Singapore’s Variable Capital Company (VCC) framework has matured considerably since its launch in January 2020. By mid-2026, over 1,000 VCCs had been registered with ACRA, making Singapore one of the fastest-growing fund domiciles in Asia. But with that growth has come increased regulatory scrutiny — and in June 2025, the Monetary Authority of Singapore (MAS) issued Circular IID 04/2025, setting out its supervisory expectations for VCC governance following a thematic review of VCCs and their managers. For fund managers setting up new VCC sub-funds in 2026, understanding what MAS expects — and what CALA 2025 changed — is now part of the setup checklist.

This article covers what fund managers need to know when establishing a new sub-fund under an existing or new VCC, with particular focus on the MAS circular and the VCC-related amendments introduced by the Corporate and Accounting Laws (Amendment) Act 2025.

The VCC Sub-Fund Structure: A Quick Recap

A VCC is a corporate structure specifically designed for investment funds. Its distinctive feature is the ability to house multiple sub-funds under a single legal entity — the umbrella VCC — while keeping each sub-fund’s assets and liabilities ring-fenced from the others and from the umbrella itself. Shares are issued by the umbrella VCC in relation to specific sub-funds, and investors in one sub-fund have no claim on the assets of another.

This structure is particularly attractive for fund managers running multiple strategies. Rather than incorporating separate fund entities for each strategy, a single VCC can host them all, reducing administrative overhead and (in many cases) sharing service providers and compliance infrastructure across sub-funds.

For a detailed comparison of the VCC structure against offshore alternatives, see our guide on VCC vs Cayman SPC. For an overview of the general advantages, refer to our VCC pros and cons guide.

What MAS Circular IID 04/2025 Requires of VCC Managers

MAS issued Circular IID 04/2025 on 26 June 2025 following a thematic review of VCCs and their fund managers. The circular sets out supervisory expectations and good practices across several key areas. Fund managers establishing new sub-funds in 2026 must ensure their operations are consistent with these expectations from day one.

1. Independent Custody of Sub-Fund Assets

For VCCs other than private equity and venture capital funds that restrict redemption rights, MAS expects sub-fund assets to be held by an independent custodian — not the fund manager or an affiliate. This is a hard requirement for retail and most accredited investor VCCs.

When setting up a new sub-fund, confirm the custodian appointment before the sub-fund launches. The custodian should be legally independent of the VCC manager, and the custody agreement should specify which sub-fund’s assets are being held.

2. MAS Licence Requirements for Directors Performing Regulated Activities

A significant clarification in Circular IID 04/2025 concerns VCC directors who carry out regulated activities. If a VCC director undertakes deal sourcing, investment research, portfolio management, trade execution, or client-facing business development for the VCC’s investments, MAS expects that director to be appointed as a licensed representative of the fund manager — not merely as a board director.

For family offices and boutique managers that commonly appoint principals as VCC directors and also expect them to manage the portfolio, this is an important compliance consideration. The director must hold an appropriate CMS licence as an appointed representative if they are performing regulated activities. See the MAS Circular IID 04/2025 for the full text of the supervisory expectations.

3. Information Barriers Between Sub-Funds

For umbrella VCCs with multiple sub-funds pursuing different strategies, MAS expects appropriate information barriers to prevent conflicts of interest. If one sub-fund is pursuing a strategy that could be affected by trading decisions in another sub-fund under the same umbrella, the manager must have documented procedures for managing this.

Document your conflict-of-interest management procedures in your compliance manual before launching a new sub-fund. If two existing sub-funds could create conflicts of interest, revisit your procedures now.

4. Governance Documentation

MAS observed in its thematic review that some VCC managers had insufficient governance documentation — board charters, investment committee terms of reference, and risk management frameworks that were either inadequate or not tailored to the VCC structure. For new sub-fund launches, ensure your governance documents are sub-fund specific where required, and that board resolutions are passed for each material decision at the sub-fund level.

