Since the Variable Capital Companies Act 2022 came into force in May 2022, Mauritius has offered fund managers a vehicle that combines the familiarity of a company with the flexibility of a segregated fund platform. The Variable Capital Company, or VCC, is a single body corporate that carries out its business through sub-funds and special purpose vehicles, each created with the approval of the Financial Services Commission. For a manager who wants to run more than one strategy without building, licensing and staffing a separate fund company for each, it deserves a close look.

One umbrella, many sub-funds

A VCC is one legal entity. Beneath it sit sub-funds and, where useful, special purpose vehicles. The umbrella holds the licence and the governance; the sub-funds hold the investments. The Commission may approve each sub-fund to operate as a collective investment scheme or a closed-end fund, and the sub-fund then complies with the Securities Act, the FSC Rules and the guidelines that apply to that category of fund. A sub-fund may or may not have separate legal personality, depending on how it is constituted. Special purpose vehicles, by contrast, do not operate as funds: they serve as vehicles ancillary to the VCC or to a sub-fund. What every arrangement shares is a single point of regulatory contact and a single board responsible for the whole.

This is the practical appeal. A manager who wants to launch a private credit strategy this year and a real-estate strategy next year does not have to incorporate, license and staff two companies. The second strategy is added as a sub-fund to an umbrella that already exists, subject to the Commission's approval.

Ring-fenced by law

The Act provides that the assets of a sub-fund may not be used to discharge the liabilities of the VCC or of any other sub-fund, and that a creditor of one sub-fund may look only to the assets of that sub-fund. Segregation is therefore statutory rather than merely contractual: a loss in one strategy stays within that strategy. For investors comparing a VCC sub-fund with a stand-alone fund, this is the provision that makes the comparison fair.

Capital that moves with the investors

A VCC's share capital is variable by design. Shares in an open-ended sub-fund are issued, redeemed or repurchased at net asset value, and the VCC may redeem or buy back its shares in accordance with its constitution. Dividends are declared per sub-fund and paid by reference only to that sub-fund's own assets and liabilities, once the board is satisfied as to solvency. Where a VCC wishes to reduce its share capital more formally, the Act requires a special resolution and the authorisation of the Registrar, so the flexibility sits in day-to-day subscriptions and redemptions rather than in the capital base itself.

One licence, tax residence and treaty access

A VCC Fund that meets the criteria of the Financial Services Act holds a single Global Business Licence, irrespective of whether its sub-funds have separate legal personality. That licence makes the VCC tax resident in Mauritius and eligible for the country's network of double taxation agreements, of which forty-five are currently in force according to the Mauritius Revenue Authority. The headline corporate tax rate is 15 per cent, and the partial exemption regime, which exempts 80 per cent of certain categories of income including income derived by collective investment schemes, is available where the substance conditions are met.

The Act also allows a VCC to make an irrevocable election to present separate financial statements for each sub-fund. Where it does, the Income Tax Act treats each sub-fund as an entity separate from the VCC and from every other sub-fund, liable to income tax on its own income. A VCC can therefore be run as one consolidated taxpayer or as several, depending on what its investors and its strategies require.

What this means for a fund manager

Consider a manager running three strategies: a private credit fund, a real-estate fund and a venture fund. Structured conventionally, that is three fund companies, three boards, three licences and three sets of relationships with the regulator and with service providers. As a VCC it is one umbrella with three sub-funds:

  • One board and one governance framework across all three strategies, with each strategy's assets protected by statute from the liabilities of the others.
  • A new strategy is launched as a sub-fund of the existing umbrella, with the Commission's approval, rather than as a new company with its own licence.
  • Investors subscribe to, and redeem from, the sub-fund that holds their strategy at that sub-fund's net asset value, and accounts may be consolidated across the VCC or presented separately for each sub-fund, with the tax treatment following the election.

The result is a platform that grows with the manager's strategies instead of multiplying the manager's administration.

How Aurevya Can Help

Aurevya Wealth structures and administers Variable Capital Companies from Mauritius. We support fund managers with licensing, fund accounting and company secretarial services, and we work with the manager's advisers to decide whether a VCC, a conventional fund or a combination is the right vehicle for the strategies in view. To start the conversation, contact us at aurevya.com.

This insight is general information and does not constitute legal, tax or investment advice. Statutory references are to the Variable Capital Companies Act 2022 and the Income Tax Act as amended; rates and treaty counts are as published by the Mauritius Revenue Authority at the date of writing and may change.