Fund management activity: Variable Capital Company structure recommended in IFSCs

Fund management business in the Indian city of GIFT – India’s only International Financial Services Center (IFSC) – may soon get a boost with an IFSCA-appointed panel recommending the adoption of a structure legal variable capital company (VCC) for the fund industry in such IFSCs.

A VCC is basically an alternative form of corporate vehicle that removes some of the key limitations of corporations and LLPs and provides for higher regulatory standards than those applicable to trusts. A VCC can be used for both alternative and traditional open and closed fund strategies.

It may be recalled that Gift City’s regulator, the International Financial Services Centers Authority (IFSCA), formed an expert committee headed by KP Krishnan, a retired IAS officer, to review the feasibility of VCC in India and its suitability as a funding vehicle. management at the International Financial Services Center (IFSC) in India.

This Krishnan-led committee has now submitted its report to IFSCA President Injeti Srinivas.

Fund management activities are an important pillar of the overall financial services ecosystem. In accordance with the terms of reference given to the Committee, it reviewed the suitability and adaptability of the VCC for IFSC in India or alternative structures to attract investment funds to the IFSC. Traditionally, pooling of funds in India has been carried out through three types of entities, namely limited liability companies governed by the Companies Act 2013; limited liability companies under the Law on Limited Liability Companies; and trusts governed by the Indian Trust Act, 1882.

The committee assessed the characteristics of a VCC or its equivalent in other jurisdictions such as the United Kingdom, Singapore, Ireland and Luxembourg, according to an official statement.

The Committee recognized that the legal framework governing entities that undertake fund management should provide certainty and clarity for investors, effective segregation and separation of different asset pools, the ability to issue different classes of shares, changes in the capital structure of funds without regulatory approvals and the freedom to choose the appropriate accounting standards applicable to funds with different characteristics, and the ability to liquidate quickly, the statement added.

Previous Nelson Peltz's Trian Fund Management Portfolio Tracker - Q1 2021 Update
Next British Airways entrusts management of the pension fund to BlackRock