Hong Kong’s Limited Partnership Fund Ordinance

Hong Kong’s Limited Partnership Fund Ordinance

Hong Kong’s Limited Partnership Fund Ordinance 1401 788 Hauzen

The Legislative Council passed the Limited Partnership Fund Bill (the “Bill”) on 9 July 2020. The new Limited Partnership Fund Ordinance (Cap.637) (“LPFO”) came into force on 31 August 2020.

The Bill was introduced in March 2020 to establish a registration regime for limited partnership funds (“LPF”) to set up and operate in Hong Kong and aims to address the inadequacy of the Limited Partnership Ordinance (Cap. 37) (“LPO”) which was enacted in 1912, long before private equity (“PE”) funds gained popularity amongst investors and became key to the growth of the asset and wealth management business.

The Registration Scheme

Eligibility Requirement

The new LPF regime will provide an opt-in registration scheme. In order to qualify for registration as a LPF, a fund must:

  1. have one general partner and at least one limited partner, whereby:
    (a) the general partner must be a private company limited by shares incorporated in Hong Kong, a non-Hong Kong company registered with the Companies Registry of Hong Kong, a limited partnership (whether domestic or foreign), a limited partnership fund or an individual; and
    (b) a limited partner must be an individual, a corporation, a partnership, an unincorporated body or any other entity or body;
  1. be constituted by a written agreement (i.e. limited partnership agreement (“LPA”));
  2. have a registered office in Hong Kong;
  3. have an investment manager appointed by the general partner to carry out day-to-day investment management functions. The investment manager must be a Hong Kong resident above 18 years old, a Hong Kong company, or a non-Hong Kong company registered with the CR. The general partner, if meeting the above criteria, can appoint itself as the investment manager of the LPF;
  4. have an independent auditor appointed by the general partner to carry out audits of the financial statements of the LPF annually. The auditor must be a practice unit as defined in section 2(1) of the Professional Accountants Ordinance (Cap. 50);
  5. appoint a person (“Responsible Person”) to carry out anti-money laundering/counter-terrorist financing (“AML/CTF”) functions as stipulated under Schedule 2 to the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (Cap. 615) (“AMLO”) The Responsible Person must be an authorized institution, a licensed corporation, an accounting professional or a legal professional; and
  6. if the general partner has no legal personality because it is another LPF or a non-Hong Kong limited partnership without legal personality, the LPF must have an authorized representative with a legal personality to be responsible for the management and control of the LPF and to be jointly and severally liable with the general partner for all the debts and obligations of the LPF. 

Registration Procedure

A fund wishing to register under the new LPF regime must submit an application to the Registrar of Companies (“ROC”).  The application must contain the following documents and information:

  1. the proposed name of the LPF;
  2. the name, address, identification number and signature of the proposed general partner;
  3. the proposed address of the registered office of the LPF in Hong Kong;
  4. the proposed investment scope and proposed principal place of business of the LPF;
  5. the name and identification number of the proposed investment manager;
  6. the name and identification number of the proposed Responsible Person;
  7. a declaration and undertaking from the proposed general partner that the fund is intended to be set up as a limited partnership fund and meets the eligibility requirements, together with an acknowledgement that it is an offence to make a false, misleading or deceptive statement; and
  8. the name and contact information of the law firm/solicitor submitting the application.

A certificate of registration of the LPF will be issued as proof of registration if the ROC is satisfied with the application.  The ROC will maintain a register of LPFs containing the documents and information submitted at the time of application, and the register will be open for public inspection upon payment of a specified fee.

Migration of LPO-fund

Under the LPFO, there will be a streamlined mechanism for qualified fund(s) already registered under the LPO to migrate to the new LPF regime. The fund will preserve its identity and continuity by submitting documents/information set out under the “Registration procedures” above.


Statutory Obligations

The new LPF regime also imposes several on-going statutory obligations, such as the filing of annual returns and the maintenance of proper records.

The general partner or investment manager will be required to keep the following records at the registered office of the LPF (or other place in Hong Kong made known to the ROC):

  • the financial statements of the LPF audited by an auditor;
  • a register of partners containing the particulars of the general partner and each limited partner (including their identities, contact information, total amount of capital contribution, etc.);
  • records and documents obtained in the course of customer due diligence and files relating to every customer’s account and business correspondence with the customer and any beneficial owner of the customer in accordance with section 20(1)(b) of Schedule 2 to the AMLO;
  • documents and records of each transaction carried out by the LPF; and
  • information of the controller of each of the partners in the LPF.

Whilst the above records will not be open for public inspection, they are accessible for law enforcement officers as and when necessary.

Contractual Freedom

To cater for the operational needs of PE funds, the partners of the LPF will have freedom of contract in respect of the operation of the LPF subject to provisions of the LPFO e.g. admission and withdrawal of partners, organisation and governance of the LPF, investment scope and strategy of the LPF, the rights and obligations of partners, financial arrangements among the partners and custodial arrangements.

Safe harbour activities for limited partner(s)

A limited partner may conduct certain activities which will not be regarded as management of the LPF and hence will not compromise its limited liability protection under the LPF, such as:

  • serving on a board or committee of the LPF;
  • advising or approving the general partner or investment manager on the business, accounts, valuation or assets of the LPF;
  • taking part in a decision about the admission or withdrawal of any partner;
  • the term of the LPF; the appointment of the investment manager; and
  • changing the investment scope of the LPF.

Dissolution and liquidation mechanisms

Partners to the LPF will have the right to agree amongst themselves in the LPA the conditions and procedures under which the fund could be voluntarily dissolved.  Under certain conditions, the LPF may be dissolved by the Court for investor protection purposes or on just and equitable grounds. A LPF may also be wound up by the Court if a petition is issued against it.


The ROC is provided with major enforcement powers under the new LPF regime to, for example, strike the name of the LPF off the LPF register under certain conditions.

Tax Implications

For the LPF and special purpose entity

On 30 June 2020, the Inland Revenue Department (the “IRD”) published a Departmental Interpretation and Practice Note No. 61 (“DIPN 61”) on the Profits Tax Exemption for Funds. The DIPN 61 clarifies the IRD’s interpretation and application of the profits tax exemption for funds that became effective on 1 April 2019, ie: the unified fund tax exemption (“UFE”). Following the introduction of the UFE, private funds (including LPFs) will be exempted from profit tax in Hong Kong provided that certain conditions are met.

To qualify for the UFE, the LPF must first meet the definition of a “fund”, which means that the fund has engaged a “specified person” to arrange or carry out in Hong Kong its transaction or is a “qualified investment fund”. The tax payable on profits of the LPF must also be derived from “qualifying transactions”, which are typical transactions carried out by funds. The UFE, subject to certain conditions, is also available to special purpose entities held by the LPF.

For the investment manager/ investment advisor

Generally, management fee received by a Hong Kong-based investment manager is subject to profits tax of 16.5%. As profits sourced in Hong Kong would only be subject to Hong Kong taxation, if the core investment activities by the investment manager or advisor are conducted outside Hong Kong, the management fee can be subject to a lower taxable percentage.

Stamp Duty

Under section 2 of the Stamp Duty Ordinance (“SDO”), an interest in a LPF is not a “share, stock, debenture, loan stock, fund, bond or note issued by the limited partnership fund, nor is it a unit under a unit trust scheme”, thus does not fall within the definition of “stock”. Accordingly, an instrument under which an interest in the LPF is subscribed, transferred or withdrew will not attract stamp duty under the SDO. However, if the LPF accepts capital contributions or distributes profits to a limited partner which involves the transfer of dutiable assets, then the transfer will be subject to stamp duty.


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