Hong Kong Limited Partnership Fund - Know Everything about it

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Limited Partnership Funds (LPFs) are a brand-new form of fund structure that promotes Hong Kong as a fund domicile by providing an easy-to-understand regulatory environment. Flexibility in capital contributions, profit distribution, and contracting freedom stimulate investment while facilitating fund management and maintaining tax exemption under the guidelines of the unified funds exemption (UFE). According to the new LPF regulations, Hong Kong is the best place for a PE fund to be domiciled.

  

What is A Hong Kong Limited Partnership Fund (LPF)?

A Hong Kong Limited Partnership Fund structure is how the fund is organized under the limited partnership fund.  It might make it easier to set up funds in Hong Kong. It is employed to manage investments in the interests of investors. A "fund" is defined by the LPFO as an arrangement where: 

Contributions, profits, and income are pooled; returns are then given to one or more operating persons and participating persons. The property is managed for commercial purposes by individuals (referred to as "operating persons") on behalf of other individuals (referred to as "participating persons") who do not have day-to-day control over such management.

 

Fund Registration Under Hong Kong Limited Partnership Fund

Conditions for a fund to meet in order to register under the LPF regime

If a fund wants to be registered under the LPF regime, it must meet certain requirements. Specific eligibility requirements for this are outlined in Section 7 of the LPFO:

  • The written Limited Partnership Agreement must be unanimously agreed upon by the partners and must not conflict with the LPFO or any other applicable law in order to administer the fund. A Hong Kong Limited Partnership Fund required.
  • The fund was not established with any illegal intent.
  • A minimum of one limited partner (LP) and one general partner (GP) are required for LPF.

 

Advantages of Hong LPF 

  • Exempt from profits tax as long as they comply with the Unified Funds Exemption regime's requirements. 
  • The revenues from the distribution of profits, as well as the donation, transfer, or withdrawal of a partnership interest to/from the LPF, are exempt from capital duty and/or stamp duty.
  • No obligation to reveal LP's identify or history to the public.
  • Regarding the functioning of the fund, partners are free to enter into contracts, and the agreement will control all of its details.
  • the elimination of the offshore/onshore structure and offshore regulatory compliance simplified the legal framework. Now that everything is under one jurisdiction, there are no longer any other service providers, which reduces setup costs.
  • LPF won't require SFC clearance, unlike the OFC system, because it's not made available to the general public.
  • zero capital gains tax
  • There are no restrictions on the use of accounting standards at the investment or fund level, so if a manager wants to establish a Hong Kong LPF and has money under his control, he can use his current standards to ensure uniformity.

 

Summing Up:

The LPF rule enables offshore funds to redomicile as a Hong Kong LPF, offering private fund managers a fresh and alluring option for onshore investing. The LPF regime aids in increasing foreign investment in Hong Kong and accelerating the development of private funds. In order to build a stronger foundation for business chances, it is also boosting the demand for money and experience from other fields, such as technology and other professional services.

Location: Singapore

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