{"id":71743,"date":"2021-11-16T12:25:32","date_gmt":"2021-11-16T04:25:32","guid":{"rendered":"https:\/\/zegal.com\/?p=71743"},"modified":"2023-03-16T14:12:12","modified_gmt":"2023-03-16T06:12:12","slug":"limited-partnership-fund","status":"publish","type":"post","link":"https:\/\/zegal.com\/en-sg\/blog\/post\/limited-partnership-fund\/","title":{"rendered":"Limited Partnership Funds: Everything you need to know"},"content":{"rendered":"

Limited Partnership Funds<\/strong> (LPF<\/strong>) are a new type of fund structure to encourage funds to domicile in Hong Kong by offering a simpler and straightforward regulatory framework<\/strong>. Flexibility in capital contributions, distribution of profits, and contracting freedom facilitates fund management and encourages investment<\/strong>, whilst retaining tax exemption<\/strong> subject to the conditions of the unified funds exemption (UFE)). The new LPF regime places Hong Kong as a premier jurisdiction in which to domicile a PE fund.<\/p>\n

<\/span>Background<\/b><\/span><\/h2>\n

The introduction of the Limited Partnership Fund Ordinance<\/strong> (LPFO<\/strong>) replaces the old regime of the Limited Partnership Ordinance<\/strong> (LPO<\/strong>) and it came into effect on 31 Aug 2020. Prior to the enactment of LPFO, there was not much flexibility for the set up of private funds. The private fund managers of Hong Kong had to set up funds constituted in the form of limited partnerships in offshore jurisdictions such as the Cayman Islands and Delaware. The enactment of LPFO is very welcoming and with its introduction, Hong Kong aims to bolster its position in asset management and seeks to cement a place for private equity investment by attracting more fund sponsors. <\/span><\/p>\n

Initially, the LPFO did not allow offshore funds to re-domicile in Hong Kong. However, funds registered in the form of a limited partnership under LPO were allowed to migrate to the LPFO after meeting the eligibility requirements. Now, LPFO allows even a non-Hong Kong fund set up in the form of a limited partnership to be registered as an LPF<\/strong> under the LPFO after meeting certain eligibility requirements. This whole process validates the pre-existing rights and liabilities of the fund and prevents the creation of a new separate legal entity.<\/span><\/p>\n

LPFO has simplified the legal structure<\/strong> by removing the onshore\/offshore structure and offshore regulatory compliance. There is no need to be regulated by the laws of double jurisdictions as everything is now placed in a single jurisdiction and it has to comply with the laws of only one jurisdiction. The partners of a LPF are not required to engage lawyers of a different place to register a fund as LPF which definitely is both cost-efficient and hassle-free at the same time. This whole process has increased Hong Kong’s competitiveness<\/strong> by this new fund regime by providing an exemption from profits tax, no capital or stamp duty on proceeds, and hence, a simpler regulatory framework.<\/span><\/p>\n

Having mentioned the key features of this regime, it is worth considering now what is the LPF, the registration process of a fund as an LPF is, advantages of LPF, re-domiciliation of non-Hong Kong funds, migration of funds registered under LPO, and the de-registration process of LPF in the following sections.<\/span><\/p>\n

<\/span>What is a Limited Partnership Fund (LPF)?<\/b><\/span><\/h2>\n

The fund under the limited partnership fund is constituted in the form of a limited partnership.  It can facilitate the establishment of funds onshore in Hong Kong. It is used for the purpose of managing investments for the benefit of investors. <\/span>Under the LPFO, a \u201cfund\u201d is defined as an arrangement in which: <\/span><\/p>\n