Deeply understand the new limited partnership Fund Ordinance in Hong Kong

In the eyes of investment funds focused on Asia, Hong Kong has always been a true regional center and an ideal location for setting up teams. However, these funds typically establish offshore funds in places such as the Cayman Islands to enjoy a more familiar regulatory system and tax neutral platform for investors, where investment gains only need to be taxed in the home country.
In order to attract more funds and investment managers to stay and flow into Hong Kong, this year, Hong Kong7month9The Regulations on Limited Partnership Funds were officially passed on the8month31It will be officially implemented from today. This regulation establishes and operates a limited partnership fund in Hong Kong（LPF）The introduction of a new registration system will provide Hong Kong with a more competitive legal infrastructure, as well as greater flexibility and responsiveness for market participants, aligning their fund registration location with commercial substance.
In this context, virtual data room suppliersIntralinksRegarding this matter, we have communicated with Hong Kong Senior Fund Lawyer, Law Firm Luo Xiaxin（Stephenson Harwood）Partner Shen Wenxun（Penelope Shen）We conducted discussions and provided a detailed interpretation of the Limited Partnership Fund Regulations.
Intralinks:You have experience in consulting investment funds in Asia. Can you tell us something about your background and legal practice?
Lawyer Shen Wenxun: I focus on the establishment and architecture of private investment funds, especially hedge funds and private equity funds. Over the years, providing legal advice to this type of client has naturally expanded to include fund restructuring, distribution and private placement, compliance and regulatory requirements, side letters, and derivative documents (includingISDAProvide legal advice on major brokerage agreements. These clients include some large asset management companies in Hong Kong, China, and Singapore.
Intralinks:What are the new highlights of the new Limited Partnership Fund Regulations?
Firstly, the new regulations will align Hong Kong's industry standards with other advantageous regions - limited partnership funds（LPF）Does not have a separate legal personality, and the partner is limited to Shen Wenxun, a lawyer: Partner Agreement（LPA）Contractual freedom to regulate the operation of limited partnership funds. Secondly, the new regulations do not set minimum requirements for the scale of funds. In addition, the general partner has unlimited liability for all liabilities of the limited partnership fund and ultimate responsibility for the management and control of the limited partnership fund. Finally, the new regulations do not impose any restrictions on the investment objectives and strategies of limited partnership funds.
Intralinks:How will limited partners benefit from the new Limited Partnership Fund Regulations?
Lawyer Shen Wenxun:The most important thing is that the maintenance cost of limited partnership funds will be greatly reduced compared to this. For example, the cost of an exempted limited partnership in Cayman is several thousand US dollars, while the cost in Hong Kong is several thousand Hong Kong dollars. This means that the net income distribution left to limited partners will be higher.
Intralinks:Are there any other development trends that will attract the establishment of funds in Hong Kong, except for the new regulations? What is the open-end fund company system or the unified fund exemption tax law?
Lawyer Shen Wenxun: The unified fund tax exemption law will undoubtedly simplify the tax structure of the fund. With the development of the Greater Bay Area in China, open-end fund companies（OFC）The launch of the latest limited partnership fund system is timely - many investors are looking for opportunities to raise or invest in the region.
Intralinks:What are the new regulations in Hong Kong compared to systems such as Singapore and Cayman?
Lawyer Shen Wenxun: Overall, the limited partnership fund system in Hong Kong is in line with the systems and industry standards of these countries and regions you mentioned. Exempted Limited Partnership with Cayman（ELP）Compared to Hong Kong, the system requires the appointment of fund managers, who can be limited partners（GP）. However, regardless of the structure, as long as the management of limited partnership funds or exempted limited partnership enterprises takes place in Hong Kong, we need to carefully review relevant regulatory regulations to ensure compliance.
Singapore also has a limited partnership system, but recently their variable capital company has attracted more attention（VCC）System. The difference between variable capital companies and open-ended fund companies is that the former can be used for private equity investments. An umbrella shaped variable capital company can establish multiple subordinate funds, making it more flexible compared to traditional limited partnership structures and benefiting from economies of scale to reduce costs. The relevant laws also provide procedures for relocating capital companies to different locations, allowing corporate entities to be established through investment funds.
Intralinks: Do you think that in the future12Will private equity funds, family offices, and asset management industries in Hong Kong experience better development and growth in the next month?
Lawyer Shen Wenxun: Although the political level and the uncertainty of the Sino US trade war will still have an impact, I expect Hong Kong to see gradual growth in private equity funds, family offices, and asset management. There are also many potential synergies among these individuals - for example, family offices in Asia are gradually maturing, which has led to an increase in their allocation in private equity investments. Hong Kong will continue to benefit from the national led Greater Bay Area development strategy. Although the impact of macro politics and trade wars is inevitable, this is still an exciting era.