CMFAS M8 Types of CIS & Fund Structures question: Variable Capital Company (VCC)

CMFAS M8Types of CIS & Fund Structures

A Variable Capital Company (VCC) differs from an ordinary company primarily because a VCC:

A has fixed share capital, so it cannot redeem shares without first reducing its capital
B can issue and redeem its own shares and pay dividends out of capital, easing fund operations
C must be listed on SGX, so its shareholders can exit only by selling their shares on the exchange
D is a trust rather than a body corporate, so its investors hold units, not shares

Show the answer and explanation

Answer: B. can issue and redeem its own shares and pay dividends out of capital, easing fund operations

The VCC framework lets the entity freely issue/redeem shares at NAV and pay dividends out of capital, unlike an ordinary company constrained on returning capital; a VCC is a body corporate, not a trust.

Common mistake

Describing a VCC as a trust; it is a corporate vehicle purpose-built for funds.

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CMFAS M8 Types of CIS & Fund Structures question: Variable Capital Company (VCC)

Answer: B. can issue and redeem its own shares and pay dividends out of capital, easing fund operations

Common mistake

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CMFAS M8 Types of CIS & Fund Structures question: Variable Capital Company (VCC)

Answer: B. can issue and redeem its own shares and pay dividends out of capital, easing fund operations

Common mistake

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