Limited Partnership Fund Ordinance for Hong Kong
Limited Partnership Fund Ordinance (Cap. 637) ("LPF Ordinance") which enables funds to be registered in the form of limited partnerships in Hong Kong has established and become effective from 31 August 2020. Here are the highlights of the LPF Ordinance in Hong Kong:
Introduction
In Hong Kong, our Limited Partnerships Ordinance (Cap. 37) ("LPO") was enacted about a century ago. It is not tailored to and cannot quite meet the needs of investment funds which are a relatively modern invention that suppress the fund manager desire to set up the fund with limited liability in Hong Kong. To encourage fund (including private equity and venture capital funds) to set up and operate in Hong Kong, the new LPF Ordinance was enacted and would further promote Hong Kong's private equity market and drive demand for local related professional services, and in turn strengthen Hong Kong's position as a premier international asset and wealth management centre.
The advantage of LPF in Hong Kong
- Information confidentiality
The information of the limited partnership is confidential and not available for public use.
- No capital duty
There is no capital duty of the Limited Partnership Fund established under LPF Ordinance compare with 0.8% capital duty of the capital contribution of the Limited Partner under the existing LPO.
- Cost advantage compare with Cayman Islands
The cost of establish and annual maintenance fee of a Hong Kong Limited Partnership Fund is cheaper than the tradition Fund established in Cayman Islands.
- Great location and close to China
China is the largest Asian private equity investment destination and becoming a major source of outbound investment capital and Hong Kong is close to Mainland China and has captured a significant share of this developing activity.
- Tax relief
(1)
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Hong Kong profit tax: Tax treatment is also a key factor influencing the choice of jurisdiction for fund domiciliation and management. According to the Profits Tax Exemption for Funds (Amendment) Bill 2018, it provides Hong Kong tax exemption to all funds provided conditions are satisfied.
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(2)
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Stamp duty: An interest in a Limited Partnership Fund does not fall within the definition of "Stock" under section 2 of the Stamp Duty Ordinance (Cap.117) and therefore is not chargeable to stamp duty when the interested in a Limited Partnership Fund is contributed, transferred or withdrawn.
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Qualifying for registration under the LPF Ordinance
- Must have one general partner and at least one limited partner;
General partner must be:
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Limited partner must be:
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- a nature person (at least 18 years old)
- private company limited by shares incorporated in Hong Kong;
- non-Hong Kong company registered with the Companies Registry (“CR?;
- limited partnership registered under the LPO;
- Limited Partnership Fund; or
- a non-Hong Kong limited partnership with or without a legal personality
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- a nature person;
- corporation;
- partnership;
- unincorporated body;
- any other entity or body.
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- Must be constituted by a written agreement;
- Must have a registered office in Hong Kong;
- If the general partner has no legal personality because it is another Limited Partnership Fund or a non-Hong Kong limited partnership without legal personality, the Limited Partnership Fund must have an authorized representative with a legal personality to be responsible for the management and control of the Limited Partnership Fund and to be jointly and severally liable with the general partner for all the debts and obligations of the Limited Partnership Fund;
- Must appoint an Investment Manager to carry out the day-to-day investment management functions and it must be a Hong Kong resident over 18 years old or a Hong Kong company or a non-Hong Kong company registered with the CR in Hong Kong. If the Investment Manager conducts regulated activities in Hong Kong, he must be the licensee of the Securities and Futures Commission (SFC). E.g. Type 9 for asset management.
- Must appoint a responsible person to carry out anti-money laundering/counter-terrorist financing ("AML/CTF") functions as stipulated under Schedule 2 to the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (Cap. 615) ("AMLO") for the LPF to fulfil the standards set out by the Financial Action Task; and
- Must appoint an independent auditor to carry out audits of the financial statements of the Limited Partnership Fund annually.
Requirements and restrictions of Limited Partnership Fund's name
- Must have an English name, a Chinese name or a name consisting of both an English name and Chinese name.
- The English name must contain the words "Limited Partnership Fund" as the last 3 words of the name or "LPF" as the last words of the name. The Chinese name must contain the characters "有限合夥基金" as the last 6 words of the name.
- A Limited Partnership Fund must not be registered if a name:
(1) is the same as a name appearing in the index of the names of Limited Partnership Funds;
(2) is the same as a name appearing in the index of limited partnerships kept under section 13 of the LPO;
(3) is the same as a name of a body corporate incorporated or established;
(4) would constitute a criminal offence; or
(5) is offensive or contrary to the public interest.
- Except with the Registrar's prior approval, a Limited Partnership Fund must not be registered if the name would be likely to give the impression that it is connected in any way with the Central People's Government, the Government of the Hong Kong Special Administrative Region ("HKSAR") or any department or agency of the Central People’s Government or the Government of the HKSAR.
Establishment Process of Limited Partnership Fund
Under the Limited Partnership Fund regime, a fund wishing to register must submit an application to the Registrar of Companies ("RoC"). An application must be submitted by a registered Hong Kong law firm or a solicitor admitted to practise Hong Kong law in Hong Kong on behalf of the fund. Upon receiving an application, if the application is accepted by the RoC who will register the fund as a Limited Partnership Fund and issue a certificate of registration of Limited Partnership Fund as proof of registration.
Filing Obligations after Registration
Annual Return - must file an annual return together with the specified fee with the Registrar within 42 days after each anniversary of the date on which the certificate of registration is issued.
Business Registration Certificate - must apply within 1 month after the registration date. If the fund holds a valid Business Registration Certificate, the general partner must notify the Commissioner of Inland Revenue of the registration within 1 month after the registration date.
For further details regarding Open-ended Fund Company in Hong Kong, you can visit:
Limited Partnership Fund Ordinance
Companies Registry External Circular No. 2 / 2020
In this regard, Kaizen being a Certified Public Accountant practicing in Hong Kong, we provide full range services including different type of Company registration required by the Hong Kong Laws. If you have any questions regarding above, please feel free to contact your professional consultants here at Kaizen.
Source: Hong Kong Companies Registry
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