This article covers the basic rules for setting up a Limited Partnership Fund LPF in Hong Kong. This includes the duties of the investment manager and GP and the exemption from profits tax. It also discusses the issues relating to re-domiciliation.
Introduction of the LPF
Hong Kong’s introduction of the Limited Partnership Fund (“LPF”) regime, which comes into effect on 31 August 2020, has many positive features. These include simpler regulation, flexibility in contracting, and no capital duty on profits. Moreover, the new regime places Hong Kong in the forefront of the PE fund domiciles in the region.
Private Equity Fund
A private equity fund can only invest in investments in private companies. It cannot invest in publicly-traded companies or in other financial assets. The fund must also have a minimum of three partners. The minimum amount of investment per partner is five percent, and the maximum is 20 percent.
LPF and SPC
There are a few restrictions in Hong Kong. One is that an LPF can only invest in private funds and it cannot invest in a special purpose investment entity (SPE). An LPF must have a manager licensed by the SFC to qualify for this exemption.
LPF is a Type of Private Fund
A limited partnership fund in Hong Kong (LPF) is a type of private fund that can be structured for a number of reasons. One of the main reasons is to reduce the cost of establishing a fund in Hong Kong, as compared to offshore jurisdictions. However, while a limited partnership fund in Hong Kong is a good choice for certain sponsors, it may not be the best option for all funds.
Investment Manager to Handle LPF
Do you’ve setting up a fund in Hong Kong; you must hire an investment manager. An LPFO investment manager should be licensed by the SFC. While it may be tempting to take the first offer that comes your way, you should also be very careful to ensure that your investment manager has the proper experience and qualifications.
Independent Auditor for LPF
In addition to appointing an investment manager, a LPF must also appoint an independent auditor. Your auditor must be able to verify the fund’s financial statements, which should be audited at least once a year.
Liability of GP
The General Partner (GP) of a Limited Partnership Fund (LPF) must appoint an authorized representative. This person will share liability for all debts and obligations of the fund. He or she will also be the ultimate responsibility of managing and controlling the fund. A non-Hong Kong company can be an authorized representative.
LPF is more flexible than the other Jurisdictions
In Hong Kong, the LPF regime is more flexible than the other jurisdictions. It allows funds to tailor the arrangement to the objectives of the fund. However, it is still difficult to dissolve a partnership under the current regime. Fortunately, the new regime will make the process of setting up and administering an HK fund simpler.
General and Limited Partners
The Hong Kong limited partnership regime requires at least one general partner and one limited partner. The general partner has unlimited liability for the fund’s debts while the limited partners are only legally liable for their own debts if they participate in the management of the fund. The Hong Kong fund also has a white list of permitted activities, similar to those in other key funds jurisdictions.
