The concept of Variable Capital Companies (VCC) was introduced in Mauritius in order to enhance the competitiveness of the financial services sector. The Variable Capital Companies Act (Act) came into force by proclamation on the 16th May 2022.
What are VCCs?
VCC, a new type of vehicle, permit the setting up of Sub Funds (SFs) and Special Purpose Vehicles (SPVs) within the same entity, facilitating the segregation and ring-fencing of assets and liabilities of each sub entities.
The Financial Services Commission (FSC) may approve the operation of a sub fund as a collective investment scheme or a close-end fund. Therefore, under a single entity, the VCC, fund managers are able to manage a collective investment scheme sub-fund and a closed-end sub-fund.
In addition, there is no restriction on the number of sub-entities that can be created under the VCC structure, nonetheless, prior approval of the FSC is required for the creation of any such sub-entity.
Although the existing business structures in Mauritius have proven to be effective, VCCs allow greater flexibility and efficiency by streamlining management and operations by way of a single entity.
While traditional business structures allow for a single fund or an umbrella fund consisting of multiple sub-funds to operate, a VCC offers a palette of additional features, such as efficient and streamlined management thereby providing cost efficiency.
Main uses of VCC are:
- Private equity business;
- Special Funds, for instance, Hedge Funds;
- Open or Close ended Funds;
- Venture capital Funds;
- Multi Family offices.
Mauritius is one of the two jurisdictions to now legislate this vehicle – Singapore being the only other jurisdiction to do so. With the introduction of the Act, Mauritius is increasing its competitiveness vis-à-vis other jurisdictions and cementing its reputation as a robust and sound international financial centre.