When the Monetary Authority of Singapore looked closely at the roughly 1,200 Variable Capital Companies on its books as at 31 March 2025, the headline finding was reassuring: most VCCs and their managers were meeting the core regulatory requirements that come with the structure. But “most” is not “all”, and the gaps MAS did find, in custody arrangements, in director appointments, and in a handful of VCCs that looked less like genuine investment funds and more like personal holding vehicles, were significant enough to warrant a dedicated circular.
That circular, MAS Circular No. IID 04/2025 (the “Circular”), dated 26 June 2025, is required reading for every VCC manager, director, and corporate secretary in Singapore, even though it reads more like a diagnostic report than a rulebook. It does not introduce new law. Instead, it tells the industry, in unusually direct terms, where MAS’s thematic review of Variable Capital Companies (“VCCs”) found real-world practice falling short of existing obligations under the Variable Capital Companies Act 2018 (the “VCC Act”) and related MAS notices and guidelines.
This article works through what the Circular actually says, sets it against the statutory backdrop, and translates the findings into a practical governance checklist that VCC managers and boards can run against their own structures before MAS comes knocking with a more pointed question.
The 2025 Thematic Review: Scope and Numbers
The Circular explains that MAS carried out its thematic review in 2024, drawing on lodgements filed by VCCs together with a survey of VCC managers covering investment focus, asset size, governance practices, and management approach. By the time the Circular was issued, the population under review had grown to approximately 1,200 VCCs, managed collectively by around 600 MAS-regulated financial institutions, comprising fund management companies and banks. The vast majority of these VCCs are offered only to accredited and institutional investors, and they span both open-ended and closed-end strategies across public and private markets.
Against that backdrop, the Circular restates four requirements that sit at the core of VCC governance: a VCC must operate as one or more collective investment schemes (a “CIS”) in the form of a body corporate; it must appoint a manager regulated by MAS; it must have at least one director who is a director or qualified representative of that manager; and it must engage an eligible financial institution to carry out anti-money laundering and countering the financing of terrorism (“AML/CFT”) checks under MAS Notice VCC-N01. On top of these, a VCC manager is separately required to segregate VCC assets and hold them with an independent custodian, and to ensure that anyone conducting fund management activity for the VCC, such as providing input on portfolio composition or marketing the fund, is appointed as the manager’s representative.
Custody Arrangements: Closing the Gap
The first substantive finding concerns custody. MAS observed a small number of VCCs that did not report having custody arrangements in place, despite investing in asset classes, such as listed equities and fixed income instruments, that ordinarily require independent custody. The Circular is direct on this point: VCC managers must ensure that assets under management are held with an independent custodian, unless those assets fall within the private equity or venture capital carve-out available where the investments are offered only to accredited or institutional investors.
For managers running a VCC that holds liquid, exchange-traded assets, this is not a discretionary best practice. It flows from custody requirements under the Securities and Futures (Licensing and Conduct of Business) Regulations, and MAS has now signalled that it is actively checking compliance against lodged information rather than assuming the requirement is self-policing. Boards should treat any VCC without a clearly documented, independent custodial relationship, outside the narrow PE/VC exemption, as an immediate remediation item.
Director Appointments and the Licensing Trap
The second observation is more nuanced. MAS found that some VCCs had appointed additional directors, beyond the director required to come from the VCC manager, specifically to strengthen board oversight and governance. MAS does not discourage this. The concern arises only where such a director is also engaged in activities that amount to regulated fund management activity, such as deal sourcing, investment research, portfolio management, or trade execution for the VCC’s investments, or client-facing work such as account servicing, business development, or marketing.
Where a director crosses that line, the Circular is clear that they must be appointed as a licensed representative of the VCC manager. Boards that have added independent or non-executive directors purely for governance optics should map, individually, what each director actually does day to day. A director who sits quietly on the board and reviews minutes is in a different position from one who is fielding investor calls or weighing in on trade decisions. For a refresher on how the underlying Capital Markets Services licensing regime now works following the 2024 repeal of the Registered Fund Management Company tier, our FAQ on the MAS Capital Markets Services licence sets out the current framework in more detail, and MAS’s own Guidelines on Licensing and Conduct of Business for Fund Management Companies remain the primary reference for what counts as a regulated activity.
“Substantive Fund Management Activity”: The Genuine CIS Reminder
The most pointed observation in the Circular, and the one with the widest implications for how VCCs are used, concerns what MAS calls substantive fund management activity. The review identified a small number of VCC managers overseeing VCCs that held illiquid assets on behalf of a single investor or a few connected investors, where those assets had previously been owned directly by the investors themselves before being transferred into the VCC wrapper.
MAS’s position is unambiguous: a manager that merely helps an investor transfer their existing investments or assets into a VCC, without providing genuine investment input or influence over the merits or suitability of those assets, is not carrying out substantive fund management activity. The Circular reminds the industry that a VCC is meant to be used as a collective investment scheme, and that VCC managers are expected to play an active role across all aspects of investment and risk management, including portfolio construction, investment due diligence, and analysis. Three practices are singled out as falling short: acting as a mere conduit for customers to structure investments into fund units without substantive input into the merits of the investment; setting up VCCs that simply pass through funds managed by other, unrelated managers; and purely marketing the VCC without any substantive management role.
