The process of making a law of Variable Capital Companies Act (‘VCC Act’) in April 2022 characters yet another landmark for Mauritius as it strengthens its position as the International Financial Centre of choice for the region. The introduction of the Variable Capital Company (‘VCC’) which was announced in April 2021, was one of the action points that came from the National Budget 2020/2021 under control with the 10-year Blueprint that was well-known for the Mauritius IFC.
The VCC Act has also ensured that the legislative framework regulating the VCC complies with the requirements of the Anti-Money Laundering/Combatting the Financing of Terrorism.
A VCC is a company incorporated under the Companies Act 2001 and which carries its activities through its sub-funds and Special Purpose Vehicles (“SPVs”). A VCC needs to be authorised by the Financial Services Commission, Mauritius (the “Commission”) as a VCC Fund pursuant to the VCC Act.
A sub-fund of a VCC Fund, subject to the approval of the Commission, will operate as a Collective Investment Scheme (“CIS”) or a Closed-End Fund (“CEF”) of any category and may elect to have a separate legal personality from that of the VCC Fund. For example, a sub-fund can be approved to operate as a CIS and an Expert Fund. The sub-fund shall comply with all requirements under the Financial Services Act (the “FSA”), Securities Act, Securities (Collective Investment Schemes and Closed-end Funds) Regulations 2008, relevant FSC Rules and Guidelines applicable to a/an CIS/Expert Fund. A sub-fund of a VCC Fund can also act as a feeder fund or a master fund.
The rationale for using a VCC
The VCC can operate as a standalone entity or as an umbrella structure comprising sub-funds. SPVs can also be set up under the VCC or its sub-funds. For fund managers having several investment strategies and objectives, the VCC could prove to be the ideal vehicle since it can have different sub-funds operating as either closed-end funds or open-ended funds as well as SPVs. If it so wishes, the VCC, its sub-funds and SPVs can all share a board of directors, a fund manager, CIS administrator and other service providers which ultimately provides significant economies of scale. Furthermore, the sub-funds and SPVs in a VCC can opt to have a separate legal personality and be structured as companies.