India has issued draft legislation to create variable capital company (VCC) structure for pooled investment funds in the Gujarat International Finance Tec-City, or GIFT City, five years after the idea was first mooted.
The structure combines the benefits of trusts, limited liability partnerships and companies, and limits their disadvantages, according to the draft published on the website of the Department of Economic Affairs on June 8.
“VCC could make GIFT City more competitive, as it is emerging as a preferred option in various jurisdictions across the globe,” it says, citing as examples Hong Kong, Luxembourg, Singapore and the UK.
The legislation was drafted by India’s finance ministry and the International Financial Services Centres Authority (IFSCA). It’s not clear when the bill will be presented in parliament.
Singapore introduced its VCC structure in 2020. The following year, the IFSCA set up an expert committee led by K.P. Krishnan, a renowned Indian economist and public policy expert, to study whether India should introduce a similar structure.
In 2022, another expert committee was tasked to design the actual framework. Two years later, Nirmala Sitharaman, India’s finance minister, endorsed the concept of creating a VCC structure in the 2024–2025 budget.
Located in Gandhinagar, the capital of Gujarat, a state in the western coast of India, GIFT City is the country’s first operational smart city and international financial services centre. It’s designed to be a global financial and information technology hub, aiming to bring offshore financial operations onshore by competing with international centres like Dubai and Singapore.
