Open-ended Fund Companies

The GP may need to be either a:

1. Hong Kong resident who is at least 18 years old
2. private company limited by shares incorporated in Hong Kong
3. limited partnership registered under the Limited Partnerships Ordinance (Cap. 37)
4. limited partnership fund
5. registered non-Hong Kong company
6. non-Hong Kong limited partnership without legal personality

If the GP delegates all investment management activities to the investment manager and/or if the LPF will not carry on a business with regulated activities in Hong Kong, the GP may not have to appoint an SFC licensed entity for acting as an investment manager.

The GP of the LPF, who does not invest in "securities" under the SFO, may also be able to be unlicensed.

Two directors who are natural persons and are at least 18 years old

The directors have to be approved by SFC and are with good repute, appropriately qualified, experienced, and proper for conducting business activities of the OFC.

If the OFC will not carry on a business with regulated activities in Hong Kong, the GP still have to appoint an SFC licensed entity for acting as an investment manager.

The LPF should assign an individual (who can be the GP itself) as an IM to conduct everyday investment management functions of the partnership.

The IM should be either a:

1. Hong Kong resident who is at least 18 years old
2. company incorporated in Hong Kong
3. registered non-Hong Kong company

An IM of the LPF, which does not invest in "securities" under the SFO, may be able to be unlicensed.

The IM function needs to be delegated to an IM, who is licensed or registered with the SFC to conduct Type 9 (asset management) regulated activity.

It is not necessary to assign a custodian for showing proper custody of the LPF assets under the LPFO. 

Yet, if the GP or the IM is a Type 9 licensee, the SFC's Fund Manager Code of Conduct will apply to the investment management activities concerning the LPF. This includes requiring the GP or the IM (as applicable) to:

1. exercise due skill, care, and diligence in appointing the custodian; or
2. if self-custody is adopted, the GP or the IM should adopt policies and procedures for separating custodial functions from its investment management functions. 

According to Part IVA of the SFO, the OFC’s investment property needs to be entrusted to a custodian for safe-keeping. 

Criteria for being a custodian:

1. fulfill the same eligibility criteria as mentioned in the UT Code; or
2. an institution that is licensed or registered with the SFC for conducting Type 1 (dealing in securities) regulated activity.

The GP should assign one auditor in each financial year for conducting annual audits of the LPF’s financial statements. The auditor should be independent of the LPF’s GP and IM.

One auditor should be assigned in each financial year.

No investment restrictions.

No investment restrictions for private OFCs in Hong Kong.

It should not be a business undertaking with general industrial or commercial purposes.

No separate legal personality for the LPF.

The GP bears unlimited liability for all LPF’s debts and obligations. The GP itself may have limited liability, such as when it is a limited liability company.

There are separate liabilities for the OFC.

If the LP does not participate in the fund management outside of the safe harbours provided for in the LPFO, the LPs will not be liable for the LPF’s debts and obligations beyond the amount of their agreed contribution. 

Shareholders are not responsible for the OFC’s debts and liabilities.

Concerning the LPF’s operation, it enjoys the freedom of contract generally, which includes the freedom of contract regarding:

1. transfer of interests by the LPs;
2. partners’ admission and withdrawal;
3. partners’ powers, rights, and obligations;
4. financial arrangement between partners;
5. organisation, management structure, and decision making;
6. investment scope and management;
7. scope of fiduciary duties;
8. valuation reporting frequency;
9. the life of the LPF;
10. arrangement of custodial; and
11. procedures of dissolution.

The OFC has a lower degree of freedom.

Some possible restrictions include:

1. requirements regarding the custodian and investment manager;
2. the OFC Rules, OFC Code, and the SFO prescribe termination and dissolution and cancellation of registration requirements and procedures; and
3. specific requirements related to corporate administrative matters, such as there are certain requirements for holding AGMs.

Usually, no approval is needed for the changes made after the LPF is established. Yet, the Companies Registry have to be notified for certain changes, which include changes of names, changes of place where the LPF keeps its records.

The changes to an OFC that require approval from the SFC are as follows:

1. change of name of an OFC or its sub-fund;
2. establish a new sub-fund under an OFC;
3. appoint a director, custodian or IM;
4. terminate an OFC or its sub-fund; and
5. cancel an OFC’s registration.

It is not compulsory for having the registration of a limited partnership fund under the LPFO.

It is necessary for an OFC to register and be approved by the SFC. When the OFC is approved, it is incorporated under Part IVA of the SFO.

Based on the documents and information provided, usually around 2 to 3 weeks of time is needed. But this time period can also be influenced by commercial considerations.

The SFC mentioned that they intend to process the applications for private OFC establishments within one month, starting from the date they commence the application (i.e. when all required documents are sent and accepted by the SFC).