22 October 2021
On 30 September 2021, the Secretary for Financial Services and the Treasury welcomed the passage of the Securities and Futures (Amendment) Bill 2021 and Limited Partnership Fund and Business Registration Legislation (Amendment) Bill 2021 by the Legislative Council, which are intended to spur the rapid development of the asset and wealth management business of Hong Kong.
The amended Ordinances establish new fund re-domiciliation mechanisms for existing funds set up in corporate or limited partnership form outside Hong Kong to re-locate their registration and operation to Hong Kong and to be registered as open-ended fund companies (OFCs) or limited partnership funds (LPFs) respectively. The re-domiciliation mechanisms will come into operation on 1 November 2021.
Under the re-domiciliation mechanisms, existing investment funds set up in corporate or limited partnership form outside Hong Kong may apply to the Securities and Futures Commission or the Companies Registry for registration of the fund as an OFC or LPF in Hong Kong respectively. Upon re-domiciliation, the continuity of the fund, including contracts made and property acquired, will be preserved. The mechanisms do not operate to create a new legal entity (which will necessitate dissolution of the original fund). The fund would have the same rights and obligations as any other newly established OFCs or LPFs in Hong Kong. The fund will be required to deregister in its original place of establishment upon re-domiciliation.
The amendments could encourage funds currently formed in popular offshore jurisdictions, such as the Cayman Islands, but actually managed in Hong Kong, to re-domicile to Hong Kong. This is especially so in light of increasingly stringent economic substance requirements in offshore jurisdictions, and the preferential tax treatment now offered in Hong Kong to LPFs and OFCs (see our articles here and here on these preferential tax treatments).
