International Financial Services Centres Authority (IFSCA) constituted panel on variable capital company on Tuesday submitted its report with a recommendation to adopt a VCC-like legal structure for conducting fund management activity in IFSCs.
The panel headed by former Skill Development Secretary K P Krishnan examined the feasibility and suitability of the variable capital company (VCC) as a vehicle for fund management in the International Financial Services Centre in India.
Fund management activities are an important pillar of the overall financial services ecosystem, IFSCA said in a statement.
The committee, which handed over its report to IFSCA chairman Injeti Srinivas, assessed the features of a VCC or its equivalent, in other jurisdictions, such as the UK, Singapore, Ireland and Luxembourg, it added.
In line with the mandate given to the committee, the Krishnan panel examined the relevance and adaptability of the VCC for the IFSC in India or alternative structures to attract fund business in the IFSC.
Conventionally, pooling of funds in India is undertaken through three types of entities, namely, limited liability companies governed under the Companies Act, 2013; limited liability partnerships under the Limited Liability Partnership Act; and trusts governed under the Indian Trusts Act, 1882, the statement said.
The committee recommended the adoption of a VCC-like legal structure to conduct fund management activity in IFSCs, it added.
"The Committee recognised that the legal framework governing entities that undertake fund management should provide for certainty and clarity to investors, effective segregation and ring-fencing of different pools of asset, the ability to issue different classes of shares, alterations to the funds' capital structure without regulatory approvals and the freedom to choose the appropriate accounting standards applicable to funds with different characteristics, the ability to wind up quickly," it said.
The IFSCA set up this committee to explore the potential for allowing another legal structure - popularly known as a variable capital company (VCC) - as an additional option through which asset managers could pool the investors' funds.
The VCC structure dispenses with some of the key limitations of companies and LLPs and provides for higher regulatory standards than those applicable to trusts.
The country's first IFSC has been set up at the Gujarat International Finance Tec-City (GIFT) in Gandhinagar.
IFSCA was established on April 27 last year with its head office in Gandhinagar.
