Variable Capital Company (VCC)

Why in news?

Dr. K.P. Krishnan committee on “Variable Capital Company” has submitted its report to International Financial Services centres Authority (IFSCA) regarding feasibility of Variable Capital Companies in International Financial Services Centres in India.

Background

IFSCA had set up K.P. Krishnan committee to explore potential for allowing variable capital company (VCC) as an additional option using which asset managers could pool investors’ funds.

Variable Capital Company (VCC)

- It has been designed for fund management industry.

-Variable Capital Company (“VCC”) is a corporate structure that is tailored for collective investment schemes .

-Under VCC several collective investment schemes (whether open-end or closed-end) may be gathered under the umbrella of a single corporate entity .

-The new corporate entity structure gives an alternative to unit trusts, limited partnerships, limited liability partnerships and companies.

- VCC is its umbrella structure is that it allows the sub-funds to share a board of directors and have common service providers, such as the same fund manager, custodian, auditor and administrative agent.

Recommendations of K.P. Krishnan Committee

- The committee recommended to adopt a VCC-like legal structure to conduct fund management activity in IFSCs.

-Committee assessed features of VCC or its equivalent, in jurisdictions of Singapore, UK, Ireland and Luxembourg.

What is a collective investment scheme?

The collective investment scheme is a plan of action that comprises a pool of assets that are managed by the collective scheme manager and is governed by the Collective Investment Schemes Regulations given by the Securities & Exchange Board of India.