Singapore VCC vs Mauritius VCC

VCC is a type of company that allows the creation of sub-funds (and/or SPVs) within its structure and in some aspects is similar to an ‘umbrella’ fund structure.

In this analysis we will compare the regulation of VCCs in Singapore and Mauritius based on the following criteria:

1. Legal personality of sub-funds;
2. Types of sub-funds available;
3. Regulation of VCCs’ fund managers;
4. Regulation of investors and commitments; and
5. Tax treatment of VCCs.

1. Legal Personality:

The first difference between Singapore and Mauritius regulation of VCC relates to the legal status of sub-funds. While Mauritius law provides for the possibility of VCC’s sub-funds to have separate legal personalities, Singapore law provides for a ‘quasi’ separate legal personality of VCC’s sub-funds.

This ‘quasi-legal personality shields assets of VCC’s sub-funds meaning that each sub-fund can be liable only for its own debts and assets of a particular sub-fund may not be used to cover obligations of another sub-fund created within one VCC,

In fact, this ‘quasi-legal personality is also present in Mauritius law and comes as a default option for VCC’s sub-funds. However, under Mauritius law sub-funds may accrue ‘true’ legal personality by way of incorporation as a company.

2. Types of sub-funds:

There are no restrictions with respect to a type of fund that may be used as a sub-fund of a VCC. Both Mauritius and Singapore law allows the use of VCC for open-ended and closed-ended funds, including Hedge Funds, Private Equity Funds, Venture Capital Funds, Real Estate Funds, and others.

However, compared to Singapore, Mauritius law allows the creation of ‘sub-funds’ to perform the functions of a special purpose vehicle (SPV).

3. VCCs’ fund manager

As a general rule, fund managers of VCC (in both Singapore and Mauritius) should be regulated.

In Singapore, there are two options available for a fund manager. The first is to get a Capital Markets Services License (CMSL). The second is to register as a Fund Management Company (RFMC). However, the RFMC option is available only to those fund managers who provide its services to no more than 30 qualified investors, and assets under its management do not exceed S$250 mln.

Both options oblige fund managers to have base capital in an amount not less than S$250,000, employ 2 persons with at least 5 years of experience in fund management activities and be subject to other obligations. However, some of these requirements are relaxed in relation to fund managers of Venture Capital Funds.

Furthermore, Singapore law provides that VCC should have the same fund manager for all its sub-funds.

In Mauritius fund managers of VCC should be licensed, unless the Financial Services Commission gives approval to a company to be self-managed. The licensing criteria are less onerous, compared to Singapore’s, and include a minimum capital requirement of MUR 1 mln (around USD 22,500), professional insurance, and others. Furthermore, Mauritius law provides for the possibility to appoint different managers to different sub-funds.

4. Regulation of investors and commitments

The maximum (or minimal) number of investors and amount of commitment will depend on the type of fund that is used as a VCC sub-fund.

In Singapore, there are two main regulatory regimes of collective investment schemes (CIS, ie. funds).

The first concerns Authorised CIS (domestic) and Recognised CIS (foreign). Such funds have no restrictions on the number of investors and/or amount of commitment, but a heavily regulated and among others require authorisation by a regulator and registration of prospectus.

The second relates to Exempted and Restricted CISs. Such funds do not need to be authorised and to register prospectus. However, in order to get such status certain conditions should be met.

For a Restricted CIS, the offer of such funds units must be made only to accredited investors (or companies/trusts owned by accredited investors) or on the terms that a minimal investment in a fund is S$200,000.

For an Exempted CIS, the offer of its units should be made only to institutional investors or to no more than 50 persons within 12 months. Furthermore, it is also possible to qualify as an Exempted CIS in case offer of fund’s units is personal and total amount raised does not exceed S$ 5 mln.

In Mauritius, the general rule is that funds should be authorised by a regulator, before they may operate. However, certain types of funds (Professional CIF and Expert Fund) are exempted from authorisation requirements and certain other obligations.

Professional CIF requires offering of shares only to ‘sophisticated’ investors or as a private placement. Expert Fund also requires all investors to be ‘sophisticated’ or to make a minimum investment in the amount of USD 100,000.

Mauritius law also provides for a Special Purpose Fund which is tax-exempt. Special Purpose Fund requires authorisation and should satisfy following criteria: it must offer shares solely by way of private placements, have a maximum of 50 investors and a minimum subscription should be USD 100,000 per investor.

5. Tax treatment of VCC

In Singapore, VCCs may apply for a tax exemption under two grounds – Singapore Resident Fund Scheme and Enhanced-Tier Fund Scheme.

For both grounds, there should be annual local business spending of at least S$200,000 and for Enhanced-Tier Fund Scheme, the size of a fund should be S$50 mln. or more. These conditions apply to a VCC as a whole, taking into account all its sub-funds local business spending, and sub-funds sizes.

The difference between these two schemes is that using Singapore Resident Fund Scheme poses a risk of penalty for non-qualified investors participating in a VCC.

In Mauritius, as a general rule, VCC and sub-funds are not tax-exempt but may rely on partial tax exemption. However, in case a sub-fund is formed as a Special Purpose Fund it will be tax-exempt.

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