On August 31st, 2020, the Hong Kong Legislative Council’s Limited Partnership Fund Ordinance (LPFO) came into effect, establishing the region as a leading jurisdiction for Limited Partnership Funds.
Hong Kong’s new Limited Partnership Fund regulations match the features of previously popular jurisdictions, such as Bermuda and the Cayman islands, that have now fallen out of favor in light of EU blacklisting and increased pressure over the years from authorities, institutions and non-governmental organizations. Hong Kong, by contrast, has maintained a sterling reputation for transparency, compliance and integrity over the decades, providing a new, more stable foundation for international investment funds in 2020 and beyond.
The Limited Partnership Fund Ordinance follows 2019’s Profits Tax Exemption for Funds, which granted conditional tax relief to funds domiciled in the region. The LPFO further develops Hong Kong’s thriving family office sector and private equity environment as venture capital projects in the Greater Bay Area continue to gather momentum.
What is a Limited Partnership Fund?
Limited Partnership Funds are a way of structuring private funds with liability allocated between a limited partner that will not held responsible for debts or losses beyond an established threshold, and a general partner that assumes full liability. Under the new LPFO Hong Kong-based Limited Partnership Funds are now free to distribute profits, set equity contribution, amend terms and dissolve partnerships according to the individual needs of fund participants and beneficiaries.
Under the LPFO, the Hong Kong Registrar of Companies governs Limited Partnership Funds, requiring at least one General Partner and one Limited Partner in a Limited Partnership Agreement. Furthermore, the LPF should involve an investment manager, an audit service provider, a Responsible Person and an Authorized Representative.
What are the benefits of a Limited Partnership Fund in Hong Kong?
What is the registration process?
LPF applications must be filed with the Registry of Companies (RoC) through a registered law firm or solicitor on behalf of the partners in the fund. The application should include information including the name of the fund, details about its operations and the identity details of the General Partner, Investment Manager and Responsible Person.
What are the requirements for a Limited Partnership Fund in Hong Kong in 2020?
The LPF should satisfy the legal definition of a fund, which requires that the asset be managed by, or on behalf of the individuals operating the partnership, with contributions from participants. Participants should not have direct control over the assets, although they may be consulted during any stage of the decision-making process. The Fund should also maintain a registered office in Hong Kong.
The partnership asset should provide some form of income for its participants in order to be considered a fund, and may not be considered a fund if it is operated in any way other than in a business capacity, or if all participants in the partnership fund are employed by (or related to a person employed by) the fund operator. Franchise agreements are ineligible, as are funds governed under the Securities and Futures Commission.
We are excited about the growth potential and opportunities that the new Limited Partnership Fund legislation will bring to Hong Kong. Investors will be able to scale funds to new heights through via the competitive advantage of Asia’s leading financial services hub and the expanding horizons of the Greater Bay Area. Should you have any interest in exploring the exciting new investment possibilities for Limited Partnership Funds in Hong Kong, feel free to contact us via email@example.com or +852 2541 6632 for a consultation anytime.
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