Hong Kong Summary
|Fund Structure||Limited Partnership Fund|
|Cost||Registration with the Companies Registry: approx. US$390|
Business registration fee and levy: approx. US$32 (1-year certificate) or approx. US$508 (3-year certificate)
Formation can become costly depending on the law firm and other advisors engaged
|Timing||Entity registration can be completed in one week, but it can take up to two months in unusual circumstances if the application requires additional governmental review|
|Fund Marketing||There is no requirement for a LPF to have a private placement memorandum or an offering document|
|Tax Treatment||The unified fund tax exemption provides a jurisdictionally neutral tax treatment for private funds in Hong Kong|
No stamp duty is payable when an interest in a LPF is contributed, transferred, or withdrawn
|Hong Kong Venture Capital and Private Equity Association||https://www.hkvca.com.hk/en/index.aspx|
Hong Kong Overview
With its proximity to Mainland China and its membership in the Greater Bay Area, Hong Kong is regarded as a fertile ground for venture capital investment opportunities in rapidly growing sectors ranging from technology to healthcare. As part of its government’s efforts to attract investment funds and enhance Hong Kong’s position as a premier asset management hub, the Limited Partnership Fund Ordinance came into effect on August 31, 2020. It made the long-awaited Hong Kong Limited Partnership Fund (LPF) structure available to investment managers. This structure enables fund managers to benefit from flexible features typically only allowed through fund structures in domiciles other than Hong Kong. Until recently, many investors in Mainland China have preferred to domicile funds in places like the Cayman Islands and Singapore for that reason.
Under the LPF regime, the GP is required to delegate investment management functions to an investment manager, which can be the GP of the LPF, a Hong Kong incorporated company, a registered non-Hong Kong company, or a Hong Kong resident who is at least 18 years old. If investment management activities regulated by the Securities and Futures Commission (SFC) are carried out in Hong Kong, then the investment manager must be a licensed entity or person. The SFC requires the investment manager applying for an asset management license to have at least two responsible officers with at least five years of industry experience. These responsible officers are required to pass regulatory exams before the license application can be submitted.
The LPF regime has an opt-in registration schedule. In order to register an LPF, an application package must be submitted to the Companies Registrar by a Hong Kong law firm or solicitor. Regarding the fund offering, you should consult legal counsel if you have any questions about offering securities in foreign jurisdictions to ensure you are complying with local fund marketing regulations.
Venture funds using the LPF structure are eligible for the unified fund tax exemption (UFE). The UFE exempts private funds from profits tax in Hong Kong as long as they satisfy certain conditions. The relevant profits of the fund must be derived from “qualifying transactions” as defined in the Inland Revenue Ordinance to qualify for this treatment. Note there is no pre-approval requirement with the Hong Kong authorities to benefit from the UFE. Also, the Hong Kong Government recently introduced the carried interest tax concession regime, which provides tax concessions for eligible carried interest received by qualifying persons or qualifying employees distributed by a certified investment fund operating in Hong Kong.
More Domicile Analysis
For more information on fund domiciles, including details and analysis below:
- Venture Capital Domicile Report
- Fund Domicile in Delaware, United States
- Fund Domicile in Ontario, Canada
- Fund Domicile in Singapore
- Fund Domicile in Hong Kong
- Fund Domicile in Caymans
- Fund Domicile in Mauritius
- Fund Domicile in the Netherlands
- Fund Domicile in Luxembourg
- Fund Domicile in Estonia
- Fund Domicile in the United Kingdom