CALA 2025: What Changed for VCCs

The Corporate and Accounting Laws (Amendment) Act 2025, which commenced on 6 May 2026, introduced several amendments relevant to VCCs. The key changes for sub-fund managers are:

  • Sub-fund provisions updated: The Variable Capital Companies Act has been amended to align sub-fund compliance obligations more clearly with the Companies Act framework, particularly regarding audit requirements and the named-PA rule. Audit reports for VCCs must now name the individual public accountant responsible for the engagement — the same requirement that now applies to all Singapore companies under CALA 2025.
  • ACRA filing cadence: VCCs must file annual returns with ACRA on the same timeline as other companies. Ensure your compliance calendar accounts for this per sub-fund where each sub-fund’s financial year end differs from the umbrella’s.
  • Register of members per sub-fund: Each sub-fund must maintain its own register of members. With CALA 2025 updating the requirements around controller registration, confirm that your register of registrable controllers reflects the sub-fund structure accurately.

Setting Up a New Sub-Fund: Step-by-Step Process

Adding a new sub-fund to an existing umbrella VCC involves fewer steps than incorporating a new VCC, but the process still requires careful execution:

  1. Pass a board resolution at the umbrella VCC level authorising the establishment of the new sub-fund. The resolution should specify the sub-fund’s name, investment objective, and share class structure.
  2. Update the VCC constitution to include the new sub-fund schedule. The constitution must be amended to reflect the new sub-fund, and the amendment must be filed with ACRA via BizFile+.
  3. Appoint a custodian for the new sub-fund’s assets (unless MAS’s PE/VC exemption applies).
  4. Update your fund manager’s CMS licence or exemption to cover the new sub-fund’s strategy, if the strategy differs from existing sub-funds.
  5. File the new sub-fund particulars with ACRA. ACRA’s BizFile+ portal allows registration of additional sub-funds under an existing umbrella VCC.
  6. Open a segregated bank account for the new sub-fund. Most banks in Singapore require this to be a separate account — not just a sub-account — to satisfy the legal ring-fencing requirement.
  7. Apply for Section 13O or 13U tax incentive if applicable. A new sub-fund that qualifies for family office tax exemptions under the Income Tax Act will need a separate MAS approval. See our Section 13O vs 13U comparison for the qualifying criteria.

VCC Grant Scheme: Current Status in 2026

ACRA’s VCC Grant Scheme continues to co-fund the costs of incorporating a new VCC or re-domiciling an existing fund as a VCC. The scheme co-funds up to 30% of qualifying expenses paid to Singapore-based service providers (legal, tax, administration) for the first three years of the VCC’s existence. The grant is capped at S$150,000 per VCC (S$30,000 per qualifying activity category).

For fund managers launching a new umbrella VCC (rather than adding a sub-fund to an existing one), check with ACRA whether the grant scheme is still accepting applications for your proposed structure. For sub-fund launches within an existing VCC, the grant scheme may cover costs related to the additional sub-fund setup depending on the timing of the original VCC incorporation.

For more information on VCC fund structures, the Variable Capital Companies Act resource provides detailed guidance on the statutory framework.

Common Mistakes When Adding a Sub-Fund

Based on ACRA and MAS guidance, the most common mistakes fund managers make when adding a new sub-fund include:

  • Failing to update the VCC constitution before the sub-fund starts operating.
  • Using the umbrella VCC’s bank account for the new sub-fund rather than opening a segregated account.
  • Not updating the fund manager’s CMS licence scope to cover the new sub-fund’s investment strategy.
  • Appointing a director who performs regulated activities without ensuring they hold the appropriate MAS representative status.
  • Assuming that governance documents from an existing sub-fund apply automatically to the new one without sub-fund-specific tailoring.

If you need legal advice on your VCC’s constitution amendment or regulatory compliance before launching a new sub-fund, getting that advice early prevents costly corrections later.

Conclusion

Setting up a VCC sub-fund in 2026 is more straightforward than it was in 2020, but the regulatory expectations have grown alongside the framework’s maturity. MAS Circular IID 04/2025 has set clear standards for governance, custody, and compliance that fund managers must now meet from day one of a new sub-fund launch. CALA 2025 has added audit and filing requirements that align VCC compliance more closely with the general Singapore corporate framework.

Raffles Corporate Services provides VCC corporate secretarial services, including sub-fund registration, constitution updates, and ongoing ACRA compliance. For the latest Singapore investment news and fund management updates, there are useful resources for fund managers and family offices.

For business owners weighing fund structure decisions alongside broader business investment planning, both need to be considered together.

To speak with the team at Raffles Corporate Services, you can email [email protected] or call, SMS, or WhatsApp +65 8501 7133. We are happy to assist with any queries.

— The Editorial Team, Raffles Corporate Services