MAS issues circular on governance and management of variable capital companies

29 July 2025

On 26 June 2025, the Monetary Authority of Singapore (“MAS”) issued Circular IID 04/2025 on Governance and Management of Variable Capital Companies (“VCCs”) (“Circular”).

MAS carried out a thematic review of VCCs and their managers in 2024. The Circular highlights key observations from MAS’ review and sets out supervisory expectations and good practices for VCC managers in their governance and management of VCCs. While the Circular is premised on MAS’ observations of VCCs, the supervisory expectations are relevant to other types of fund structures where applicable.

MAS states that in general, based on the survey responses, a majority of VCCs and VCC managers met key regulatory requirements relating to the governance and management of VCCs. However, the survey responses also suggested potential areas where certain VCCs and/or VCC managers may not be fully adhering to regulatory requirements.

Key areas covered by the Circular include the following:

  • Custody arrangement: A small number of VCCs did not report having custody arrangements despite investing in certain types of assets that would require independent custody arrangements. VCC managers must ensure that assets under management are subject to independent custody, unless the assets are private equity or venture capital investments offered only to accredited/institutional investors.
  • Appointment of VCC manager and director: Some VCCs appointed additional directors who were not directors or representatives of the VCC manager to strengthen oversight and enhance the corporate governance of the VCC. Where such VCC directors are engaged in regulated activities, they must be appointed as licensed representatives of the VCC manager.
  • Substantive fund management activity: A small number of VCC managers were managing multiple VCCs that did not hold any assets and/or did not have any investors. This was despite the VCCs having been incorporated for more than a year. VCC managers should periodically assess and wind down VCCs that hold no assets and/or have no investors.

Another potential area of concern relates to instances where VCC managers do not carry out substantive fund management activity. This refers to cases where VCCs hold illiquid assets on behalf of a single investor or a few connected investors, and where these assets were previously owned by the investors. MAS is of the view that VCC managers who merely help transfer investors’ existing investments or assets into the VCC without providing investment inputs would not be considered as carrying out substantive fund management activity.

  • Anti-money laundering and countering the financing of terrorism: VCCs should continue to remain vigilant to money laundering and terrorism financing (“ML/TF”) risk typologies in the sector and take note of the key observations noted in MAS’ thematic review of the sector in 2022. In this regard, eligible financial institutions and directors of the VCCs should receive appropriate and regular training on ML/TF risk management.

Based on the survey findings, MAS is conducting supervisory reviews of specific managers and engaging these managers further to determine whether supervisory interventions or regulatory actions are warranted.

Reference materials

The Circular is available on the MAS website www.mas.gov.sg.