Hong Kong SAR
- Hong Kong Limited Partnership Fund (“LPF”) Regime
Hong Kong is the second largest private equity hub in Asia after Mainland China. As an international financial centre, Hong Kong has a vital role to play in the Funds Industry, and is committed to strengthening its position as a jurisdiction of choice for Private Funds in Asia for investment and wealth creation in the region.
Significant milestone for private fund structuring in Hong Kong
The Hong Kong LPF Ordinance was enacted on 31 August 2020, aiming to allow Private Funds to set up and operate locally as Limited Partnerships. The new LPF regime provides an alternative investment vehicle for private fund managers who are raising funds or investing in Asia and looking for a regionally domiciled fund vehicle.
Main Features of the Hong Kong LPF
It is widely used by Closed-Ended Private Funds such as private equity, venture capital, real estate, infrastructure, debt and special situation funds;
- Fund structure is governed by a Limited Partnership Agreement with General Partner (“GP”) and at least one Limited Partner;
- A simple and user-friendly set-up process by registration with the Registrar of Companies by a Hong Kong registered law firm or solicitor;
- Tax benefits: no capital duty and no stamp duty: LPF is typically in scope under the unified funds exemption and carried interest can be tax exempted.
Key parties and operation obligations
- GP is responsible for daily management and control of the LPF, assuming unlimited liability;
- Investment Manager must be SFC-licensed if undertaking regulated activities in Hong Kong;
- Auditor is appointed to perform independent fund audit annually;
- AML responsible person is to carry out anti-money laundering compliance functions;
- Proper custody management is required;
- A registered office is maintained in Hong Kong;
- Independent party such as fund administrator may be engaged for fund valuation and investor services as necessary and applicable.
It is proposed that the LPF regime will allow re-domiciliation of offshore funds to Hong Kong provided that the migrating offshore fund meets the same set of eligibility requirements of an LPF. Hence the new LPF regime will no doubt provide ample opportunities and long-term growth for the Fund Industry and the Private Equity sector in Asia.
2. Trust or Company Service Providers license
To enhance the due diligence commitments on the designated non-financial businesses and professionals, a licensing regime was introduced under the Anti-Money Laundering and Counter-Terrorist Financing Ordinance on 1 March 2018.
Any person who carries on a trust or company service business as defined in the guideline is required to obtain a Trust or Company Service Providers license (“License”) from the Registrar of Companies. The License will be granted for three years’ period and the Licensee needs to renew it subject to a ‘fit and proper’ test.
Anyone who carries on the relevant business without a TCSP license is liable on conviction for a fine of HK$100,000 and imprisonment for 6 months.
3. Legal update
Waiver of registration fees for annual returns (except for late delivery) for 2 years.
With effect from 1 October 2020, registration fees for annual returns delivered to the Companies Registry on time and within the concession period from 1 October 2020 to 30 September 2022 (both dates inclusive) are waived. This applies to all private and public companies having share capital, companies limited by guarantee and registered non-Hong Kong companies.
Increase of stamp duty rate on transfer of Hong Kong stock
With effect from 1 August 2021, the rate of stamp duty payable on sale or purchase of Hong Kong stock is increased from 0.1% to 0.13% of the consideration or value of each transaction payable by buyers and sellers respectively.
New Inspection Regime under the Companies Ordinance
Proposals have been made to the Legislative Council on the timing of implementation of the new inspection regime by the public about the Usual Residential Addresses (“URAs”) and full identification numbers (“IDNs”) (collectively “Protected Information”) of directors, company secretaries and other relevant persons as follows:
Phase 1 – from 23 August 2021, companies may replace URAs of directors with their correspondence addresses, and replace full IDNs of directors and company secretaries with their partial IDNs for public inspection on their own registers;
Phase 2 – from 24 October 2022, Protected Information on the Index of Directors on the Register of the Registry will be replaced with correspondence addresses and partial IDNs for public inspection. Protected Information in the documents filed with the Registry after commencement of this phase will not be provided for public inspection.
Phase 3 – from 27 December 2023, data subjects could apply to the Registry for protecting from public inspection their Protected Information contained in documents already registered with the Registry before commencement of Phase 2, and replace such information with their correspondence addresses and partial IDNs.
Notwithstanding the above, specified Persons could apply to the Registry for access to Protected Information from Phase 2 onwards
Please do not hesitate to contact us should you require any further information.