.

Speaker name
Jimmy Leong
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Fumin would you like to comment on.

Speaker name
Fumin Feng
Spoken content

and the very intention of the VCC grant scheme, you know, this is intended to help our managers defray some of the costs, but maybe you know that, you know, the cost must be condensed. So in other words, you know, for any cost that is incurred by the fund administrator instead of salt. No, it's setting out of the VCC structure. Having a fund manager, you know, uh, put together, you know, this new VCC platform. Uh, and then the answer to the question is yes.

Speaker name
Jimmy Leong
Spoken content

Okay. Thank you. Um, a separate question for Fumin. Um, do we anticipate, that the AMS will allow, single family offices to modify as permissible fund managers, UCC. And if so, how soon would that be?

Speaker name
Fumin Feng
Spoken content

Okay. I mean, as I mentioned in my presentation earlier, we are in the midst of considering the potential widening of the scope of permissible fund managers to possibly include other entities, including single family office. So I will not front run the discussion because they are separate aspects that we have to consider. Firstly, the fact that, you know, we have to consider the, at AML CFT of investor to that of why we have introduced the permissible fund manager to oversee the investment fund vehicle. That itself is something that we will examine in closer detail as to how we can mitigate such risks via other mechanisms easily will allow the widening to the other exam classes. In terms of timeline. You know, we will also need to consult with the industry as well, uh, and potentially demonstrate, you know, sort of pipeline of things and the officers who are very keen, you know, to be, to come on board to use at VCC going forward. So I think even the industry demand and on our end, uh, assess title, assess the risks, you know, because we can look to two words sometime hopefully in the near future or to weave this into the legislation in VCC lifecycle.

Speaker name
Jimmy Leong
Spoken content

That would be fantastic. And I'm sure everyone is looking forward to that. Uh, um, another question has come in, um, uh, perhaps for Mark. Um, this is with regards to from an onshoring and co-location perspective and in view of economic substance requirements, how does a VCC fulfill those requirements?

Speaker name
Mark Voumard
Spoken content

Okay. So I think that's really talking about BEPS action seeks a principle purpose test. Um, you know, it's interesting, nearly every country in Asia, uh, is a MLI seeing the tree. Uh, I believe the Philippines, Thailand, Vietnam, and not, uh, but that's under negotiation. Uh, all of them focused on treaty abuse except the Philippines. Uh, and many have taken actions, uh, including Australia, China, uh, India, Indonesia, Japan, Korea and New Zealand and Singapore and in Vietnam. Um, so in, to sort of answer your question, you know, but I guess the key point is the VCC must be managed from Singapore, um, by a single base license regulator, manager. So that's probably the biggest ticket box to meet the six because unlike lots of Dublin, the asset manager must be in Singapore. Well, the fund must be run by an asset manager in Singapore. Uh, in terms of sort of what we, we, we focus on in a board meetings. Um, they obviously need to be held on shore. Uh, you know, majority of single residents, a non resident directors are attended to, are encouraged rather to attend, uh, at least 50% of the board meetings in Singapore, in person, uh, investment committee meetings. I had to substance. Uh, we typically have at least four per fond. In one case we have 10, a detailed recommendations for the manager to the board of the BCC, which actually makes the final Mmm, uh, decisions in regards to investment investments. They should be detailed with deal packs, uh, and with all the relevant translate transaction related documents. Um, in terms of onshore substance, I did mention the 13 X texting Sydney scheme before. One of the key requirements in addition to the annual Spain is it you need to have at least three full time investment professionals working on shore with the manager. Um, so that really provides substance control. You know, the, the manager and in particular the board of the VCC. Mmm. Nate must be able to demonstrate of the investment investment decisions. Uh, the role of the support about the role of the permissible fund manager. Again, you know, the permissible fund manager based in Singapore can, uh, delegate some activities to the offshore manager or advisor or GP, but critically they need to be licensed or regulated and prison in Singapore. In terms of MAs beside Mmm. You know, the AMS doesn't directly license the offshore manager. So the manager of the sec, again, I must be on shore and licensed by the MTSS, creating additional additional substance. So, you know, if I look at sort of other, um, I'll show you the optional jurisdictions came in, for example, they're a given the growing number of, um, the requirements to, to have that presence in Cayman. There are a number of service providers providing a solution in Cayman for example. I would, that tends to be perhaps more [inaudible] type solution. Um, but I wonder how long that will satisfy the OACD and the you, uh, cause it's not a manager per se. It's actually essentially a coop sec type type service.

