Variable Capital Companies at GIFT City IFSC

Overview

The Ministry of Finance has released the draft IFSCA (Amendment) Bill, 2026, for public consultation, proposing to introduce the Variable Capital Company (VCC) at GIFT City. The Finance Minister first announced this in the FY 2024–25 Budget. The VCC is already an established vehicle in Singapore, the UK, Luxembourg, Mauritius, and Ireland. Relevant legislation from these jurisdictions was examined in preparing the draft.

Structure of a VCC

A VCC is a body corporate with perpetual succession and limited liability, operating through a two-tier model. Funds are pooled at the sub-fund level — no asset, liability, income, or expenditure shall be held to the account of the VCC. Instead, it must be either attributed to a particular sub-fund or apportioned amongst multiple sub-funds. Sub-funds are not separate legal entities, but they are fully ring-fenced: assets of one sub-fund cannot be used to discharge liabilities of another, including in winding up. Each sub-fund is treated as a separate person for taxation. Cross-investment between sub-funds of the same VCC is expressly permitted.

Capital Structure

The VCC issues two types of shares:

• Management Shares — issued at the VCC level to those who incorporate or control it. They carry voting rights (in proportion to paid-up value) but no economic rights, unless otherwise specified by regulations. They cannot be redeemed but may be bought back, with restricted transferability. A management shareholder may access economic benefits only by investing in participating shares.
• Participating Shares — issued at the sub-fund level to investors. They carry economic rights, including dividends (payable from profits or paid-up capital) and redemption rights, with voting rights limited to matters involving variation of rights. Multiple classes and sub-classes may be issued within a single sub-fund, with differential voting rights permitted. Capital may be altered as freely as in an open-ended fund.

VCCs may also issue redeemable debentures (without voting rights) and borrow funds on behalf of sub-funds.

Governance

A common board of directors governs the VCC across all sub-funds, appointed by management and shareholders. The board appoints the Fund Management Entity (FME) and all key managerial personnel by resolution. Key roles:

• Fund Management Entity — must be registered with IFSCA; acts in a fiduciary capacity towards members; accountable to the board.
• Fund Manager — an officer of the FME, designated as key managerial personnel; separate fund managers may be designated per sub-fund.
• Compliance Officer — reports to the board; responsible for legal compliance and investor grievance redressal. To keep costs lean, an FME officer may hold this role simultaneously, subject to IFSCA criteria.

Related party transactions, director loans, and layered investment structures are subject to regulatory restrictions. A framework is provided to restrict the number of layers of VCCs or sub-funds through which investments may be made.

Confidentiality

Confidentiality of information associated with the VCC, its sub-funds, and investors is a core feature of the structure. Information — including details of shareholders, investments, financial statements, and securities — may only be disclosed in circumstances and to persons specified by regulation. This applies to the Registrar and any other person in possession of such information.

Conclusion

The VCC framework is a long-overdue structural upgrade for GIFT City. By combining ring-fenced sub-funds, flexible capital, and built-in confidentiality within a single purpose-built vehicle, India is now speaking the language that global fund managers understand. The public consultation is an opportunity that practitioners should not let pass.