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K.P. Krishnan Expert Committee

K.P. Krishnan Expert Committee

Why in news?

  • K.P. Krishnan headed expert committee on Variable Capital Company has submitted its report on the feasibility of Variable Capital Companies in the International Financial Services Centres.

About the committee

  • The IFSCA set up this Committee to explore the potential for allowing another legal structure, popularly known as a VCC, as an additional option through which asset managers could pool the investors’ funds.
  • The VCC structure removes some of the key limitations of companies.
  • It provides for higher regulatory standards than those applicable to trusts.

Report of the committee

  • The Committee assessed the features of a VCC or its equivalent, in other countries such as the UK, Singapore, Ireland and Luxembourg.
  • The Committee recommended the adoption of a VCC-like legal structure for the purpose of conducting fund management activity in IFSCs
  • The Committee recognized that the legal framework governing entities should provide certainty and clarity to investors. K.P. Krishnan Expert Committee

Key-recommendations made in the Report

  • The Committee assessed the features of a VCC or its equivalent, in other jurisdictions such as the UK, Singapore, Ireland and Luxembourg.
  • The Committee recommended the adoption of a VCC-like legal structure for the purpose of conducting fund management activity in IFSCs.          K.P. Krishnan Expert Committee
  • The Committee recognized 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.

Variable Capital Company (VCC)

  • The Variable Capital Company (VCC) is a new corporate entity structure under which several collective investment schemes (whether open-end or closed-end) may be gathered under the umbrella of a single corporate entity and yet remain ring-fenced from each other.
  • The new corporate entity structure gives funds an alternative to unit trusts, limited partnerships, limited liability partnerships and companies.
  • A key characteristic of the VCC is its umbrella structure is that it allows the sub-funds to share a board of directors and have common service providers, such as the same fund manager, custodian, auditor and administrative agent.
  • Certain administrative functions, for instance, the holding of general meetings and preparation of prospectuses, can also be consolidated.            K.P. Krishnan Expert Committee
  • Where a VCC is set up as an umbrella fund with several sub-funds, members may hold shares that are referenced to a particular sub-fund held by the VCC.

About the IFSCA [ K.P. Krishnan Expert Committee ]

  • IFSCA was established in 2020 under the IFSCA Act, 2019. It is headquartered at GIFT City, Gandhinagar in Gujarat.                K.P. Krishnan Expert Committee
  • The IFSCA is a unified authority for the development and regulation of financial products, financial services, and financial institutions in the IFSC in India.
  • At present, the GIFT IFSC is the maiden international financial services centre in India. Prior to the establishment of IFSCA, the domestic financial regulators, namely, RBI, SEBI, PFRDA, and IRDAI regulated the business in IFSC.          K.P. Krishnan Expert Committee

ALSO READ : https://www.brainyias.com/monetary-policy-committee-mpc/

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