Speaker name
Jimmy Leong
Spoken content

Okay. Thank you. Um, perhaps a follow up question for Fumin on that, on co-location. Um, so for men, you have mentioned, um, the, the use cases of, uh, regional association of investment funds from other jurisdictions, um, such as Cayman Mauritius Bahamas. Um, so the first question is, so what are the comparable structures that can be read almost all as a VCCS. And the second question is, how does that re demonstration process actually work? If you got to share some of your views on that, that'd be fantastic. Thank you. So,

Speaker name
Fumin Feng
Spoken content

uh, in terms of comparable structures, the criteria is simple. It's essentially an investment fund, uh, which is a body corporate tasting corporate that's outside of Singapore. And that is a collective investment scheme. In other words, this has to be an investment fund. We get this. So at samples of foreign corporate entities that can be done myself to VCs, to Singapore VCC would include, you know, Caymus Sigma data portfolio companies came and SBCs and through pilot program. No, we have also seen, you know, Bahamas start as small as smaller companies being, we don't sell. So the, the possible, uh, scenarios that allow for this carpet, a foreign corporate entity to [inaudible] would be from a foreign umbrella fund listing up all VCC umbrella fund, cool. A foreign non umbrella fund to a standalone VCC in the event that you know, a foreign non umbrella fund that intends to set up a VCC umbrella, you know, that scenario could be done as well, but perhaps you know that in a two step process first of which is to. [inaudible] the foreign non umbrella fund into Singapore as a standalone PCC and thereafter, you know, form an umbrella with a single supplier. So that process can be done. Right. And uh, as to the second question as to how the redomiciliation process might work. Um, I think the first question that the fund manager has to ask themselves would be no. Whether that foreign corporate entity is authorized to transfer out, no. His registration under the existing laws of its current place of incorporation. Alright. And, uh, if, so the next thing that, you know, the final comprehend that you would have to consider is to conduct a name search on across website and if the name is available, you can proceed to submit an application to Accra via the transfer of registration, online form. So you know, upon approval by outcrop a pick and roll. So received the notice of concern of registration from Accra and it will be registered as a VCC in Singapore. But the process, uh, you know, may not have ended at this point because the fund manager will have to follow up, you know, with the foreign, uh, jurisdiction to deregister. It is existing fund, uh, from the, uh, jurisdiction is outside of sample and there are the two submit a document evidencing the D registration and its place of current incorporation within 60 days after the geography situation with CRA. So if more time is needed, you know, um, if they can apply to Accra, not to extend the timeline as well.

Speaker name
Jimmy Leong
Spoken content

Okay. That's great. Thank you. Um, there are a couple of questions and I, I'm, it's on the same topic. I'm going to throw that at Mark. Um, this is, um, as a, from a fund manager, a manager perspective Mark. Um, so is there a minimum requirement of, uh, investors in each sub fund within the VCC structure?

Speaker name
Mark Voumard
Spoken content

Okay, sure, sure. Well, I mean, I will ask Fumin to help me a little bit on this one, but the key to understand is that each sub fund is a collective investment scheme. It's open to any number of investors, but it must be, uh, the constitution and the, the, the appendix, which is typically prepaid for each sub fond, essentially a mini mini OAM OPPM, um, must make it clear that as a collective investment scheme, as, as to whether there's an actual specific minimum number. I will pass that to Fumin. But I will say it as a collective investment scheme open to all investors.

Speaker name
Fumin Feng
Spoken content

That's right. So, so, uh, you know, we, we think that in so far as the investment fund is structured, uh, as the investment fund that qualifies under the requirements under this year S uh, cool. You know, we can allow that to do access as an investment. Thank you. I'll be talking to the athlete advisors.

Speaker name
Jimmy Leong
Spoken content

Sure. Um, so I guess unfortunately, uh, due to the time limitation, we have quite a lot of questions that we were not able to address. Uh, we will, however, you know, follow up on those questions offline and we'll definitely be in touch. Yeah. So ladies and gentlemen, thank you. We have come to the end of our session. We hope that it has been very educational, uh, with two experts on the panel and very informative for everyone. Um, um, so on behalf of IQ-EQ, uh, MAS Gordian capital, thank you for joining us today and it has been a pleasure and I wish you a very pleasant day ahead. Thank you everyone. Thank you. Thank you. Thank you. Thank you very much. Thank you.