This matters because it goes to the heart of why the VCC framework exists. A VCC is not meant to be a bespoke wrapper for a single family’s existing portfolio with a manager attached in name only. Structures of that kind sit uncomfortably close to what MAS regards as a passive holding arrangement dressed up as a regulated fund, and managers running such structures should expect closer supervisory attention going forward. Family offices and single-family structures considering a VCC purely as a holding vehicle, rather than a genuinely managed fund, may find a more suitable comparison in alternative structuring options; our article on VCC versus Cayman SPC structuring is a useful starting point for weighing those trade-offs honestly.
Dormant VCCs Should Be Wound Down
Closely related, the review also found VCC managers overseeing multiple VCCs that held no assets and had no investors at all, despite having been incorporated for more than a year. MAS’s expectation here is straightforward: VCC managers should periodically assess the VCCs under their management and wind down those that are dormant rather than allowing shell structures to sit on the register indefinitely. Where a VCC or a sub-fund within an umbrella structure has genuinely reached the end of its useful life, the process for closing it correctly, and the important distinction between striking off, winding up, and dissolving a single sub-fund, is covered in our guide to winding up or dissolving a VCC sub-fund.
AML/CFT Oversight Remains a Live Issue
The Circular closes its substantive findings with a reminder on AML/CFT. VCCs remain responsible for their own AML/CFT obligations even where an eligible financial institution has been appointed to carry out the necessary checks, and directors are expected to exercise sufficient oversight over that institution’s controls. This includes identifying and verifying customers and beneficial owners, maintaining an accurate and up to date register of beneficial owners, performing screening, and being able to produce beneficial ownership information to MAS and law enforcement agencies promptly on request. MAS also pointed VCCs back to the observations from its 2022 thematic review of the sector’s money laundering and terrorism financing risk typologies, a signal that this is an area of sustained, rather than one-off, supervisory interest.
A Practical Governance Checklist for VCC Managers and Boards
The table below translates the Circular’s findings into concrete questions a VCC manager or board should be able to answer with confidence at any point in time, not only when preparing for an annual review.
| Area | Question to ask | Action if the answer is no |
|---|---|---|
| Custody | Are all assets, other than PE/VC investments offered solely to accredited/institutional investors, held with an independent custodian? | Put formal custody arrangements in place without delay and document the exemption basis for any asset held outside custody. |
| Director appointments | Does at least one director hold a role with the VCC manager, as required under the VCC Act? | Appoint a qualifying director from the manager before the next board meeting. |
| Director licensing | Do any other directors carry out deal sourcing, portfolio management, trade execution, account servicing, or marketing for the VCC? | Appoint that director as a licensed representative of the manager, or restrict their role to non-regulated oversight only. |
| Substantive management | Can the manager demonstrate active involvement in portfolio construction, due diligence, and investment analysis for the VCC? | Document the manager’s investment process and decision-making record; reassess whether the structure is genuinely a CIS. |
| Single/connected investor exposure | Does the VCC hold assets that were previously owned directly by its sole or few connected investors, with no real manager input since transfer? | Escalate for legal and compliance review; consider restructuring outside the VCC framework if substantive management cannot be evidenced. |
| Dormancy | Has the VCC held no assets and/or had no investors for more than a year? | Begin the process to wind down or dissolve the VCC or the relevant sub-fund. |
| AML/CFT oversight | Is the board actively overseeing the EFI’s AML/CFT controls, rather than treating the appointment as a full delegation of responsibility? | Introduce periodic board-level reporting on beneficial ownership registers, screening, and enhanced due diligence outcomes. |
What This Means for VCC Managers Going Forward
The Circular states plainly that MAS is now conducting supervisory reviews of specific managers identified through the thematic review, and is engaging them to determine whether supervisory interventions or regulatory action are warranted. That is a clear signal that the review was not a one-off data-gathering exercise. MAS expects every VCC manager, not only those already under closer scrutiny, to test their own management of VCCs against the observations in the Circular and to take corrective steps where gaps exist: putting formal custody arrangements in place, ensuring individuals conducting regulated activity are properly appointed as representatives, and winding down VCCs that have been dormant for an extended period.
For managers who have relied on the streamlined fund manager licensing framework introduced after the 2024 repeal of the Registered Fund Management Company tier, it is worth pairing this review with a broader check of ongoing conduct obligations; our FAQ on the streamlined fund manager framework covers how licensing categories now apply. Boards should also note that governance expectations for VCCs increasingly sit alongside other MAS supervisory workstreams touching sub-fund valuation and risk practices, discussed in our piece on MAS’s valuation and risk management papers and what they mean for VCC sub-funds. Taken together, the direction of travel is consistent: MAS is moving from setting up the VCC framework to actively supervising how it is used in practice, and managers who treat governance as a box-ticking exercise at incorporation, rather than an ongoing discipline, are the ones most likely to attract attention.
None of the findings in the Circular require a wholesale rethink of a well-run VCC. Most of the fixes, documenting custody, mapping director roles against licensing thresholds, evidencing active investment management, and clearing out dormant structures, are administrative rather than structural. But they do require someone on the board or at the corporate secretary’s desk to ask the questions honestly, rather than assuming that because a VCC was properly incorporated in the first place, it remains properly governed today.
The Editorial Team, Raffles Corporate Services