Why a tailor-made limited partnership regime for funds is needed in Hong Kong

# If the general partner of the LPF is (a) another LPF; or (b) a non-Hong Kong limited partnership without a legal personality, the general partner must appoint a person as the authorized representative of the LPF to be responsible for the management and control of the LPF.  The authorized representative of the LPF should be (i) a Hong Kong resident who is at least 18 years old; (ii) a Hong Kong incorporated company; or (iii) a registered non-Hong Kong company.   The authorized representative and the general partner in the LPF are jointly and severally liable for all the debts and obligations of the LPF.  Also, both the authorized representative and the general partner in the LPF have ultimate responsibility for the management and control of the LPF.

What are the key features of the LPF regime?

1.       Simple structure

2.       Not a legal person

3.       Registration scheme

4.       Appointment of investment manager, auditor and responsible person

5.       Proper custody of assets

What are the benefits of the LPF regime?

• Features on par with overseas fund domiciliation centres
• Alignment of fund structure with place of management
• Investor protection
• Nominal set up fee
• Tax and stamp duty treatment
• Migration of funds registered under the LPO

EY teams warmly welcome the Government’s initiative to establish the LPF regime in Hong Kong which will be beneficial to Hong Kong’s development as a premier international asset and wealth management centre in the region. The Government has also announced in the 2020/21 Budget that a concessional tax arrangement regarding taxation of carried interest will be introduced starting from this year of assessment. A consultation paper on the proposed new rules, including eligibility conditions and compliance procedures was released earlier this month with comments due by 4 September 2020. Once finalized, the carry concession will further increase the attractiveness of Hong Kong as a place for private equity funds to set up and operate. 

To allow broader usage of the LPF regime, the Government should consider providing other financial grants or subsidies to attract the use of LPF. The Government should also consider subsequently introducing provisions to permit the migration of existing offshore limited partnerships to Hong Kong.