Variable Capital Company India: A Beginner’s Guide

1
Variable Capital Company India A Beginners
Guide
Open in app Sign up Sign in Search Write
Ras Rashi Follow hi 4 min read 3 days ago --
The government will enable pooled private equity
fund structures as variable capital companies
(VCCs) a structure more popular in financial
hubs such as Singapore and Mauritius in a bid
to attract overseas investors. In this evolving
financial market of India, business lawyers
believe that the adoption of the VCC framework
has helped Singapore become the hub for
international fund management, and a similar move
for India will be beneficial. In a recent
article by Thinking Legal titled Variable
Capital Company Basic Structure and Its
Evolving Framework In India, Vaneesa Agrawal
highlighted a significant development in the
Indian investment landscape that is capturing
the attention of business lawyers nationwide. The
ability of VCCs to issue and redeem shares
without extensive regulatory filings or
shareholder approvals sets them apart from
traditional corporate structures, necessitating
a fresh approach to legal advisory services in
the realm of investment funds.
2
This guide, from a business lawyers perspective,
aims to provide a comprehensive understanding of
VCCs, their structure, advantages, regulatory
considerations, and potential challenges in the
Indian context. Understanding VCCs Legal
Implications and Structures Business lawyers
understand that a Variable Capital Company (VCC)
is essentially a business structure created to
enable pooled investments and offer owners
limited liability. The key distinction between
the VCC and conventional corporate structures is
the latters inability to issue and redeem
shares without requiring onerous shareholder
approvals or regulatory filings. Business
lawyers emphasise the significance of elucidating
the notion of an umbrella structure, which can
have several sub-funds, to their clients when
providing VCC structure advice. As Vannesa
Agrawal, in her Thinking Legal article points
out, each sub-fund may have unique investing
goals and tactics, enabling customised methods
to satisfy a range of investor demands. This
flexibility is the key reason why VCCs are
gaining traction in the financial markets of
Singapore and Mauritius, and now according to the
business lawyers, India is following suit.
3
Vaneesa Agrawal, Thinking Legal

• Legal Considerations in Setting Up VCCs
• Business lawyers will be essential in helping
  clients through the establishment process as
  India adopts the VCC framework. To provide
  comprehensive counsel, seasoned business lawyers
  need to be well-versed in both models.
• VCCs can be established in India as Limited
  Liability Partnerships (LLPs) or as companies.
• Vaneesa Agrawal, Thinking Legal
• The two main setups that business lawyers
  typically talk about are
• Umbrella VCC

4
Business lawyers clarify that the umbrella VCC
structure permits the establishment of many
sub-funds that have the flexibility to invest in
diverse asset classes or strategies while
upholding the legal separation of assets and
liabilities. 1. Standalone VCC According to
Vaneesa Agrawal, an expert business lawyer, this
is a more straightforward organisation that
handles its investments directly without the
intricacy of several sub-funds. Legal Challenges
and Opportunities in VCC Regulations Business
lawyers feel that understanding the constantly
changing regulatory landscape is one of the most
important parts of working with VCCs. Vaneesa
Agrawal highlights that, according to Indian
legislation, VCCs are categorised as Alternative
Investment Funds (AIFs), necessitating an AIF
licence from the Securities and Exchange Board
of India (SEBI). It is imperative for business
lawyers to remain up to date with the latest
debates regarding the ways in which this new
structure will interact with current laws, like
the LLP Act of 2008 and the Companies Act of
2013. Key regulatory considerations that
business lawyers focus on include Taxation
Business lawyers provide guidance on the tax
ramifications of VCCs, including how to best
take advantage of Indias tax treaties by
acquiring tax residency certificates and treating
each sub-fund separately for tax
purposes. Compliance By stressing the regulatory
segregation of risks between sub- funds,
business lawyers make sure their clients are
aware of and abide by
5
the streamlined compliance standards for
VCCs. Management Structure Business lawyers
point out that VCC structures, as opposed to
typical AIFs, permit different managers across
sub-funds without necessitating new
registrations. Business lawyers think about how
this flexibility may affect governance and fund
management. Advantages and Challenges Legal
Guidance in the VCC Ecosystem It is therefore
important that business lawyers equipped with the
knowledge to help the client brace up for the
forthcoming hurdles in the process, these
include Regulatory Ambiguities Given that this
is a new structure within the financial space of
India, a lot of things about the VCC law and
regulations, for instance, are not clear.
Business lawyers will have to keep their eyes
open and advise their clients on how to deal with
the grey areas of the law. Client Education
Business lawyers appreciate that there may be
some hesitation amongst local investors who are
not conversant with VCCs. This is where the
business lawyer assists in creating confidence
through information on the advantages and
disadvantages of this investment
option. External Factors Competition especially
from countries like Singapore and the UAE which
already have a working VCC structure means Indian
business lawyers have to assist their clients
VCCs in attaining a competitive edge. In
Conclusion
6
In the context of business law and financial
regulation of the country, the introduction of
Variable Capital Companies in India is a landmark
event. With the VCC market booming, the
intervention of business lawyers will be
critical for the success of this novel investment
vehicle in the country. And, as Vaneesa Agrawal,
founder of Thinking Legal highlights, The VCC
business structure has been a welcome evolution
in the way funds can be structured and
managed. It is well-known that both limited
liability and unlimited groups of members can
exist and operate in the form of a company.
Moreover, it is a legal lung that is extremely
flexible from an investment perspective and in
many instances, can accommodate highly tailored
requirements that commercial law has failed to
capture thus far. VCC-like structures have been
around for some time in the Private Equity
investment sector as they address some of the
rigidities associated with conventional means of
pooling capital for investment into several
operating companies and providing them with
growth capital.
Business Lawyer Vaneesa Agrawal Thinking Legal
7
Rashi Written by Rashi Follow 3 Followers