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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
The Limited Partnership Fund and Business Registration Legislation (Amendment) Ordinance 2021 (the “LPF Amendment Ordinance”) provides a mechanism for an overseas fund that is established in the form of a limited partnership (the “non-Hong Kong LPF”), to re-domicile to Hong Kong as a Hong Kong limited partnership fund (the “Hong Kong LPF”) under the LPFO. An application for the registration of a non-Hong Kong LPF must be made to the Hong Kong Companies Registrar by the general partner (the “LPF Application”). The LPF Application must be in the specified form and be accompanied by the lodging and registration fees.
The LPF Application must also be accompanied by a statement that:
- any consent or approvals for the proposed registration of the non-Hong Kong LPF that is required by contract or undertaking has been obtained or waived;
- any consent or approvals for the intended deregistration of the non-Hong Kong LPF in its jurisdiction of establishment required by contract or undertaking has been obtained or waived;
- the intended deregistration of the non-Hong Kong LPF in its jurisdiction of establishment is not prohibited under the laws of that jurisdiction or by any agreement entered into among the partners in the non-Hong Kong LPF; and
- the proposed general partner understands that the name of the non-Hong Kong LPF once registered in Hong Kong, may be struck from the LPF Register where it has not been deregistered in its jurisdiction of establishment within 60 days of the date of registration in Hong Kong.
To be eligible for registration in Hong Kong, a non-Hong Kong LPF must meet the following eligibility criteria:
- it must be constituted by a limited partnership agreement;
- it must have at least one general partner and one limited partner;
- the general partner of the non-Hong Kong LPF is (i) a natural person who is at least 18 years old; (ii) a private Hong Kong company; (iii) a registered non-Hong Kong company; (iv) a limited partnership registered under the Limited Partnership Ordinance (Cap. 37); (v) a limited partnership fund; or (vi) a non-Hong Kong limited partnership with a legal personality;
- every limited partner in the non-Hong Kong LPF is (i) a natural person or (ii) a corporation, a partnership of any kind, an unincorporated body or any other entity;
- its name complies with the requirements of section 8 of the LPFO;
- have an office in Hong Kong to which communications and notices may be sent; and
- not all of the partners of the non-Hong Kong LPF are corporations in the same group of companies.
Registration and deregistration
The application for registration of the non-Hong Kong LPF must be made to the Companies Registry by the general partner who is named in the application as the proposed general partner of the non-Hong Kong LPF. Upon registration, the fund will be issued with a certificate of registration. Once registered as a limited partnership fund in Hong Kong, the original fund must be deregistered in its place of establishment within 60 days after the registration date. The General Partner may apply to the Companies Registry for an extension subject to any condition that the Companies Registry considers appropriate.
Where the non-Hong Kong LPF, immediately before registration in Hong Kong, does not hold a valid business registration certificate, the general partner must, within one (1) month after the registration date, apply for a business registration certificate for the non-Hong Kong LPF. Where the non-Hong Kong LPF does have a valid business registration certificate, the general partner must within one (1) month after the registration date, notify the Commissioner of the Hong Kong Inland Revenue Department of the following:
- the registration;
- the name in which the Hong Kong LPF is registered; and
- the details of the general partner in the LPF.
The fees payable in respect of the re-domiciliation of a non-Hong Kong LPF are generally as follows:
- HK$479 to lodge the application for the registration of a non-Hong Kong LPF; and
- HK$2,555 for registering a non-Hong Kong LPF as a limited partnership fund under the LPFO.
The effect of re-domiciliation
Where a non-Hong Kong LPF re-domiciles to Hong Kong, the re-domiciliation and registration in Hong Kong, does not:
- create a new legal entity;
- prejudice or effect the continuity of the non-Hong Kong LPF;
- affect any contract made, resolution passed or any other thing done by or in relation to the non-Hong Kong LPF;
- affect any function, property, right privilege, obligation or liability acquired, accrued or incurred by, to or on behalf of the non-Hong Kong LPF;
- render defective any legal proceedings commenced or continued by, on behalf of or against the non-Hong Kong LPF.
In addition to the above, from the effective date of registration, all property of the original non-Hong Kong LPF will continue to be the property of the fund. While such re-domiciliation and registration in Hong Kong does not amount to a transfer of assets of the fund or a change in the beneficial ownership of the assets of the fund.