Being an international finance and business market, Hong Kong acts as an important spot for investment. Hong Kong is committed to strengthening its position for being a wealth creator and investor in the region.
The city has taken steps with the passing of the Limited Partnership Fund Ordinance to establish Hong Kong as a leading and proactive fund formation jurisdiction. The registration of this limited partnership funds (“LPFs“) has been welcomed by private equity funds’ managers based in Hong Kong and Mainland China.
Limited Partnership Fund Ordinance
The Limited Partnership Fund Ordinance (Cap.637) has been introduced by the Companies Registry and will be effective on 31 August 2020. This Ordinance establishes a new limited partnership fund regime to enable private funds to be registered in the form of limited partnerships in Hong Kong.
The main rationale behind implementing this new Ordinance is to attract private investment funds to Hong Kong. This new regime will allow more and more private equity and venture capital funds to facilitate their capital channels into the corporate sector, including start-ups in the innovation and technology field in the Greater Bay Area.
What is Limited Partnership Fund (LPF)
Under the LPF regime, the funds qualifying for registration should consist of one general partner with unlimited liability regarding the fund’s debts and liabilities and one limited partner with limited liability. If the funds meet the eligibility criteria under the Ordinance, then a fund is considered a limited partnership registered under the Limited Partnerships Ordinance (Cap. 37).
What is a Limited Partnership Regime?
With the Limited Partnership Fund Ordinance’s passing, Hong Kong has taken one step closer to establish this place as a leading fund formation jurisdiction. All the managers of the private equity funds are set up in Hong Kong and Mainland China, especially those financed by international investors via an offshore fund structure. With the LPF regime’s effect, many private equity fund managers are motivated to apply and register themselves.
However, some managers are looking at the pros and cons of domiciling their existing private equity fund platforms. The tax concession for carrying out the interest distributed to general partners was released by the Financial Secretary on 26 February 2020. After checking all the details of the taxes under the commencement of the new LPF regime, most private equity fund managers are poised to apply to register an LPF.
Registration of Limited Partnership Fund
According to the new Limited Partnership Fund Ordinance, the fund can be registered as an LPF when the general partner applies to the Companies Registrar along with the specified fees. A registered Hong Kong law or solicitor admitted to practice Hong Kong law can apply for the proposed general partner.
When the Registrar issues the certificate of registration, then only the process for registration will take place. The general partners are also required to apply for the business registration certificate under the LPF regime under the Business Registration Ordinance (Cap. 310).
Eligibility requirements of a fund to be registered as LPF
Some requirements need to be met to register the funds under the new Limited Partnership Fund regime. These new requirements are set out under section 7 of the Limited Partnership Fund Ordinance (“LPFO”).
Here are the eligibility criteria for funds that need to be followed on its registration as an LPF:
- The limited Partnership agreement must constitute the funds and the arrangements under this agreement does not violate any other applicable law or the new LPFO.
- There should be one general partner and at least one limited partner with the applicable funds.
- Under the new LPFO, the fund’s name must comply with the LPF’s name requirements.
- The name under which the fund is registered shouldn’t contravene the imposed restrictions on the LPF’s name.
- The fund needs to have an HK office where the notices and communications can be received from the government.
- The purpose of registering the funds should be lawful; and
- Not all the partners in the fund are corporations in the same group of companies.
How to register a fund as an LPF?
In order to register a fund under new LPFO, the applicants need to submit an application in the specified form LPF1 “Application for Registration of Limited Partnership Fund” to the Companies Registry (“the Registrar”).
The form should be submitted with the relevant fees. This amount and the form can be submitted by a registered Hong Kong law firm or a solicitor admitted to practice Hong Kong law in Hong Kong on behalf of the proposed general partner in the fund.
FAQ- 1 How long does it take to issue the Certificate of Registration of Limited Partnership Fund?
The Companies Registry will issue the Certificate of Registration for Limited Partnership fund within 4 working days after receiving receipt of the application.
FAQ-2 How do I know if my application for registration of an LPF is successful?
The applicant will get notified by email about the successful registration of the fund under the new LPFO.
FAQ-3 If my application for registration of a Limited Partnership Fund is not successful, can I have any refund on the fees paid?
In case your application gets rejected, then some amount of money, ie. HK$2,555, will be refunded to the applicant. The remaining amount becomes the lodgement fee for the application and is non-refundable.
Conclusion
This article is all about the new LPF Ordinance, which has been passed by the Companies Registry to foster the position of Hong Kong as a leading fund formation jurisdiction.
This Ordinance will take effect on 31 August 2020. Please note though that only law firms or solicitors practicing law in Hong Kong can apply for an LPF. We believe that this new LPF regime will spur new substantial opportunities and long-term benefits for the asset management community.