Introduction
On 19 December 2023, the Hong Kong Government announced the details of the new Capital Investment Entrant Scheme (New CIES) at a press briefing, led by the Secretary for Financial Services and the Treasury, Mr Christopher Hui. The New CIES is one of the eight policy measures proposed under the Policy Statement on Developing Family Office Businesses in Hong Kong in March 2023.
Under the New CIES, eligible investors who make investments of at least HK$30 million in the permissible investment assets will be able to apply for residency in Hong Kong.
Because of the aim to strengthen the development of the asset and wealth management, financial and related professional service sectors in Hong Kong, the scope of eligible collective investment schemes (Eligible CIS) which will qualify as permissible investment assets under the New CIES is largely expanded.
Scope of Eligible CIS under the New CIES
Under the New CIES, Eligible CIS include:
(i) Securities and Futures Commission (SFC)-authorised funds managed by corporations licensed by or institutions registered with the SFC for Type 9 regulated activity (Type 9 Managers);
(ii) SFC-authorised real estate investment trusts managed by Type 9 Managers;
(iii) SFC-authorised Investment-Linked Assurance Schemes issued by insurers permitted to carry on Class C business as specified in Part 2 of Schedule 1 to the Insurance Ordinance (Cap. 41); and
(iv) open-ended fund companies (OFCs) registered under the Securities and Futures Ordinance (Cap. 571) and Type 9 Managers.
In addition to the above, ownership interest in limited partnership funds (LPFs) registered under the Limited Partnership Fund Ordinance (Cap. 637) is also a type of permissible investment assets.
Key observations
In respect of the expansion of the scope of funds qualifying as permissible investment assets, the following are our key observations:
- All SFC-authorised funds managed by Type 9 Managers are in scope. There are no longer requirements on (i) the underlying investments of the Eligible CIS or (ii) the currency of denomination of the fund. Previously, under the old scheme, an Eligible CIS had to invest at least 70% of its average net assets in other permissible investment assets as specified (i.e. HK$ equities, debt securities, certificates of deposits, subordinated debt, etc.), and had to be denominated in HK$ or offer HK$ share class.
- Hong Kong OFCs and LPFs are in scope, regardless of whether they are authorised by the SFC for sale to the public in Hong Kong. This implies that private funds in these legal forms are in scope too.
Based on the announcement, the eligibility criteria of an Eligible CIS appear to be significantly relaxed compared to the previous scheme, which is consistent with the aim of the New CIES to attract asset owners to set up in Hong Kong and tap into the diverse investment opportunities in Hong Kong by deploying and managing their wealth. We will have to wait for further announcements on the application procedures and administrative matters closer to the launch of the New CIES.
The Hong Kong Government has expressed its aim to officially launch the New CIES and invite applications in mid-2024.
For further information, please contact:
Pinky Siu, Partner, Deacons
pinky.siu@deacons.com
