The LPF regime was established by the Limited Partnership Fund Ordinance (Chapter 637 of the Laws of Hong Kong) (LPFO) which took effect on 31st August 2020. Like an Exempted Limited Partnership (ELP) in the Cayman Islands, an LPF does not have separate legal personality and acts through its general partner (GP).
The LPF is designed for private equity and venture capital funds introducing the new structure for the funds.
An LPF is established by a limited partnership agreement. The protection on the limited liability status of limited partners and the flexibility on contractual terms of an LPF are same as that of an ELP. However, unlike an ELP, an LPF is not permitted to have more than one GP, or to have all its partners from the same group of companies.
REGISTRATION AND OPERATION
- An LPF must have a registered office in Hong Kong and its application for registration must be submitted by a Hong Kong law firm or solicitor.
- The GP/ IM will need to be licensed by the SFC to carry out regulated activities in Hong Kong.
- A registration certificate will be issued by the CR upon completion of registration, and the fund need to beregistered as an LPF with evidence.
- There is no statutory minimum capital requirement or investment restriction for LPF.
Hong Kong opens its gateway through the new LPF regime, encouraging the funds to be domiciled in Hong Kong. Therefore, The LPF tended to provide a comparable regulatory framework to other jurisdictions commonly used by Asian focused funds.
KEY FEATURES- GP & LP Eligibilities
|General Partner||Limited Partner|
|Natural person at least 18 years old||Natural person (whether in the person’s capacity as trustee, or in the person’s own or any representative capacity)|
|Private company limited by shares incorporated.||Corporation|
|Registered non-Hong Kong company||Partnership of any kind|
|Limited partnership/ a limited partnership fund||Unincorporated body|
|Non-Hong Kong limited partnership with/ without a legal personality||Any other entity (whether in its capacity as trustee, or in its own or any representative capacity);|
The GP must also appoint Auditors to carry out the annual financial statements.The auditor must be independent from the GP, the investment manager, and the authorized representative.
Responsible person- AML/ Compliance
A responsible person must be appointed by the GP to carry out the anti-money laundering measures set out in Schedule 2 of the Anti-Money Laundering and Counter-Terrorist Financing Ordinance in relation to customer due diligence and record-keeping. The responsible person is ultimately responsible for compliance with the anti-money laundering obligations set forth therein. It can only be one of the following: (i) an institution authorized by the Hong Kong Monetary Authority, (ii) a corporation licensed by the SFC, (iii) an accounting professional or (iv) a legal professional.
Records must be made available for inspection by Hong Kong Government bodies (but not for public inspection), and an annual return must be filed with the Registrar.
If GP is a non-Hong Kong limited partnership without legal personality, it must appoint an authorized representative to be responsible for managing and control of LPF.
The appointed authorized person can only
- a Hong Kong company,
- a non-Hong Kong company or,
- a Hong Kong resident of at least 18 years old.
Migration of existing funds
Existing funds registered under the Limited Partnership Ordinance who register as an LPF are deemed not to have been dissolved, and therefore no change in legal or beneficial ownership of the assets of the fund should arise. However, no provisions have been introduced to facilitate legal migration of non-Hong Kong incorporated GPs to become Hong Kong incorporated GPs.
An LPF may ordinarily be dissolved in accordance with the limited partnership agreement without a court order, although a notification of dissolution must be filed with the Registrar. However, a court ordered dissolution may occur on application by a partner in the fund or a creditor in prescribed circumstances. Tax clearance from the IRD will be required before a fund can be dissolved.
Stamp Duty-No stamp duty is chargeablefor any transfer, contribution, or withdrawal to/from HK LPF, as the partnership interest of the LPF will not be considered as “stock”.
Profit Tax-Qualified LPFs may enjoy profits tax exemption.
Profit Tax exemption included 1) Fund Transactions, 2) Profit from incidental transitions (not defined in IRO, DIPN61)
Carried Interest-The HK Government offers tax concessions for carried interest issued by LPF operating in HK subject to fulfilment of certain conditions.
Others-TaxPayable for the management fees.
ASCENTcan be your local partner in your LPF journey. To know more how ASCENT can help please contact us.
DAVY KONG NATALIE LAU
Managing Director – Hong Kong Head of Sales- Hong Kong
Ascent Fund Services (Hong Kong) Ltd. Ascent Fund Services (Hong Kong) Ltd.
It should be noted that the information is presented in summary form and readers are advised to seek professional advice before formulating business decisions.
For enquiries relating to this website or other fund services, please contact any ASCENT professionals.