Hong Kong introduces new re-domiciliation mechanism for foreign investment funds
Hong Kong’s Securities & Futures (Amendment) Bill 2021 and Limited Partnership Fund & Business Registration Legislation (Amendment) Bill 2021, which are deigned to spur the rapid development of the asset and wealth management business, were approved by the Legislative Council on 30 September.
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 were brought into operation on 1 November.
Christopher Hui, Secretary for Financial Services and the Treasury, said: “To give full play to Hong Kong’s advantages as an international asset and wealth management centre, introducing the fund re-domiciliation mechanisms enhances the investment fund regimes of Hong Kong with a view to attracting investment funds from all over the world to set foot in Hong Kong. This would further develop Hong Kong into a preferred fund domicile and drive demand for local related professional services, and in turn strengthen Hong Kong’s position as an international financial centre.”
The establishment of the OFC and LPF regimes were enacted via amendments to the Securities & Futures Ordinance (SFO) and the enactment of the Limited Partnership Fund Ordinance (LPFO) in July 2018 and August 2020 respectively. They broadened the choice of fund vehicles domiciled in Hong Kong and were designed to reduce the use of exempt companies and limited partnerships based in the Cayman Islands.
Prior to the OFC regime, private open-ended corporate funds could not be established in Hong Kong because of company law, while Hong Kong’s Limited Partnership Ordinance had not been updated to cater for fund vehicles.
Under the new re-domiciliation mechanisms, existing investment funds set up in corporate or limited partnership form outside Hong Kong can apply to the Securities & 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 fund will be required to deregister in its original place of establishment upon re-domiciliation but the mechanisms do not operate to create a new legal entity that would necessitate dissolution procedures of the original fund. Such a fund will have the same rights and obligations as any other newly established OFCs or LPFs in Hong Kong.