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Hong Kong Limited Partnership Fund
The Hong Kong Limited Partnership Fund
The Limited Partnership Fund Ordinance (Cap. 637) (LPFO) came into force in August 2020.
The Hong Kong limited partnership fund is very similar to the offshore limited partnership fund vehicles which the asset management industry has become accustomed to. Broadly, there is no regulatory approval required, no minimum capital requirements in relation to the limited partners, there are no restrictions on investments, there is flexibility in relation to freedom of contract and there are broad safe harbours.
The registration and formation requirements of a limited partnership which is formed under the LPFO and registered with the Companies Registry include the requirement that the limited partnership be constituted by the partnership agreement, has a registered office in Hong Kong and is formed with at least one general partner and one limited partner. Under the LPFO, the general partner has a duty to make a number of appointments in relation to the limited partnership fund. These appointments include the appointment of an investment manager (who may be the general partner or another person) to carry out the day-to-day investment management functions of the limited partnership fund and the duty to appoint a local Hong Kong auditor who is independent of the general partner and the investment manager. There is no duty to appoint a custodian. However, the general partner is under a duty to ensure the proper custody of the assets of the limited partnership fund.
The LPFO provides flexibility in respect of contractual freedoms. The limited partnership fund generally has the freedom of contract regarding the operation of the limited partnership fund. In addition, the LPFO contains a number of safe harbours for those involved in certain activities of the limited partnership fund. A limited partner may conduct certain safe harbour activities, which will not be regarded as ‘management’ of the limited partnership fund and will not therefore compromise its limited liability status in respect of the limited partnership fund. Examples of safe harbour activities include:
- serving on a board or committee of the limited partnership fund;
- discussing with, advising or approving the general partner or investment manager of the limited partnership; and/or
- calling, requesting, attending or participating in a partners meeting.
The limited partnership fund regime in Hong Kong is administered by the Companies Registry and an application for the registration of the limited partnership fund must be made to the Companies Registry.
Re-domiciliation of an overseas limited partnership fund to Hong Kong
Currently there is no re-domiciliation mechanism for overseas limited partnerships to re-domicile to Hong Kong. However, the Legislative Council Panel on Financial Affairs published its paper on the “Re-domiciliation mechanism for Foreign Funds” which sets out that their target is to introduce a Bill into the Legislative Council for the first and second readings in the second quarter of this year. The Bill will provide a mechanism to allow a foreign fund which has been established as a limited partnership to re-domicile to Hong Kong if it meets the same eligibility requirements of a Hong Kong LPF.