Variable Capital Company

The Variable Capital Companies (“VCC”) Act issued in 2022 has set the legal framework of Mauritius’ latest addition to its investment fund landscape cementing its position as the International Financial Centre of choice for the region. The VCC is a company-type structure which can operate as a stand-alone company or as an umbrella structure compromising of sub-funds or Special Purpose Vehicles (SPVs). The SPV shall not operate as a fund but as a vehicle ancillary to the VCC or the sub-fund.  The Mauritius VCC is commonly known as the VCC Plus (VCC+), when compared to other VCCs from other jurisdictions, due to its flexibility and added benefits.

Features / Advantages
  • Can consist of CIS funds and closed-end funds within one structure
  • May issue shares of varying amounts and/or issue shares for payment of calls as agreed between its shareholders
  • The share capital of a VCC will always be equal to its net assets, thereby providing flexibility in the increase and reduction of capital
  • Allows for flexibility regarding the distribution and payment of dividend out of capital rather than profits
  • A sub-fund of a VCC may invest in other sub-funds of the same VCC
  • In a VCC, investment portfolios are segregated through the sub-funds and SPVs whereby assets and liabilities can be clearly segregated and ring-fenced
  • VCCs may sue or be sued in respect of a particular sub-fund, hence mitigating the contagion risk of the whole entity
  • The winding up of individual sub-funds does not automatically initiate the winding up of the entire VCC
Taxation aspect
  • Where the VCC Fund elects to present separate financial statements, each sub-fund or SPV shall be deemed to be an entity separate from the VCC Fund and shall be liable to income tax in respect of its own income. Hence, the VCC, its sub-funds and SPVs will be required to file separate tax returns.
  • In line with section 26(3)(b) of the Act, where the VCC presents consolidated financial statements, a single income tax return should be filed with Mauritius Revenue Authority and the VCC would be subject to tax on the aggregated income of its sub funds and SPVs.
  • It is expected that where the sub-fund of a VCC holds a valid CIS or closed-end fund licence as issued by the FSC, the sub-fund may benefit from the partial exemption regime as long as it satisfies the prescribed substance conditions in Mauritius.