The Mauritius VCC: a modern and efficient investment structure

In this article by Novan Maharahaje, Head of Fund Services - Africa, Middle East & Asia, and Leevyn Isabel, Commercial Director - Middle East, delve into the world of variable capital companies (VCCs) in Mauritius. Introduced in April 2022, the VCC regime has emerged as a game-changer for investment funds and family offices seeking a streamlined and cost-effective approach to investment structuring.

What is a Mauritius VCC?

Imagine a corporate umbrella specifically designed to house your investment activities. That's precisely what a VCC offers. It's a versatile structure that allows fund managers and investors to operate multiple sub-funds (SFs) and special purpose vehicles (SPVs) under one central platform. Think of it as a single roof sheltering diverse investment strategies, each with its own distinct set of objectives and risk profiles.

What are the benefits of establishing a VCC in Mauritius?

The Mauritius VCC offers a compelling proposition for those seeking to optimise their investment structures. Here are some of the key benefits:

• Cost-effectiveness and investor protection: VCCs promote streamlined operations by requiring only a single Global Business License (GBL) for the core VCC structure. Additionally, the VCC Act fosters robust investor protection by ensuring clear segregation of assets and liabilities between individual SFs and SPVs. This means that even if one sub-fund encounters difficulties, the assets of other sub-funds remain shielded.
• Economies of scale: VCCs leverage economies of scale by allowing shared service providers, like CIS managers, custodians, and legal professionals, to cater to the entire VCC framework, encompassing all its SFs and SPVs. This translates to significant cost savings for fund managers and investors.
• Flexibility and segregation: VCCs offer exceptional flexibility through the creation of multiple SFs and SPVs. A VCC can have a sub-fund operating under a Collective Investment Scheme (i.e. open-ended Fund) and another sub-fund operating as a Close Ended Fund. These sub-entities can cater to diverse investor appetites, allowing for variations in investment objectives, risk profiles, and asset classes. Moreover, SFs within a VCC can opt for separate legal personalities, further enhancing asset protection and mitigating risks associated with individual sub-funds.
• Tax efficiency: Mauritius boasts a favourable tax environment for VCCs. Depending on the chosen structure, SFs and SPVs can elect for separate tax treatment, potentially leading to tax benefits. Additionally, the VCC regime offers a partial tax exemption on certain foreign-sourced income streams, further enhancing its attractiveness.
• Regulatory efficiency: Establishing and operating a VCC in Mauritius benefits from a streamlined regulatory framework. The application process is swift, and the Mauritius Financial Services Commission (FSC) demonstrates a commitment to facilitating VCC adoption. This translates to faster time-to-market for fund managers.

What are the key differences between a VCC and a PCC?

While both VCCs and protected cell companies (PCCs) offer asset segregation, a critical distinction lies in the legal personality of their sub-structures. SFs within a VCC can elect to have separate legal identities from the main VCC, functioning similarly to protected cell companies. This means the failure of one sub-fund with a separate legal personality wouldn't automatically trigger the winding-up of the entire VCC structure. On the contrary, cells within a PCC, despite having segregated assets and liabilities, lack distinct legal personalities from the core PCC. Additionally, VCCs offer greater flexibility for fund managers, allowing them to create SPVs for specific investment purposes, which isn't readily available with PCCs.

What investment opportunities do VCCS cater to? 

The VCC structure offers a wide range of investment vehicles, including:

• Private equity and venture capital funds
• Family offices
• Mutual funds
• Hedge funds
• Real estate funds
• Infrastructure funds
• Renewable energy funds

What are the differences between a Mauritius VCC and a Singapore VCC?

While both Mauritius and Singapore offer VCC structures, key differences exist. One such distinction lies in the legal personality of SFs and SPVs. Mauritian law allows SFs and SPVs to have separate legal personalities, while Singapore law provides "quasi" separate legal personality. Furthermore, Mauritius VCCs can create SFs that function as SPVs, offering greater flexibility compared to Singapore VCCs. Additionally, Mauritius allows different managers for different SFs, unlike Singapore which requires a single fund manager for all SFs under a VCC. Lastly, the approval process for establishing a VCC in Mauritius is generally faster compared to Singapore.

However, VCC’s under both jurisdictions have their own merits and the choice of where to domicile will depend on various factors, such as the target investor base, investment destination and tax efficiency.

How can Ocorian help?

The Mauritius VCC regime has emerged as a compelling option for investment funds and family offices seeking a modern, efficient and cost-effective platform for structuring their investments. 

Ocorian will accompany you throughout the process of setting up and administering your VCC. You will also benefit from our market leading funds services platform, our local expertise and our insights to enable you to scale up and grow. Contact our team today.