Binarystar’s VCC Structure: Key Benefits for Limited Partners

Singapore is a crucial asset management hub in Asia that serves as a gateway for global investors to access opportunities throughout the region. The country’s financial sector oversight is regarded as among the best globally, with regulators striking the right balance between promoting financial innovation and safeguarding financial stability.

In January 2020, a new corporate structure was introduced to attract more investment funds to domicile in Singapore and further strengthen its position as a global fund management hub.

At Binarystar Ventures, we saw this as a game-changer for asset management in the region. The VCC structure has several features explicitly tailored for investment funds, which offer us tangible benefits that flow on to limited partners choosing to invest in our fund.

Ultimately, as a registered VCC, we’re structured in a way that enables us to gain operational efficiencies and the highest levels of fund management excellence. That’s of great benefit for our limited partners who can be assured our back-office operations are organised, optimised, and held to the strictest regulatory standards.

What is a Variable Capital Company (VCC)?

The Variable Capital Company (VCC) is a corporate structure and legal entity specifically designed for investment funds. The structure can be used for traditional and alternative strategies, both on an open-ended and closed-ended basis. All VCCs are regulated under the Variable Capital Companies Act.

Although the VCC was primarily developed to attract investment funds to set up shop in Singapore, there are many upsides for limited partners investing in VCC structured funds.

Key benefits for limited partners

VCCs must use a Singapore-based licenced or regulated fund manager

VCCs are prohibited from being self-managed. They must be managed by a fund management company registered or licenced by the Monetary Authority of Singapore (MAS) under the Securities and Futures Act (SFA). As such, Binarystar Ventures has partnered with Ruby Capital PTE. LTD, a licensed venture capital fund manager that is regulated by the Monetary Authority of Singapore.

A VCC must safeguard its assets to an approved custodian

A VCC is required to safeguard its assets to a custodian unless exempted. The custodian must be an approved CIS trustee under the Securities and Futures Act and must comply with the CIS Code, which sets out custodians’ operational obligations.

VCCs have similar fiduciary duties as Singapore incorporated companies

As a VCC, Binarystar directors must adhere to similar common law fiduciary duties as the directors of Singapore incorporated companies. Our Directors have the following statutory responsibilities under the VCC Act:

• Maintain proper accounting books and present financial statements in compliance with IFRS, Singapore FRS, or US GAAP accounting standards.
• Ensure compliance with all requirements of the VCC Act.
• Prepare accounts and get audited by a Singapore-based auditor on an annual basis.
• Maintain specific registers and other documents.
• File requisite reports and documents with The Accounting and Corporate Regulatory Authority (ACRA) of Singapore.

The Board of Directors is also required to:

• Prepare, approve, and sign a report on the VCC’s current state for each financial year.
• Provide information on the VCC’s business development and performance and any significant events impacting the VCC.

VCCs are subject to AML/CFT requirements

As a registered VCC, we are subject to AML/CFT requirements, which are supervised by the Monetary Authority of Singapore. Furthermore, we are required to outsource the performance of AML/CFT duties to a fund manager and are ultimately responsible for compliance with its AML/ CFT requirements. VCC directors are also subjected to fit and proper checks and must have at least one director who is also a director of its fund manager.